Petrotrin has been in operation for over 97 years, and now our legacy refinery as we know it, will close. Its transition is set to begin next month. The announcement was made on the eve of our 56th anniversary of independence and Ancel Roget, president of the Oilfield Workers' Trade Union (OWTU) commented that a move to privatise the company would bring the country back to "plantation days."
I offer the proposition that this decision of the Petrotrin board and Cabinet was not the best option, notwithstanding the massive debt with which the company has found itself burdened, due to decisions taken over the last decade. Unfortunately, the major stakeholders could not find common ground.
However, some experts believe there are wider and deeper economic and social implications that are hinged to this decision. I heard a former energy minister ask a pertinent question: was the decision based on the company’s balance sheet, or did stakeholders consider the effects on the economy. So, what were the other options available to the board?
Joint Trade Union Movement (JTUM) members responded to the news via a press conference and issued a statement in support of the plight of their fellow OWTU members. They took the news as a declaration of war on the trade union movement.
The OWTU had proposed a plan to focus on increased productivity, accountability, and achieving production targets, with employees taking full responsibility for performance. Its plan also addressed quick-win projects yielding an additional 2,000 barrels of oil daily, and multiple other initiatives in land and offshore areas. Increasing refinery efficiencies and reviewing from whom TT imports crude were among aspects of this plan.
OWTU’s education and research officer Ozzie Warwick said the Lashley team, chaired by permanent secretary in the Ministry of Energy Selwyn Lashley agreed with the union’s recommendations and commented, “It’s strange it didn’t recommend closing the refinery. But our plan will ensure Petrotrin’s survivability."
According to reports, Petrotrin is heavily overstaffed, with deficiencies in technical competencies in key disciplines. Manpower costs accounted for between 47 and 50 per cent of recurrent expenditure. It’s net debt at financial year-end 2017 amounted to $11.4 billion while taxes and royalties owed to Government amounted to $3.1 billion. The company is projected to continue accumulating losses at a rate of about $2 billion a year, and left as is, a $25 billion cash injection is needed to keep Petrotrin afloat. Petrotrin also needs to improve the integrity of its assets, estimated to cost around $7 billion to prevent oil leaks for example. This is indeed a dying company.
An unfortunate circumstance is that now the company is apparently bordering on insolvency, as it has been operational only due to its non-payment of taxes, and the Government’s guarantees of short-term loans.
The Government had commissioned the now termed Lashley Report and a strategic review and transition report from McKinsey and Company Inc. After the Lashley Report was received by the energy sub-committee of the Cabinet, it was passed to the ministries of energy and finance and Petrotrin for deeper reviews and analysis, following which a new board was appointed to come up with a plan to turn the company around.
The Lashley Report recommended splitting the company into three divisions: land-based production; its marine operation, Trinmar; and refining and marketing. Energy Minister Franklin Khan had said no options are off the table, but the report failed to propose staffing cuts and steered clear of privatisation. These were glaring weaknesses in the Lashley recommendations. Is it because Lashley assumed that both options would meet trade union resistance? The restructuring proposal would also prove inconsequential.
In September 2017 Cabinet had agreed that the company engage the recognised majority union to discuss cost reduction and survival strategies.
The Prime Minister claims he had formally invited Roget for discussions in an attempt to work out a way forward but the invitation was declined. The union was also apparently invited to sit on the board, and that too was declined. When Government hosted the Spotlight on the Energy Sector at the Hyatt Regency Trinidad, the union once again declined the Government’s invitation.
I seriously question the union's motives in its unavailability to consult and participate in good faith in discussions to find workable solutions for such an important state-sector company. Was this the best representation the union could have made in the interest of its members and our citizens? Was there sufficient consultation to generate the best ideas given the real-time situation at Petrotrin?
At the worker level, we all should sympathise and offer our collective support as their lives will be altered due to decisions made by others. Given the vacuum created, and the absence of business suggestions to offer alternative opportunities, we would be left with higher unemployment and affected communities.
The Government has now made a bold poker move by “bluffing” the union when the PM publicly offered to sell Petrotrin’s refining assets to the OWTU. This offer should not have surprised anyone, as all reports dealt with the asset integrity of the company, given that the plant is close to 100 years old and carries little, if any, value on Petrotrin's books. Mothballing the plant would simply not be a strategic economic option, and therefore its sale to a private operator was always on the cards.
The question then is, if the refinery is sold, would the successor company inherit the terms and conditions of the collective agreements? In other words, would any new refining company be viewed as a legal successor to Petrotrin.
This move I think is a well played one, as it now challenges the union to “put its money where its mouth is”. It also provides the Government with the public relations and politically defensive cover of being worker sensitive, while at the same time putting the union into the space to do what they have been calling on Government to make happen.
What is now very clear is that the Petrotrin refinery is not too big to fail, as we have survived both the dismantling of CL Financial, as well as the closure of Caroni Ltd. This too we will survive.