Seepersad-Bachan: How will Heritage pay its debts?

Former energy minister Carolyn Seepersad-Bachan is questioning if state oil company Heritage Petroleum can meet its debts as it chooses to store rather than sell its product until the world oil market stabilises and prices are better.

Heritage inherited a multi-million dollar debt obligation in the form of a US-bond, which it inherited from Petrotrin. Foreign exchange earned by the company is also used by its sister, Paria Fuel Trading, to pay for the domestic supply of fuel, which now has to be imported since the Pointe-a-Pierre refinery was shuttered in 2018. The company made the decision following Monday's US benchmark oil price collapse, with a barrel of oil dropping at one point to -US$38.

“We are in a bind to pay this debt. A perfect situation could have been if (TT) could have bought the oil from Cushing (the US storage hub in Cushing, Oklahoma) and used it to make product, even to service the local and Caricom markets. But we are short-sighted in our (strategy),” the political leader of the Congress of the People said.

UNC deputy leader David Lee said the country is in treacherous times.

Even as oil prices continue to slump, Lee noted that gas prices were also down from the budgeted price of US$1.80 per mmbtu.

“Given this and the situation with covid19, the drop in oil prices paints a grim picture for the government and the country, especially as (the State) have to provide relief for people during this period.” He suggested that while it might be inevitable that the government will have to dip into the Heritage and Stabilisation Fund, it should first avail itself upon the resources allotted to the country from multi-lateral organisations.

Movement for Social Justice Leader David Abdulah said the implications of depressed oil prices, including this latest WTI collapse, is that the country’s foreign exchange earnings have been severely reduced – and consequently, government revenue.

“This is happening in the midst of economic shutdown because of the covid19 pandemic (and it) is going to stress our economy. It therefore requires very creative thinking by the national economic recovery team (announced last week by the Prime Minister) to address or find solution for stabilisation, recovery and growth, while trying to achieve diversification and transformation of the economy as well as maintaining decent jobs.”

It’s a huge challenge, he said, but also a huge opportunity.