Oando PLC gets Cabinet nod to make deal for refinery

OANDO PLC has been selected as the preferred bidder for the lease of the Guaracara refinery, as announced by Minister of Energy Stuart Young. He said the decision was primarily based on Oando's strong financial track record, highlighting its $1.5 billion acquisition of ConocoPhillips' assets in Nigeria.

Speaking at a media briefing at Whitehall on February 27, Young said Cabinet had taken "considerable time" discussing the decision.

"We had robust conversations and interrogations," he said, emphasising the significance of the decision.

Young provided context on the decline of Petrotrin, lamenting when government took office in 2015. He said Petrotrin was struggling with losses of $361.5 million in 2014, which escalated to $1.2 billion by 2016.

During this period, domestic oil production sharply dropped from 144,000 barrels per day in 2005 to 78,000 barrels by 2015.

"The situation worsened in the years that followed, dropping further to 42,000 barrels per day by 2016. The refinery, capable of processing 175,000 barrels of oil per day, found itself unable to meet production demands as oil output fell drastically."

He said that led to importing crude oil, adding to the company's losses.

"The increasing import costs of crude contributed to a loss of $5 to $7 per barrel processed at the refinery."

Young said In 2016, Petrotrin registered a staggering loss of $4.3 billion, bringing the cumulative losses over a three-year period to approximately $5.9 billion. With a looming bond payment of US$850 million due in August 2019, "the situation became unsustainable."

He described the decision to lease the refinery to Oando as a pivotal step in addressing the challenges in the oil sector.

"The government believes that Oando's financial strength and expertise will help revitalise the refinery and contribute to the country's energy future."

He said in February 2017, Cabinet made the decision to create the Lashley Committee to review the operations at the refinery and make recommendations for its restructuring. By November 2017, the committee recommended it be restructured.

"The government maintained full transparency regarding the restructuring and the creation of new entities such as TPHL, Heritage, Paria and Guaracara."

By October 2018, Cabinet approved officials from the Ministry of Finance with the specific mandate to address the restructuring. At that time, rating agencies warned if Petrotrin was not restructured, the US$850 million bond could not be refinanced, which would have affected the country's rating.

In November 2018, the decision was made to restructure the company and establish Trinidad Petroleum Holdings Ltd (TPHL) as a holding company. Paria was created to handle fuel supply, importing and exporting 50 per cent of the fuel, while the other 50 per cent remained for domestic consumption.

Despite the refinery's closure, Young said fuel continued to be available at pumps across the country without interruption.

He said both Heritage and Paria had been profitable, with Heritage paying billions in royalty taxes and contributing to the repayment of the US$850 million bond, which was refinanced without a government guarantee.

Speaking on expressions of interest in 2019, Young said the government invited proposals from around the world to restart the refinery and the first attempt came from Patriotic Energies Ltd, a company set up by the OWTU.

But Young said after a period of exclusivity, the deal was unable to be finalised despite the government's efforts to assist.

"The government remains committed to ensuring the refinery is restarted by a capable operator, but it will not return to the costly task of running the refinery itself."

Young explained the government pursued potential opportunities through unsolicited proposals from international operators and in 2021/2022, attempts were made through Project Calypso, where Quanton Consortium LLC showed interest but was unable to raise the necessary capital.

"The government is determined to find the right entity to restart the refinery and ensure it becomes a viable and sustainable operation."

From 2023 to 2024, unsolicited proposals were received through the expression of interest process, with a cut-off date of May 2024. During this time, a total of ten parties were invited to participate.

"One of the entities that showed interest and visited the refinery was Jindal Steel and Power, a company based in India."

He accused the opposition of relentlessly attacking the said Jindal family.

"The family matriarch is the fourth wealthiest woman in the world and I believe the opposition's attacks were responsible for the deal not working out."

By May 2024, the committee established to evaluate companies that show interest had ten potential interests.

"The committee assessed each proposal, meeting with every entity involved, some more than once."

He said during the process, Patriotic Energy Services Company submitted a fraudulent wire transfer document claiming a transfer of US$1.5 billion, prompting TPHL and Heritage Petroleum to pursue the matter with law enforcement.

By September 2024, the committee submitted its recommendations to Cabinet. The findings included questions about the status of Oando.

"It was noted that Oando had been delisted from both the Johannesburg Stock Exchange in South Africa and the Nigerian Stock Exchange in 2024 due to late filings of their financials," Young said both delistings were resolved.

Young said Oando also acquired operations from another smaller multi-national oil and gas company.

On the findings of the evaluation committee, Young said it was noted both Oando and CRO (another entity) proposed a lease-type arrangement for a stipulated period.

He described the financing process as twofold. First, an asset integrity report would be conducted, where experts would assess the refinery and its assets to determine what needed to be done to restart it.

The second part of the process involved securing the capital needed for the restart and developing a realistic operational plan.

"Oando scored higher due to its track record of raising funds in the upstream sector. Those two deals I mentioned – the $1.5 billion and the $750 million – helped it rate higher," Young explained.

After considering all factors, the evaluation committee recommended Oando as the preferred bidder for the lease. Cabinet then deliberated and accepted the committee's recommendation.

"We have also noted the proposal for the lease-type commercial arrangement, which sees the refinery operating alongside Paria Fuel Trading Company Ltd, allowing access to Paria's associated logistical assets through a commercial arrangement between Paria and Oando."

Young said the lease arrangement allowed the government to retain ownership while granting usage rights to the preferred bidder, generating consistent revenue.

"We’re not giving up the refinery. Some entities along the way wanted to acquire Paria for bunkering purposes, not to restart the refinery."

He added the arrangement would reduce the state's burden in maintaining and upgrading the asset and create flexibility for future developments. Young said Cabinet had informed TPHL of its non-objection to proceeding with discussions with Oando.

"The ball is now in TPHL's court," Young concluded. "The Cabinet is satisfied with this decision, and I urge the public to stay informed and make decisions with the country's future in mind."

Responding to the media on the lease, Young stressed the refinery was not for sale and emphasised the government was concerned with investing in restarting it. He said specific details about the lease arrangement were yet to be worked out and were not part of the evaluation process.

"Key considerations, such as the rate for electricity, gas, and water supply, were discussed but remain to be finalised."

On the question of local labour involvement, he said most of the labour needs could be sourced locally. While foreign subcontractors might be required for specific tasks.

Responding to the briefing, Opposition Leader Kamla Persad-Bissessar, in a WhatsApp statement, said Young had been out of his depth for the last ten years.

She referred to Young as an unremarkable junior lawyer and claimed "all metrics" in the energy sector were down.

"The entire country knows that this disposal of the refinery on the eve of a general election is a last-gasp corrupt deal to fill the pockets of this outgoing

government."

Persad-Bissessar's statement said this is the government's third attempt to gift the refinery to "disreputable persons." .

"The UNC will not honour any agreement this government enters into regarding the Pointe-à-Pierre refinery and we guarantee the UNC will pursue investigations against everyone who participates in the theft of the refinery’s assets."

She concluded the UNC is "committed to restarting the Petrotrin refinery" in consultation with local stakeholders following the general elections.