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Petrotrin’s battle for survival
To say that state-owned Petrotrin finds itself in an interesting predicament is a bit of an understatement. That said, few people—both inside and outside of the oil industry—can truly grasp the size and magnitude of the problems the Pointe-a-Pierre-based oil refinery must contend with to ensure its very survival.
To really paint the picture of Petrotrin’s quagmire to the country involves exploring some statistics on the company that are jarring and would, quite clearly, elucidate in part its challenges. Permit me to do some crude—but instructive—number-crunching on a company whose viability and sustainability should definitely be called into question at this time.
As it stands today, Petrotrin is estimated to have somewhere between 3,000 and 5,000 employees (inclusive of temporary and contract labour). The company’s employee bill (inclusive of salaries and benefits) is also estimated to be in or around $2 billion.
Additionally, the employee bill is said to be more than half of the company’s total expenses.
Quite obviously, something about this scenario, from a purely commercial perspective, makes little sense. Firstly, in a highly capital-intensive environment the fact that the employee bill as a percentage of total expenses is over 50 per cent is perplexing, suggesting that (and as stated by numerous commentators before) the company is heavily overstaffed.
If one were to do simple “back of the envelope” calculations, it would suggest that on average, (again this is a very crude average) an employee at Petrotrin earns over $33,000 per month or roughly $400,000 per year. By any industry standard—even in the highest reaches of Silicon Valley perhaps—this seems to be unreasonably high. It is no secret that wages at Petrotrin are not on par with comparative jobs at other energy companies—they are higher.
Some might argue that it is fair given all the considerations of the job, but for a company with a depleted balance sheet, how can it possibly be sustainable?
In fact, maintaining such a high employee bill in the face of a company that has been making losses and unable to remit to the government its fair share (the prime minister is on record as stating that the company owes the Treasury over $2.75 billion in unpaid taxes and royalties) should give all stakeholders of Petrotrin—including and especially the taxpayers of T&T—reason for pause.
Tough decisions around labour at the company will eventually have to be made.
The OWTU has already stated its position that “not a man should be sent home” but, in the final analysis, what good would taking such a stance do for the company?
It should also be noted that as part of the last collective bargaining stand-off between the company and the union which nearly precipitated an ill-conceived strike, the union agreed to, as a condition of the settlement, increase productivity amongst its members. It’s anyone’s guess whether such “productivity gains” have occurred.
Taking a look at the company’s cash position is also telling.
Between 2014 and 2016, Petrotrin’s cash moved from over $1.7 billion to roughly $780 million, a decline of over 50 per cent. That a company’s cash position could deplete so rapidly over a two-year period is frightening. That said, given the company’s employee bill, one can speculate as to where some of Petrotrin’s cash would be going.
Further, with a debt-loaded balance sheet, Petrotrin would find itself hard pressed to raise funds to engage in any meaningful development projects (Moody’s downgraded the company’s credit ratings in 2016) especially much needed upgrades on its refinery assets.
Petrotrin president Fitzroy Harewood has said that asset integrity at the company remains its biggest challenge.
In fact, Harewood stated at an Energy Chamber luncheon in 2017 that it would cost the company upward of $16 billion to address all the problems with asset integrity with the company’s tanks, pipelines, berths and other assets.
A note on Petrotrin’s debt: The company owes US$1.6 billion in bonds. If the government were to take over the debt through a guarantee or actual cash, it means ostensibly that the population would be inheriting that amount which, in turn, means that each citizen of T&T would owe roughly US $1,231 on Petrotrin’s behalf.
Space does not permit, but the Petrotrin rabbit hole goes deeper still.
Issues of refinery utilisation, costs associated with importing crude, and other internal controls at the company raise another host of questions about turning the Petrotrin ship around.
All told, the Wilfred Espinet-led board has its work cut out for it. The OWTU must as well engage with a view to restructuring the company and putting it on a sustainable course rather than the predictable path of noise and rabble rousing.
Failure by the union to consider some obvious solutions could lead to the very demise of the hand that feeds it. If positions on either side become entrenched, then the entire nation should batten down the hatches, because this one is going to get ugly.
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