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Petrotrin: An economic SoE needed

Monday, September 3, 2018

Having read closely two recent articles on the Petrotrin crisis written by Raffique Shah, I would like to add to the chorus of voices expressing grave concerns as to the economic future of Trinidad and Tobago in light of the impending financial meltdown of Petrotrin.

Apart from a public perspective in commenting on Petrotrin, I also have personal reasons for doing so. Growing up in a little village in close proximity to the heart of labour, Fyzabad, my first job was as a 14-year old labourer in the Forest Reserve Texaco Oilfield.

It was at a Labour Day celebration that I got exposed to one of my earliest heroes, Raffique Shah. I have never had the privilege of meeting the gentleman but his exploits excited me. It was no coincidence that the first job I applied for on leaving Iere High School was that of officer trainee in the Trinidad and Tobago Army. Alas, I did not pass muster and failed to emulate my hero. By the late 1970s, I joined in the chorus “Texaco Must Go” and was simplistically overjoyed when they left, as Trinidad and Tobago took “control of the commanding heights of its economy”.

It was a major neo-colonial step to abolishing “the Parasitic Oligarchy.”

My first legal job was as an attorney at law (LO13) in Trintoc and I rose swiftly through the ranks. In 1991, I obtained a scholarship, facilitated by Trintoc, to study International Commercial Transactions at New York University which led to my doctorate at the University of Cambridge.

Thus, my pain at the demise of Petrotrin is profound. Ageing infrastructure, environmental disasters, inefficient operations, manpower cost challenges, declining oil production and conflict- driven industrial relations climate; it is not a pretty picture.

Yet those negative factors dwarf in comparison to the debt crisis facing Petrotrin. “The 2019s, which have US$850m maturing on August 14 next year, were trading as low as 98.00 last week, down from 107 on January 2, according to MarketAxess data….With maturity date just a year away, efforts are now being made to find ways to address the sizable bond payment, not to mention other maturities such as US$750m in outstanding 2022s…. “They don’t have enough cash to meet the US$850m maturity that is due in August next year,” said Michael Roche, an emerging market fixed-income analyst at Seaport….Roche calculates that as of March 31, Petrotrin had just US$144m of cash against total debt of US$1.728bn…The government has recently appointed a new board with a mandate to bring Petrotrin back to profitability and improve performance, but that could take years (Banks talk to Petrotrin as clock ticks on hefty bond maturity, July 26, 2018, Nasdaq, By Paul Kilby). Now the financial sector is trembling at the prospect of 2019 and expressing optimism that “The government will do whatever is necessary to ensure that the bond payment due in 2019 is satisfied. This is a must, as the way this is handled will impact the sovereign and NGC (the National Gas Company of Trinidad) as global bond issuers also”(Kirby). Translate, taxpayers must pay. Another Clico on the horizon without the financial government largesse that existed at the time of the demise of Clico.

The chairman of Petrotrin, Wilfred Espinet, is quoted as saying that the debt owed is equivalent to US$2,000.00 for every man, woman and child. Mr Shah has called for radical surgery and suggested that a cut in payments, salaries and wages be applied to all employees and contractors and implemented on a pro-rata basis.

Unfortunately, in the face of this economic apocalypse, the board of Petrotrin has gone further and taken a decision to exit the refinery business and concentrate on its exploration and production activities. This would appear to be a bold move but the explanations given for the choice of this option remains opaque.

An exploration and production oil company with secondary reserves having a staff complement of 800 to produce 40,000 barrels of oil can only be an example of misplaced comedy. Can the board of directors indicate whether this staffing can be benchmarked against what exists at other companies with similar levels of production? Can the board of Petrotrin state what would be the expected cost of fuel at the pump in light of its decision to import fuel at world market prices, subject to Government intervention through a possible subsidy? Can the board of Petrotrin indicate what would be the expected social and economic consequences of its decision? Apart from the union, has the board of directors of Petrotrin indicated which other local entity, persons or organisations have been provided with the appropriate information to make a reasoned contribution to the future of Petrotrin?

Dr Rajendra Ramlogan is a Professor in Commercial and Environmental Law at the University of the West Indies.

Look for part II in
tomorrow’s T&T Guardian



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