I RECENTLY chronicled this administration’s calculated avoidance of parliamentary scrutiny on Petrotrin, including their failure for almost two years to convene a Joint Select Committee (JSC) on Energy.
And when they did hold a meeting, they adamantly refused to discuss closure of the refinery, the most disastrous decision in Trinidad and Tobago since Independence. The Prime Minister and his Finance Minister obviously want to hide from the monumental mess they have made.
As someone closely following the global energy revolution, I was not surprised that none of the big names touted, like Shell and BP, were among the bidders for Petrotrin. No one who understands the direction of the industry would want to buy a refinery now.
“The end for oil is nigh,” said Citigroup’s Seth Kleinman in 2017, one of the world’s top energy analysts who quit his Wall Street job for the renewables industry in Costa Rica. Oil super-majors also see the future and are getting deeper into renewables. Between 2017 and 2018 Exxon, Shell, Chevron, BP and Total generated combined investment of US$44.6 billion in renewable energy. But our senior ostriches, Keith Rowley and Colm Imbert, have refused to acknowledge the “existential crisis in the oil industry”.
It will not go away! The International Energy Agency sees oil demand peaking next year, and then declining by 23 per cent over the next 15 years. Bloomberg NEF says electric and hydrogen vehicles will reduce demand for refinery products like gasoline and diesel over the next ten to 20 years. And, hear this! A report led by think-tank Carbon Tracker, examined 492 oil refineries, 94 per cent of global capacity, and found that 21 per cent of refineries are already unprofitable. It estimates that a quarter of the world’s oil refineries face closure by 2035 as countries meet their greenhouse gas emissions reduction targets. This will be accompanied by a surge in electric vehicles. Companies like Shell, Total, Chevron, Sinopec, etc, could see refining profits fall by 70 per cent, says the report, which concludes “falling oil demand would drive the least profitable refineries out of business”. But Rowley and Imbert thought they could close down our refinery and put it on the market to be gobbled up. Such ignorance! Such mucking up!
Their bid offer was a disaster. Who were the 77 original bidders who vanished, leaving only three with compliant binding offers? They had to be speculators who, recognising the current ecology, were looking for bargains in a fire sale. And of the final three, only OWTU/Patriotic, it is alleged, offered to come up with the US$700 million up-front payment. The other two couldn’t. Raising high capital for a small refinery is now extremely difficult. The market knows the reality.
Indeed, recognising the difficulties, and to save face, the Government, though experiencing foreign exchange shortages, allowed a three-year moratorium on payments and a ten-year repayment period, without OWTU/Patriotic even asking, says the Finance Minister, pretending to be magnanimous but in fact driven by desperation to restart the refinery and recover from the monumental mess they made by closing it down. The Government has virtually given Petrotrin to OWTU/Patriotic, Rowley now assuring them of fullest cooperation. He has no choice. Nobody else wants the refinery as a serious, long-term investment!
But while dinosaurs dither, the global energy revolution accelerates. Since 2010, the cost of solar energy has fallen by 73 per cent, wind by 22 per cent and lithium-ion batteries for electric cars by 80 per cent, making renewables affordable for the vast global market. But for four wasted years, this Rowley/Imbert combination lost the opportunity to attract green investment which reached US$288.9 billion last year, far exceeding oil and gas. Renewables also created 11 million jobs by the end of last year, solar and wind industries each now creating jobs 12 times faster than the rest of the US economy. They created not a single job here!
In a letter to the editor asking, “Why was Petrotrin closed”, accountant PS Morales, after reading Petrotrin’s 2018 financial report, concludes that if certain one-time, non-recurring adjustments are removed from the accounts, “Petrotrin is or could be a viable operation”.
Such items are: severance pay provision—$1.9 billion; impairment of property provision—$15.5 billion; and loan interest—$1.1 billion. For example, folks, a severance pay provision of $1.9 billion would not have arisen had the decision not been taken to shut down Petrotrin; and impairment arises from under-performing assets which could be managed by divesting, restructuring or disposal. The net operations of Petrotrin were stated at a loss of $15.6 billion before taxes. So, as Morales concludes, “with the removal of the above book adjustments totalling $18.5 billion there would be a conversion of the negative result to a profit of $2.9 billion”. Also, between 2010 and 2016, Petrotrin had made payments of $20.2 billion in taxes to the treasury.
Why then the shutdown?! I maintain we should have kept the refinery producing if only for the local market as we transition to a greener economy which could have absorbed jobs displaced by the rationalisation of Petrotrin. Most critically, we would have preserved our energy security and saved precious, dwindling foreign exchange. Imagine, we now spend US250 million annually to import fuel that Petrotrin once produced! Unforgivable! Rowley and Imbert have reduced a living, working refinery to scrap iron rusting at Pointe-a-Pierre.
What a legacy! What a monumental mess!