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Ending Petrotrin’s ‘ward’ status
Prime Minister Keith Rowley last week received a comprehensive report on the operations of wholly state-owned Petrotrin, which was said to have included recommendations for the restructuring of the integrated energy company.
The report came from a seven-member committee that was headed by Selwyn Lashley, who is the experienced permanent secretary in the Ministry of Energy and included former CEO of bpTT, Robert Riley and two representatives of the Oilfields Workers Trade Union (OWTU).
It is ominous that the Petrotrin review committee has agreed to remain empanelled on assignment with Cabinet until December 31, as this suggests that the process of the Cabinet taking a decision on the restructuring of Petrotrin is likely to take at least another six months.
Extending the life of the committee until the end of this year sends an unfortunate signal that the Government does not intend to treat the future of Petrotrin with the urgency that the financially troubled company requires.
And there is no doubt that Petrotrin require critical if not intensive care.
No lesser person than Prime Minister Rowley himself told the nation in an address on January 11 that Petrotrin owes the Treasury $1.2 billion in unpaid taxes and that in its current state, the company is “somewhat of a ward of the national treasury, heavily dependent on the taxpayer, who is already struggling to make ends meet”.
Dr Rowley, who was born in Tobago, must know that his description of Petrotrin as somewhat of a “ward” of T&T taxpayers is significant, given the derogatory inference of the word dating back to the 19th century relationship between Tobago and Trinidad, and its definition suggesting that the company is incapable of managing its own affairs and needs to be placed under the protection of a guardian.
It is hoped, then, that all of the recommendations of the committee point to changing Petrotrin’s ward status by ensuring that Petrotrin is no longer “heavily dependent on the taxpayer, who is already struggling to make ends meet”.
Petrotrin’s $13 billion debt burden, its ballooning debt service payments, its out-of-control employee costs and its serious cash-flow problems—indicated by its inability to pay Government the $1.2 billion in taxes it owes—are all indicative of a company in need of a major capital injection.
Petrotrin also needs billions of dollars to remediate its decrepit pipeline and storage infrastructure and to boost production of oil both by enhanced recovery and to conduct the necessary drilling, especially in the south-west Soldado field.
Given the fact that Petrotrin’s owner, corporation sole, is “struggling to make ends meet,” one of the obvious options for the company’s future is for the Government to divest some or all of its 100 per cent stake in the oil producer and refiner to an oil company that would bring both capital and industry expertise.
The need for new capital at Petrotrin is acute because, in its April 25 downgrade of T&T sovereign debt rating to junk status, Moody’s cited as one of the factors that could lead to a further downgrade “the possibility that Government support in the form of loan guarantees to Petrotrin could be higher than we currently assume, would also add to downward pressure…”
Refinancing the US$850 million ($5.7 billion) bullet payment Petrotrin must pay in 2019 without introducing new equity to company is simply kicking the oil can down the road at a time when T&T’s nationalised energy sector—especially Petrotrin and National Petroleum, the distributor of fuels—are in need of decisive and courageous action.
While the introduction of private capital at Petrotrin will be stoutly resisted by the representative trade union, the OWTU, the Government needs to weigh the larger national interests, as well as the interests of the company’s workers.