Imbert: T&T refinery to start earlier than projected

(Trinidad Guardian) Gov­ern­ment ex­pects Pa­tri­ot­ic En­er­gies and Tech­nolo­gies Ltd to be able to restart the for­mer Petrotrin re­fin­ery in less than 12 months since it won’t im­me­di­ate­ly have to raise its (US)$700 mil­lion pay­ment.

And Gov­ern­ment is al­so ex­pect­ing that the re­fin­ery won’t have the same num­ber of work­ers as Petrotrin had, Fi­nance Min­is­ter Colm Im­bert al­so con­firmed. He al­so said it’s ex­pect­ed Pa­tri­ot­ic will spend the “more re­al­is­tic fig­ure” of (US)$500 mil­lion to re­fur­bish the re­fin­ery in the first year.

Im­bert host­ed a me­dia brief­ing at his Twin Tow­ers of­fice in Port-of-Spain to clar­i­fy the sit­u­a­tion re­gard­ing Pa­tri­ot­ic’s po­si­tion as the State’s pre­ferred bid­der for the Pointe a Pierre re­fin­ery. Im­bert sought to jus­ti­fy the se­lec­tion of Pa­tri­ot­ic which was formed by the Oil­field Work­ers Trade Union.

The Gov­ern­ment an­nounced the choice last Fri­day. Pa­tri­ot­ic was grant­ed a three- year mora­to­ri­um on all pay­ments of prin­ci­pal and in­ter­est, to­wards re­fin­ery pur­chase and a fur­ther 10 years to com­plete the pay­ment of the sum of US$700 mil­lion it of­fered for the re­fin­ery. Pa­tri­ot­ic now has a month to present a “sat­is­fac­to­ry and com­pre­hen­sive” work plan on how it in­tends to com­plete the process go­ing for­ward, con­cern­ing 10 key de­liv­er­ables.

Im­bert said when the process be­gan, cri­te­ria for a lessor/buy­er in­clud­ed that restart­ing of the re­fin­ery should oc­cur with­in the first half of 2020, con­ti­nu­ity of fu­el sup­port for T&T and oth­er fac­tors.

Im­bert said 77 bids were ini­tial­ly re­ceived. This was nar­rowed to 25 par­ties. Eight sub­mit­ted non-bind­ing of­fers. Two com­pa­nies (BB En­er­gy and Sol) didn’t make it since they lacked pro­pos­als to restart the re­fin­ery. An­oth­er com­pa­ny dropped out as it lacked re­fin­ery ex­pe­ri­ence. Among re­main­ing com­pa­nies, Edge­wood Hold­ings didn’t go for­ward since it couldn’t find a re­fin­ery op­er­at­ing part­ner

When bids closed in Au­gust, fi­nal bid­ders were for­eign com­pa­nies Be­owulf En­er­gy and Klesh and lo­cal en­ti­ty, Pa­tri­ot­ic.

Im­bert said Be­owulf had two for­mer Petrotrin man­agers among per­son­nel, Klesh had a re­fin­ery in Ger­many and Pa­tri­ot­ic had lo­cal ex­pe­ri­ence. Each stat­ed they’d se­cure fi­nanc­ing in the next phase of the process.

Be­owulf said they had to to do due dili­gence for up to six months to as­cer­tain what would be need­ed to restart the re­fin­ery and a fur­ther 15 months – max­i­mum 21- to restart. Klesh stat­ed they’d restart “as soon as pos­si­ble” and Pa­tri­ot­ic gave 12 months.

All gave fig­ures for re­pair/re­fur­bish­ing. Not­ing last Sun­day’s re­port­ed fig­ure of $1.4bil­lion which Pa­tri­ot­ic may need, Im­bert said a more re­al­is­tic fig­ure was (US) $500m in the first year to deal with re­fur­bish­ing, en­vi­ron­men­tal is­sues and work­ing cap­i­tal.

He said Cab­i­net de­cid­ed on Pa­tri­ot­ic since it had the most “rea­son­able” re­sponse with most of the fac­tors. Pa­tri­ot­ic al­so had the most sig­nif­i­cant sum, he not­ed. Klesh of­fered noth­ing and Be­owulf of­fered (US)$42,000 month­ly over 15 years.

The se­lec­tion wasn’t sub­ject to the Pro­cure­ment Act which is not yet in force. It was done via Trinidad Pe­tro­le­um Hold­ings Com­pa­ny Ltd’s ten­der reg­u­la­tions.

Im­bert said Cab­i­net de­cid­ed to de­fer Pa­tri­ot­ic’s (US)$700 mil­lion pay­ment when the com­pa­ny was se­lect­ed re­cent­ly, “Pa­tri­ot­ic didn’t ask for it. We de­cid­ed we could give them terms as it would guar­an­tee the re­fin­ery’s restart if it wasn’t bur­dened by the need to come up with that cash im­me­di­ate­ly. “

“We al­so had to take in­to con­text the re­fin­ery re­fur­bish­ment cost. We de­cid­ed we wouldn’t re­quire im­me­di­ate pay­ment so Pa­tri­ot­ic could get on with the busi­ness of re­fur­bish­ing and restart­ing,” he said,

Since re­fin­ery prod­ucts have a big ef­fect on na­tion­al GDP, he said get­ting the re­fin­ery restart­ed was a top pri­or­i­ty. Gov­ern­ment felt if Pa­tri­ot­ic was re­lieved of the re­spon­si­bil­i­ty to se­cure the cash for pur­chase, they’d be in a bet­ter po­si­tion to restart it, “Now we’ve in­di­cat­ed we’re not rush­ing Pa­tri­ot­ic to come up with the (US)$700m im­me­di­ate­ly, we ex­pect they’d be able to restart the re­fin­ery in less than 12 months,” he added.

He said Pa­tri­ot­ic had said they need­ed 12 months, but Gov­ern­ment hopes they can short­en that.

Im­bert ac­knowl­edged many had asked if the re­fin­ery was so un­prof­itable over the years, why a new en­ti­ty could make a prof­it.

“There’s a sim­ple an­swer: the re­fin­ery was sad­dled with bil­lions in debt, which was a drain on rev­enue. Any­one tak­ing it over now won’t have to car­ry that debt. It al­so had high op­er­at­ing costs and was over­staffed and nev­er able to make a suit­able prof­it be­cause of its very high op­er­at­ing costs. We don’t ex­pect any en­ti­ty in­clud­ing Pa­tri­ot­ic to op­er­ate the re­fin­ery with the same num­ber of per­sons or the same cost struc­ture that was there be­fore,”

“The two in­gre­di­ents for suc­cess are that re­fin­ery costs be far less and it shouldn’t be sad­dled with a heavy debt bur­den. We’d ex­pect they wouldn’t have a high op­er­at­ing cost – they have a good chance ….” Im­bert added.

He said “if the sit­u­a­tion goes through” Pa­tri­ot­ic will own the re­fin­ery, but – like with hous­es and banks – un­til Pa­tri­ot­ic pays off for the com­pa­ny, Gov­ern­ment would have a charge on the as­sets.

No word on Trafigu­ra as Pa­tri­ot­ic fi­nancier

On con­cerns the re­fin­ery was giv­en to a union whose mem­bers were once blamed for Petrotrin’s fail­ure, he said if Gov­ern­ment didn’t think Pa­tri­ot­ic couldn’t get the nec­es­sary ex­per­tise and cap­i­tal to run the re­fin­ery, it wouldn’t have been se­lect­ed.

“Based on in­for­ma­tion avail­able to us the union has as­sem­bled a team of ex­perts in var­i­ous fields, they’ve done their ‘home­work’, we wouldn’t have se­lect­ed them if we thought they hadn’t. They’ve been able to arrange to part­ner with one of the largest fu­el traders in the world on mar­ket­ing their prod­uct, they linked with well es­tab­lished fi­nan­cial in­sti­tu­tions in terms of fi­nanciers – so yes, we think they can do it,”

Im­bert said Pa­tri­ot­ic had sub­mit­ted in­for­ma­tion stat­ing they’d en­ter an arrange­ment with multi­na­tion­al com­mod­i­ty trad­er, Trafigu­ra. But he said there was no in­for­ma­tion on Trafigu­ra fi­nanc­ing Pa­tri­ot­ic, “That’s not a name I’ve heard in terms of fi­nanc­ing,”

He said the mem­o­ran­dum of un­der­stand­ing Pa­tri­ot­ic will sign with Trafigu­ra is on­ly for mar­ket­ing. Gov­ern­ment has asked Pa­tri­ot­ic to pro­duce the MOU to get more in­for­ma­tion, but at this time Paria Fu­el Trad­ing con­tin­ues im­port­ing fu­el. If there’s to be a tran­si­tion­al plan from Paria to Trafigu­ra, Gov­ern­ment will have to see it first, Im­bert added.

Say­ing Gov­ern­ment knows Pa­tri­ot­ic can op­er­ate the re­fin­ery as “they did it for years”, he said the com­pa­ny must pro­duce a plan of their se­nior man­age­ment to show ex­pe­ri­enced man­agers.

He stressed Gov­ern­ment gave Pa­tri­ot­ic a month to come up with a work­ing plan – con­firm the abil­i­ty to fi­nance start­up and re­fin­ery op­er­a­tions – but not to full fill the plan’s re­quire­ments.