Firstly, as a PETROTRIN employee for near ten years, this post is not about taking sides, defending or going on the defensive. There are not only two sides to everything, but many…
Yes, we know that the Company was not operating as optimal as it should have been and it has become a heavy drain on financial resources, but you also have to understand the history of the company from all the way before it became the ‘Petroleum Company of Trinidad and Tobago Limited’. PETROTRIN is the product of a merger between Trintopec and Trintoc (1993), and Trinmar Limited (2000). This means that it consists of Shell Trinidad Limited assets (since 1974), Texaco and Trinidad Tesoro (a Joint Venture from 1969); not to mention Trinidad Leaseholds Limited’s Cat Cracker Unit at Pointe-a-Pierre (1921). In other words, the Company is very old and has a lot of aged assets, particularly in the Pointe-a-Pierre Refinery.
To compound the issue of skyrocketing operating and maintenance costs of these aged assets, the Company has gone through its maturity stage several times over while existing in an industry with volatile markets and prices. I know the business students out here understand the natural lifecycle of a business. You know that whole ‘initial growth stage, its expansion stage as it moves into new markets, its mature operation stage, and its eventual decline’. Now think about this state-owned Company going through these stages, and then think about the past mergers and acquisitions the GoRTT* went through all those years ago. Why? Why take on depreciating assets when the predecessors most likely did evaluations and analyses to discover that their ventures no longer made economic sense?
The answer to that question is both simple and complicated. For the sake of sanity, I will continue on the side of simplicity. One, it would have made sense at the time when the prices of oil were climbing and the new company/companies had the privilege to feed into mega-markets. Two, saving jobs (oilfield workers) meant that they would have been buffering the economy and indirectly lessening unemployment levels, and by extension crime. Three, it would have served as a ‘fountain’ for micro-economies such as service providers, contractors, non-industrial businesses and even the community. Communities and businesses that develop around an industrial area – whether it is the oil and gas industry or not – do so because the opportunity existed for them to benefit financially through the provision of a product (food, clothes, grocery etc.) or service.
Moving forward a few years after the formation of PETROTRIN, there have been issues with project management / project development / project financing. Project-cost overruns, resulting from the miscalculating errors of ‘those who shall not be named’, added heavier burdens to the already budget-intensive Company. The Company is also bound by Collective Agreements with the Oilfield Workers’ Trade Union (OWTU) which it has to honour by law, even when certain commitments may cost the organisation millions during times of losses. It’s the ugly truth that cannot be denied.
How did the GoRTT* continue to support a venture for so many years with so many financial burdens in a volatile pricing industry? As you can see below, the list doesn’t look attractive.
- High maintenance costs
- High operating costs
- Payment and/or salary agreements
- Project cost overruns
- Pre-existing loans
- Other legally binding commitments
- Etc. etc. etc.
In the last few years, every government regime of Trinidad and Tobago (PNM / UNC / PPP) had to face the decision of whether to support the Company in order to keep it alive or not. However, none of them have ever opted to give in until now. Why is that? It’s because of the negative impact it would have had on the workers and the micro-economies at those points in time. To put it simply, protecting the workers and those small businesses would have indirectly buffered the economy by lessening unemployment levels, and by extension crime. Everything is linked in some way and what affects one thing, eventually trickles down to another. (Anand’s Low Price chose a bad time to target the Pointe-a-Pierre market.)
Sadly, given the most recent decision made by the GoRTT (see link), those same micro-economies are going to collapse after the restructuring the ‘Petroleum Company of Trinidad and Tobago’, and it would have a wider domino-effect on the nation as a whole. That is, unless the GoRTT has a top-secret, comprehensible plan to minimise such an occurrence. Either way, the decision they came to couldn’t have been an easy one, but it is what it is.
We’re forced to live, learn and grow in the face of adversity.
*GoRTT Government of the Republic of Trinidad and Tobago
Image source: Empower Business Coaching