Trinidad and Tobago's distressed state-owned Petrotrin is closing its 168,000 b/d Pointe-a-Pierre refinery and will import refined products to meet demand.
Petrotrin now plans to shift its focus upstream and export crude.
The decommissioning of the century-old refinery, to begin on 1 October, is a consequence of mounting losses and high debts, the company said.
Petrotrin has imported increasing volumes of crude to supply the refinery as domestic production declines.
The plan to close the refinery was announced a few days after Trinidad struck a preliminary deal to import natural gas from Venezuela. The controversial agreement is considered vital to maintaining Trinidad's gas-based industries, including LNG.
Trinidad's crude production averaged 63,350 b/d in first half 2018, 7.5pc less than a year earlier, and half of 2006 output, according to energy ministry data. Other local crude producers besides Petrotrin include BP, Billiton and Perenco. The main crude export is 40°API Galeota Mix.
Petrotrin's crude imports – led by Russian Urals – averaged 83,000 b/d in January-June 2018, marginally less than a year earlier. Other imported grades include Gabon's Oguendjo, Brazil's Lula and Roncador, and Colombia's Vasconia.
After the shutdown, Petrotrin expects to import 25,000 b/d of refined products.
The refinery's fate was foretold by a never-completed 40,000 b/d ultra-low sulfur diesel unit, which was deemed critical to meeting stiffer local and international quality requirements, including January 2020 marine fuel sulfur content regulation. The ULSD plant was estimated to cost $200mn in 2009 when Petrotrin contracted Korea's Samsung Engineering to deliver the project. Petrotrin cancelled the deal in 2016 after the energy ministry said the partially competed unit was defective. But it had already spent $421mn on the plant, and said it would need another $300mn to complete it.
Petrotrin has lost about $1.25bn in the last five years, and owes the government $462mn in taxes and royalties. The firm says it needs a cash injection of $3.9bn to stay alive, "and even if it got this, left as it is, it is projected to continue losing about $310mn/yr."
The company's immediate financial challenges include cash to meet a payment of $850mn to Bank of America this month. It is also due to pay $750mn to Deutsche Bank Canada in 2022. It is not yet clear whether the company and the government will seek to reschedule these obligations.
The government had originally planned to restructure Petrotrin with private-sector investment. But no local or foreign interests were willing to join the government in running the company "because of the poor state of its finances and the apparent lack of a strategy to make it viable," an energy ministry official told Argus late yesterday.
"With the termination of the refining operations and the redesign of exploration and production, Petrotrin will now be able to independently finance all of its debt and become a sustainable business," company chairman Wilfred Espinet said in announcing the refinery's shutdown late yesterday.
Anticipating the announcement, energy minister Franklin Khan said on 27 August that Petrotrin "cannot continue as the company has serious systemic, structural and operational issues which must be dealt with. If Petrotrin is not handled properly, it could bankrupt this country…. The company is approaching a black hole…we have to do something quickly."
Trinidad's energy chamber – an influential trade association for the country's energy and petrochemical sectors - says it is concerned by the fallout and impact the closure of Petrotrin's refinery will have on its members.
"We understand the economics behind the decision. It's obviously a very sad day. It's a very tough decision that had to be made," the chamber's chief executive Thackwray Driver said.
The shutdown will result in 1,700 layoffs. The oil workers trade union OWTU was told in a meeting yesterday of three options facing Petrotrin - have the company continue operations as it is, run a scaled-down version of Petrotrin or shut down the refinery, union president Ancel Roget said.
Petrotrin's problems "were simply an issue of poor management," and the refinery shutdown will hurt the country, Roget said. "There will be a multiplier effect as a significant number of people depend on this company."
