Earlier this month, Prime Minister, Dr. the Honourable Keith Rowley, delivered an address to the nation. While the address touched on several economic issues facing the country, there was specific mention of the future of the energy sector and in particular, the role that the state oil company, Petrotrin, plays in the economy. Dr. Rowley stated, ‘Petrotrin has contributed significantly to the growth and development of Trinidad and Tobago but is now in need of fundamental restructuring, which cannot be put off any longer’.
According to the Prime Minister, despite producing approximately 50 per cent of the country’s crude oil, the state company is facing chronic financial difficulties which is leading to challenges in paying its taxes and royalties to the state in a timely manner.
Dr. Rowley indicated that Petrotrin currently owes approximately $2.75 billion of which $588 million is supplemental petroleum tax (SPT). SPT is only paid when the price of oil crosses $50. Petrotrin, despite the higher oil prices (now in the $60 range) has not paid the taxes to government. The consequence of this to the government is lower revenue. The Prime Minister has indicated that this will not be allowed to continue in 2018.
He went on to add that, ‘a Cabinet-appointed committee and a new board conducted various reviews of Petrotrin’s operations and identified many structural problems such as: an unwieldly operational structure and poor governance; declining crude oil production; dwindling productivity; escalating manpower costs; steadily increasing maintenance and capital costs; low refinery margins and poor asset quality’.
The committee found that the company stands to accrue $1.5 billion in losses over the next five years and huge risks exist from ageing assets and infrastructure.
Dr. Rowley also said that he received a series of specific presentations from the new Board to address Petrotrin’s many challenges in order to ensure its long-term sustainability. He reaffirmed that it was his intention to fix Petrotrin’s problems once and for all in 2018, so that the company can service its debt and taxes, thereby contributing to government’s revenue.