This was on Wednesday revealed by David Small, chairman of the Joint Select Committee (JSC) on State Enterprises. He was speaking during a press conference, which was held at the J Hamilton Maurice Room, Office of the Parliament.
Small advised that the company put a limit to project costs with the contractors and should the costs exceed that cap, it would be at the expense of the contractor and not the company.
This came as a result of the JSC’s concern about the delay in the completion of the Ultra-Low Sulphur Diesel project.
According to the report, the project commenced in 2009 with an estimated completion date of 2012. The contract went to Samsung Engineering and Construction at a cost of US$220 million which was later amended to US$260 million.
A number of problems developed with the programme and there were delays. The plant was close to completion in 2013 at 98 per cent. However, routine pre-commissioning activities in September 2013 revealed that several structural members were badly designed. Additionally, it was discovered that the wrong seismic resistance had been specified: 0.3g instead of 0.75g. In September 2014, the Company sought joint remediation of both the structural and seismic deficiencies. Samsung committed to finding a solution to the problem, however, little progress was made and in December 2015, the Board decided to terminate the contract with Samsung.
The report stated that Petrotrin is in the process of engaging a replacement contractor. The company is seeking an alternative solution to strengthen the plant to the appropriate seismic resistance, base isolation which was suggested by Samsung is not an option. Officials indicated a new completion date—at the end of this year, 2017.
Approximately $3 billion has been spent to date on the project.
Petrotrin admitted that it experienced losses and challenges in several other projects including the South-West Soldado Project, the Fluid Catalytic Cracking Unit and the Gas Optimisation Programme.
The JSC report disclosed that the state-owned oil and gas company now stands at a TT$13.28 billion debt and a US$850 million bond to be paid in two years time.
Ronald Huff, Petrotrin’s Chief Financial Officer told the Commission on the subject of the US$850 million bond, which is due August 2019, that the use of those proceeds were primarily directed towards capital expenditures, specifically the gas optimisation project in all the plants that were involved in that project.
Just on Wednesday night, hours after JSC’s report on Petrotrin, Prime Minister Dr Keith Rowley disclosed that after 2007 Petrotrin’s debt burden significantly increased—largely, due to two external loans, namely a US$ 750 million loan contracted in 2007 and the US$ 850 million loan, contracted in 2009.
Rowley added that a dramatic slump in crude oil prices, combined with an ongoing decline in refinery margins and declining local oil production led to a more than 50 per cent decrease in the Company’s revenues, from TT$37 billion in 2012 to TT$16 billion in 2016.
Further, the decline in local oil production increased the requirement for significant importation of foreign crude oil to service the Point-a-Pierre refinery. This expense, coupled with high debt servicing costs, and high operating expenditures (notwithstanding the drop in oil production) resulted in the company registering an after tax loss of TT$ 819 million in FY 2015 and a projected loss of about TT $ 600 million in FY 2016.
The prime minister disclosed that the Cash flow difficulties have also led to Petrotrin’s large arrears of payments of royalties and taxes, which are of the order of $1.2 billion, (net of outstanding fuel subsidies).
“In other words, when you net off the money owed by the State to Petrotrin at this time for the fuel subsidy against the royalties and taxes belonging to the state but withheld by Petrotrin, the company currently owes the Treasury $1.2 billion in unpaid taxes!” Rowley said.