Home' Trinidad and Tobago Guardian : January 29th 2015 Contents JANUARY 2015 • WEEK FIVE www.guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG9
It is more than a year and a half
behind schedule and state-owned
Petrotrin has already spent in excess
of $3 billion on the project. Now
the company is revealing that its
ultra low sulphur diesel (ULSD) plant
cannot be commissioned because of struc-
tural and seismic concerns.
The company s acting vice president,
refining, Colin Ramesar, told the Business
Guardian there were technical issues which
Petrotrin was now trying to work out with
the contractor. What is clear, however, is
the plant will not be opened in 2015.
"We hope to resolve most of the issues
this year and when we are in a better position
to say when it will be commissioned, we
will communicate it. Right now, we are
trying to work through what that technical
solution will be."
Explaining that it was difficult to discuss
some of the issues because of legal con-
straints between Petrotrin and the contractor,
"In reviewing certain design considera-
tions, we found some information that may
not be up to where current standards should
be and where this plant should be. This was
not picked up until we started to do some
preparations for commissioning. Things
came up that raised questions and we went
back to the engineering with the contrac-
This is a major blow to the already belea-
guered state-owned energy company.
Petrotrin has already lost hundreds of millions
of dollars last year, it is refining at two third
of its capacity, it is heavily in debt, crude
production has been flat leaving it vulnerable
to international crude prices and the company
has had a poor record of implementing proj-
ects on time and within budget.
In addition, with margins much better
on diesel than on gasoline and other refined
products, Petrotrin is losing significant
opportunity to make profits on diesel.
The company argued that the construction
of the new ultra-low sulphur diesel unit is
part of its clean fuels upgrade programme
and its continuing effort to improve the
profitability of the Pointe-a-Pierre refinery
to meet the challenges of ever tightening
It said the new unit would allow it to
meet stringent new diesel quality specifi-
cations (sulphur and aromatics) in the local,
regional and international markets.
The plant---which should produce 40,000
barrels a day (b/d) of diesel with a sulphur
content under eight parts per million---was
expected to be completed since 2013.
Almost two years ago, Petrotrin president,
Khalid Hassanali, said that it would be ready
for commissioning in 2013.
"We have had some challenges but we
have had some very tight project manage-
ment these days on the ULSD as we call it.
That would allow us to sell our diesel in
any part of the world because of the
improved specifications. Just like the gasoline
optimisation programme, not only would
it allow us to produce a higher volume of
gasoline and more valuable products, but
also to meet the specifications that are inter-
national, so that we can sell around the
world," said Hassanali.
Hassanali was once the manager of the
very project before being promoted to pres-
ident, a post he has held even past the official
Ramesar also admitted to the Business
Guardian that the changes will lead to further
overall costs on the project and to Petrotrin.
He also confirmed that, with eight months
left in its fiscal year, Petrotrin was predicting
Ramesar said the company had brought
back online a number of plants associated
with its gasoline optimisation programme
but the company was still not producing
the right mix of fuels for the market. He
complained that during the last fiscal year,
Petrotrin was buying oil and 40 per cent
of its product was fuel oil that was selling
US$13, below the selling price of a barrel of
oil, "and that did not include the energy
and manpower costs involved in the refining
of the product."
He said Petrotrin wants to reduce its cost
but, at this stage, had not looked at reducing
With oil prices tumbling and ageing equipment mak-
ing extraction ever more expensive, Britain s North Sea
oilfields face a struggle for survival, threatening a vital
source of income and energy.
The oil industry has been hard hit by crude prices
falling more than 50 per cent since June to less than
US$50 a barrel.
Energy giant BP recently announced it was cutting
300 local jobs, mostly in the Scottish city of Aberdeen,
Britain s oil "capital".
Others, including Shell and Chevron, warned late
last year of similar scale cuts.
The publication of the oil majors financial results
in a few weeks augurs more bad news, with British
subcontractors particularly nervous that they may be
In anticipation, oil services company Wood Group
has already cut staff salaries by 10 per cent.
The industry has ridden out previous fluctuations,
with prices dropping as low as US$38.37 per barrel
during the depths of the global economic crisis in 2008.
"We ve seen oil prices fall in the past and it has
recovered," said Neil Gordon, chief executive of Subsea
"There is confidence that it will recover, but that
you ll have to go through an amount of pain, until the
The recent price fall has only magnified existing
problems of high operating costs in the deep offshore
fields, with producers desperate to trim budgets even
when prices were higher.
Faced with dwindling margins, the majors are begin-
ning to think the unthinkable---abandoning Scotland s
oil and gas fields, which have seen a 50 per cent fall
in production over the past decade.
The BP-owned "Forties" field, which celebrated its
50th anniversary this year, produced around 500,000
barrels per day (bpd) at its peak, according to Colin
Welsh, CEO of the investment bank Simmons & Com-
Today, the combined production of all Britain s North
Sea fields is estimated at 800,000 bpd.
"They ll have to make the North Sea a lot more
attractive, and that involves reducing the tax rates,"
The government for too long has treated the oil
industry as a "cash cow", argued several officials who
highlighted the 60 to 80 per cent tax rates levied on
"If you look at Norway, they get very significant tax
breaks for drilling exploration wells, which encourage
them to deploy that money to do another one and
another one," said Graham Stevens, finance director
of Plexus, which specialises in wellheads.
"We don t get that kind of money in the UK."
With Britain s general election just months away,
politicians have recently been much more keen to show
support for the North Sea, particularly in Aberdeen
where more than half the jobs depend on oil.
"This is a vital industry," insisted Labour s Ed Balls,
who would likely become Britain s finance minister if
his opposition party wins the nationwide vote.
"Labour... will do what it takes to make sure we
secure the jobs and the investment which is so important
for livelihoods... but also for tax revenues coming in,"
The Conservative-led government of Prime Minister
David Cameron has promised to include support meas-
ures in its budget for the financial year 2015-2016,
which will be presented in March.
But in Aberdeen, concern is already growing that
there may be no industry to revive if prices remain low
for any length of time. AFP
threaten UK's cash
cow oil industry
plant on hold...again
Reason: structural, seismic concerns
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