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BUSINESS GUARDIAN guardian.co.tt JUNE 29 • 2017
Former energy minister
questions role of
In a brief Q&A with the Business Guardian, former energy
minister Kevin Ramnarine shares his thoughts on the function
of the Petrotrin Review Committee and offers suggestions to
move the oil company forward.
What are your thoughts on the work
of the Petrotrin Review Committee?
Ihave not seen the report by the committee appointed
by Cabinet to look into the viability of Petrotrin. I
have read what has been reported and I have noted
that the President General of the OWTU has seen it
and is happy with what has been recommended. He
is indeed very fortunate to have seen a copy of the
43-page report before the Standing Committee on Energy or
the Energy Committee of Parliament.
My first question is: who did that committee consult with?
The list of individuals and organisations they consulted with
must be made public. For example, was the Energy Chamber
asked to submit its views? Were the views of past and pres-
ent management sought? Were the views of past presidents
of Petrotrin sought? The country needs to know. Are there
important views that the committee missed?
Secondly, what is the strategy to reduce the lifting cost per
barrel of oil?
It costs Petrotrin a cash breakeven of US$41 to lift a barrel of
oil. That number excludes investment. This means Petrotrin
has one of the highest lifting cost in the world. What did the
committee recommend as steps to reduce that average cash
Thirdly, if media reports are accurate and it is the recom-
mendation that the company be broken into three then there
are issues to be addressed and questions to be asked.
What happens to the total debt of Petrotrin?
How would it be apportioned between the three companies?
What happens to the US$ 850 bond that must be repaid
What about credit ratings?
How will each of the three entities fear when they have to
get a credit rating?
What happens to the pension plan?
There are also questions around the duplication and trip-
lication of cost.
Currently services such as IT, HSE, HR, legal, security and
medical are shared across the company. Is it that in a three-
way split there will be three human resource departments and
three of legal departments, etc? That would mean increased
costs. It may also mean that instead of having one loss making
state enterprise you now have three.
Petrotrin is currently an integrated oil company as are
Exxon, Shell, Ecopetrol, Petrobras, Saudi Aramco, Chevron
etc. If an integrated oil companies is such a bad thing, why is
the world filled with them? The integrated oil company has
The exploration and production (E&P) component and re-
fining and marketing (R&M) component act as hedges for one
another. When oil prices are high the E&P economics does well
and when prices are low the refinery economics improves.
Separating the various businesses is moving contrary to the
rest of the world, rest of the industry and best practice.
The question that must now be asked is: who stands to ben-
efit from breaking Petrotrin into three separate companies?
What suggestions would you offer
to improve operations at Petrotrin?
Moving forward, Petrotrin must increase indigenous crude
oil production and drive lifting costs down. I see no strategy
to address these issues.
Case in point, Petrotrin has not drilled an inch in Trinmar
since April 2016 and its drilling on land has been greatly re-
duced. The one bright spot has been the performance of the
lease operator / farmout operator (LOFO) and the incremental
production service contractors (IPSC's).
These companies with much lower lifting cost continue to
perform. The OWTU is diametrically opposed to the LOFO/
IPSC model. That comes as no surprise. Petrotrin also has
to focus on refinancing the US$850 million bond as soon as
The recent credit rating downgrades mean that the cost
of refinancing will increase. I see no reason to abandon the
integrated structure. The changes that must be made can be
made within the integrated structure. The issue is not the in-
tegrated company model. The issue is cost management, asset
integrity, capital efficiency and the application of a business
...suggests path forward
Former Energy Minister
'Labour relations must improve'
Raphael Ajodhia, an attorney with four years
of industrial relations and advocacy experience,
shares his thoughts on the labour relations cli-
mate at Petrotrin.
Occasionally, the simple view is
that which provides the most
On the October 26, 2016,
Petrotrin declared a net loss
after tax of $533 million for
the previous financial year.
In March 2017, the Minister of Finance in-
formed the country that Petrotrin also owed
Government the net amount of $1.269 billion
in taxes and royalties, and that Petrotrin had
recorded losses in its refinery of $4.2 billion
over the period 2011 to 2016.
Therefore, by any account, Petrotrin is a
company that is simply not performing well.
Atlantic LNG was very recently reported as
having a VSEP package to its workers, as had
Repsol prior to its sale to Perenco.
BPTT, Royal Dutch Shell and BHP Billiton
have all also engaged in cost-cutting measures
which have resulted in the restructuring of
their business and the reduction of their staff.
All these companies operate in the same
sector as Petrotrin, and all can confidently
say that they have a much more profitable
So why has there been no comprehensive
restructuring exercise at Petrotrin?
The most obvious answer is that under the
present laws of T&T a company will find it
difficult, if not plainly impossible, to restruc-
ture its operations when faced with opposition
from its majority union.
The current benchmark of good industrial
relations practice is that a company must con-
sult with the union prior to embarking upon
a restructure of its operations, however there
is neither a precise definition to guide the pa-
rameters of that consultation nor a fixed time
period within which that consultation ought
to be completed.
The result is ample room for subjective in-
terpretations as to what precisely constitutes
"good faith" consultation, which often leads to
an impasse that ends up before the Industrial
Court should the company choose to proceed
Coupled with the other prerequisites im-
posed upon a company which flow from the
narrow definition of redundancy as the exist-
ence of surplus labour only, the result is that
a restructuring exercise at Petrotrin may be
so easily impugned by a disagreeable OWTU
that it may end up costing Petrotrin more in
damages and reinstatement than the economic
benefit the exercise was designed to realise.
Further, Petrotrin faces the additional dif-
ficulty of not being able to improve its finan-
cial position through adopting the industry
standard of outsourcing its basic operations to
contractors, due to the practical operation of
a "Contracting Out" Clause in their collective
agreement with the OWTU.
Essentially, the clause prevents Petrotrin
from outsourcing work which would normally
be performed internally where it would lead
to a reduction in permanent staff and, fur-
ther, mandates that where contract labour is
engaged the contractor is required to pay the
equivalent rate that is payable to a Petrotrin
employee performing the same function.
There is no dispute that Petrotrin's salary
rates are significantly higher than the market
average, so the net result is that it is marked-
ly more expensive for Petrotrin to outsource
work than for any other oil and gas company
within the sector.
Petrotrin is severely restricted in its ability
to adopt a much more beneficial and cost-ef-
fective measure by a clause which, no doubt,
the union will never agree to amend or remove
from the provisions of any future collective
Petrotrin, therefore, presents a prime op-
portunity to demonstrate the role of collective
bargaining as envisioned by industrial relations
Both the union and the company must
bargain with the shared vision of improving
Petrotrin's financial outlook, and enter into
meaningful discussions surrounding the re-
structuring of the company and the renego-
tiation of the collective agreement.
In theory, Petrotrin's reality may serve as a
lesson to unions and companies throughout
the country that the economic hardships fac-
ing us necessitate a movement away from the
adoption of antagonistic stances as a matter
of principle and tradition.
For example, it may be in the best interest
of all relevant parties to support proposals for
reform of retrenchment legislation to include
a widened definition of retrenchment, and the
inclusion of specific explanations and time
limits regarding the consultation process.
The time has come to stop opposing each
other simply for the sake of opposition.
The time has come to
stop opposing each
other simply for the
sake of opposition.
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