How Petrotrin reached a black hole …”BLAME MALCOLM JONES”

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So Franklin Khan says Petrotrin is facing a black hole. He warned that if this situation is not handled properly, it could bankrupt this country.

Well it seems the Minister of Energy has a short memory. Blame the late Malcolm Jones for Petrotrin financial woes. Remember the Gas to Liquid Plant? It never materialized and it cost the country close to two billion dollars. Poor leadership and management!

THE PROJECT

 In 2005, Petrotrin entered an agreement with World Gas to Liquids Inc for construction of a plant which would have seen the State company holding a 49 per cent share. The agreement between both parties was that WGTL would bring the GTL plant, technology, finance and project management while Petrotrin would contribute sufficient gas reserves to assure the it’s operation.

Construction started in 2007 but ran into several cost overruns and it was stopped in 2010. In 2011, World GTL Inc and World GTL St Lucia Ltd sued Petrotrin for damages in excess of US 200 million for breaches of fiduciary duties. Petrotrin filed a counter-claim of breach of contract by WGTL Inc.

In April 2014, the London Court of International Arbitration dismissed WGTL’s claim and ordered the company to bear the costs of arbitration and pay Petrotrin’s legal costs.

The court found that the project was plagued by poor management and project technology.

In 2009, Petrotrin acquired the debt for the WGTL project and appointed PwC as receiver. In 2012, PWC issued a request For proposals for an exclusive arrangement for sale of the plant. Niquan Energy made an offer in October 2014 which was accepted by PWC after consultation with Petrotrin.

ROWLEY ISSUED WARNING

After Dr Keith Rowley was fired by then Prime Minister Patrick Manning, he took the issue up in the 2009 Budget contribution.

Rowley, then a Government back bencher, spoke on September 14, 2009. Here is his contribution:

“Mr. Speaker, I want to draw your attention to page 71 of this document to tell you, let us face up to what is happening at Petrotrin. I have heard the union talking about this as a union item and I did not pay a lot of attention to it.

“When I sat down to study the documents I realized what the unions were saying, and we have a big problem here. We entered a gas to liquids project, and this document tells us that the original estimate was $850 million.

It has been revised for $1.324 billion, as a result of incomplete engineering at the start, omissions, technical issues and additional testing and project delays.

So if we agree to embark upon a project, I would think that the cost of that project will go into the consideration as to whether in fact we do it or we do not do it. I must tell you, probably the highest paid people in the country are at Petrotrin—high quality skills.

So I expect good quality estimates and if they do not have it, they hire people to do it. An $850 million project and we are now talking about a revision to $1.324 billion. That is one project. Another project— Ultra Low Sulphur Diesel Plant. Original estimate when the project was embarked upon, $708 million. It has now gone to $2.4 billion. Project administration— original estimate, $192 million.

That has now gone to $427 million. Upgrade of the Fuel Catalyst Unit, the estimate there is now up to $2.1 billion. The CCR Platforming Unit, there is not an estimate—$665 million. It is now at $1.592 billion.

The alkylisation plant, was estimated when it was entered upon, at $586 million; it is now $1.8 billion. The offsite and utilities for this whole programme was estimated to be in the order of $189 million in 2004, it is now $1.7 billion. What happened at Petrotrin that the estimates were so wrong, so far out, or worse, what happened that caused us to enter a programme where the total, when we entered the programme, was $3.3 billion, and we took a decision, “Yes, we could afford that, $3.3 billion.”? Most of those programmes are not anywhere near completion.

When we took a decision to go down that road, and it may very well be necessary because we have to go into the correct markets and have better products, we took a decision at a cost, at the time, of $3.3 billion.

Today, we are looking at a cost of $9.3 billion. We have to digest that in the context now of, “De money done.” We are now talking about raising revenue by taxation, “chirrup” “chirrup”, household by household, land and building taxes, cigarette and rum taxes, as revenue raising measures. Do not be fooled by that.

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The Gas to Liquid Plant

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