Trinidad and Tobago’s Prime Minister Dr Keith Rowley is due in Guyana next Wednesday to sign a Memorandum of Understanding (MOU) for a technical co-operation agreement on oil and gas.

The MoU, which has been long in the making, will see the re-establishment of working relationships for Trinbagonian businesses in Guyana, according to Rowley. The Trinidadian Prime Minister told a political meeting on Tuesday evening in Marabella, Trinidad that the MoU was in the making for about a year. Marabella is one of the areas in southern Trinidad where many people are employed with the State-owned Petrotrin company and who will be laid off when its refinery closes as the T&T government has announced. 

“Now it has come to a point where we can sign (the MoU). I am going to Guyana next Wednesday to sign this document which opens the way for Trinidad and Tobago’s companies to participate in that prosperity that is coming to the Guyanese even if Guyanese oil does not come to our refinery,” Rowley announced. “About two weeks ago, the Guyanese Government finally sent a diplomatic note indicating that they are ready to sign that arrangement as a result of the work done over the last year,” he revealed.

News of the impending signing of the MoU was reported in the last Sunday Stabroek. Since 2016, discussions commenced between Guyana and Trinidad on a MoU under which the latter would provide various forms of support to the oil and gas sector in Guyana.

On Tuesday, noting that Leader of the Opposition Kamla Persad-Bissessar has been critical of his government announcing the shutting down of the 100-year old Petrotrin refinery at Pointe-a-Pierre, Rowley said, “And she jumps into Guyana. You know there is oil in Guyana. Why didn’t they go to Guyana and get the oil and bring it here and refine it?” 

Persad-Bissessar has suggested that Rowley’s government negotiates with Guyana to refine its crude oil.

He said, Guyana has “been fortunate” in finding significant amounts of oil and that production is due to start in 2020. After taking office, the PM said, his government sought to find out who owned the oil.  

“Guyana oil is owned by the Government of Guyana, ExxonMobil and a third party… Guyana has no intention at this time to bring any oil to shore for any refining,” he said.

The reason for not bringing the oil onshore for refining, according to Rowley, is because “modern day technology – in treating with offshore finds like that which you cannot even see from Guyana, if you are on land in Guyana you wouldn’t even see the flares – will bring the ships that are built and specifically designed to take the oil from the well head, onto the ship, do the water separation and the ship sails away.”

When he became Prime Minister, Rowley said, he “spent a day in Guyana with the Guyanese Cabinet seeking to understand what they intend to do with their new prosperity. I discovered that to further any conversation with Guyana, not just about oil but with business in general because this oil money is going to generate all kinds of business operations in Guyana,”  the MoU which enabled a technical cooperation agreement between the two countries had expired under the Persad-Bissessar administration.

T&T Minister of Foreign and CARICOM affairs Dennis Moses and Guyana’s Foreign Affairs Minister Carl Greenidge, he said, reopened discussions for a new MoU between the two countries to mutually benefit both countries and for a working relationship for T&T businesses. While the Opposition has accused him of being stupid in the Guyana situation, he said, oil refining in Jamaica which refines 36,000 barrels a day, is being kept afloat by Venezuelan oil going there as part of the PetroCaribe arrangement. It is becoming a problem for Jamaica as the country is now using 75 per cent of its power from Liquefied Natural Gas and not fuel, he said. “They are getting out of fuel oil but their refinery is now producing 60 percent fuel off Venezuelan oil,” he said.

In the closure of the Petrotrin refinery, Rowley said, everyone will go home with an attractive separation package that includes land for housing on Petrotrin’s land. Those 50 years and above will receive an attractive pre-retirement package followed by their pension.         

Meanwhile, defending the closure of the Petrotrin refinery, T&T Finance Minister Colm Imbert told the meeting that the refinery recorded losses of over TT$11 billion between 2012 and 2017. The refinery lost TT$722 million in 2012, TT$2.3 billion in 2013, TT$2.6 billion in 2014 and TT$2.7 billion in 2015.

Even though Petrotrin tried to reduce expenditure, he said, the losses in 2016 were TT$1.3 billion and TT$1.7 billion in 2017. The huge losses, the minister said, were being masked by the company’s exploration and production departments which have shown profitability. Government had been looking at the figures for over a year and a half, he said, to arrive at its decision.

While the refinery was recording losses, Imbert said, the exploration and production departments were declaring profits, but the profits were being sucked up by the refinery. Salaries, pensions, health and other welfare benefits paid to workers, he said, were taken from the other departments and not the refinery. According to the minister, the auditors and chartered accountants have declared that “the refinery will never make a profit. Never. You can only carry forward losses as tax credits if in the future the entity will make a profit.”

At present, Imbert said, Petrotrin owes the state TT$4 billion, that is TT$2.6 billion in royalties to the Ministry of Energy and TT$2.6 billion in taxes to the Board on Inland Revenue.  Not only is Petrotrin not paying taxes but the Ministry of Finance has to give a government’s guarantee to Petrotrin’s bankers when it buys 100,000 barrels of crude a day to run the refinery because the company is not creditworthy, he said.

“We have had to guarantee loans and lose US$3 to US$4 on every barrel,” Imbert declared.  

A second study into the feasibility of the construction of an oil refinery in Guyana should be done when more operators are working in the industry, President of the Georgetown Chamber of Commerce and Industry (GCCI) Deodat Indar says.

“What I will say concerning the refinery is that a second look must be done. I believe that in the beginning years of any country’s development, a refinery might not be the best thing or the first thing you look at. But at the back end, in terms of all the downstream things you can get from a refinery, is what gives a country the true economic benefit. Things like rubber, all those oils and a whole lot of things,” he said, responding to a question at a press conference yesterday on whether the feasibility of a refinery should be considered again. Even though the country does not have the capacity to consume all the oil that will be produced, the country’s neighbours and partners can play a major role, he added. 

“I believe that a second study should be done at a time where other partners are checking in and not just Exxon [Mobil]. You have Tullow coming, you have Chevron… You also have Total coming, Repsol. By the time those companies are drilling, you have a whole industry [and] you only have one operator right now. When the rest of them come on board and they are successful in their find, let’s have that analysis, recommission back the study,” Indar emphasised.

Last year Minister of Natural Resources Raphael Trotman had ruled out this country investing in an oil refinery. “We have done some studies on the feasibility of an oil refinery. We have opened that study for public debate and discussions…  Government has concluded that it, as a government, cannot spend US$5 billion dollars in an oil refinery,” he had said.

The US$5 billion sum he referred to was the figure that Director of Advisory Services at Hartree, Pedro Haas, had told government it would cost to build a refinery here. Haas was hired by the David Granger-led APNU+AFC government to carry out a feasibility study for an oil refinery in Guyana. From his analysis, the cost to construct such a facility would be some US$5 billion, with at least half the invested amount lost upon commissioning.

When the study was done, initial calculations were done based on a 250,000 barrels per day refinery but was then scaled down to 100,000 barrels per day. However, since then, several more oil reservoirs have been discovered and projected production has skyrocketed to 750,000 barrels per day by 2025.

Vice-President of the GCCI, Nicholas Boyer also made an input and explained that the answer should not be static but dynamic based on what is happening in the industry. He pointed out that while Trinidad and Tobago is currently having issues with their refinery, they have made a deal with Venezuela and are able to still refine natural gas for export.

However, the deal he referred to has to do with natural gas and not oil refining. Trinidad is shuttering its Petrotrin oil refinery after racking up multi-billion dollars losses over the years.  Officials there have said that terminating its refining and marketing operations and retrenching 1,700 permanent and casual employees was the only way to save the company after 100 years of operations in the industry.

“So when you look at the business case for a refinery, you might be able to do exports around the region for the downstream products. The question cannot be thought of as static, it has to be a continually asked question so that the day it may be feasible, we can go ahead and make the investment whether the government facilitates a private investor or the government does it themselves,” Boyer explained.

He also noted that if they can put in local content legislation and have a Memorandum of Understanding with Trinidad where Guyana has the opportunity to supply Petrotrin oil at a very reasonable cost, this would be very advantageous to Guyana.

“I don’t see why we should say no. However, they would have to fix their issues internally,” he said, while stating that Guyana can use its leverage – becoming an oil producing country in the near future – to get the best deal.

Indar also noted that the study should have been done later since they would have had a better idea of what the industry is going to be.

“What is happening with that (Material Variance Analysis) is that they took the cash flow from the Liza 1 field but now you have Liza 2, Payara… all those in the developmental line which will carry up your production to 750,000 barrels per day by 2025. So your cash flow and your associated costs will be different if you would’ve waited to initiate the study after you’ve seen the other exploration,” he explained. Indar requested that the government make the analysis public so they can review it.

The GCCI president was also questioned on whether Guyana should play a role in saving Petrotrin, and he responded that it is up to the governments.

According to him, the downfall of the state-owned refinery would spell doom for the entire Caribbean community since Trinidad is able to manufacture goods at a lower cost because of the low oil prices. If their manufacturing costs are increased, then countries such as Guyana that import their materials to use, and to add to other products through the value-added chain will feel the impact, which would be transferred to the common man, he said.

He argued that if the refinery is to be salvaged, it would be in the best interest of the Caribbean Community.  “I would leave that in their [Government] hands but from a personal and business perspective, it will have an impact on all of us and therefore  I believe if any efforts are made to keep it afloat it will be best for the region and not [just] best for Trinidad,” he said.