Restructuring Petrotrin — but how?

In the interim he seems to have agreed with the five percent increase in salaries/wages for the OWTU members. The increased cost, despite Petrotrin’s claim that it cannot afford it, is to be funded by internal (to Petrotrin) reduction in operating costs.

The Prime Minister’s analysis parallels mine in general though I see the wage/salary increase as a means to buy time to belatedly address the problem.

The crucial task ahead is to restructure Petrotrin — but how? In this our small open plantation economy that depends on massive imports, as long as we have oil remaining we need an onshore refinery to provide for local needs. With a refinery large enough there is nothing wrong with — even imperative — earning foreign exchange by importing crude and exporting refined products.

Further, Petrotrin with its reducing production of crude oil has to look towards producing efficiently whatever remains in its fields. Hence rationalising its management to address the improvement of the efficiency of these operations is the first objective — this will include staff reductions in an establishment that reflects both mismanagement driven also by political interference and a bloated labour force.

However, Petrotrin has run up large debts, some of which can be attributed to the failure of the projects, eg the Gas to Liquids Plant (GTL) and the Gas Optimisation Project. Given the age of the refinery these were attempts to introduce new technologies, refinery upgrades.

I have continually made the point that sustainable economic development of a country and a company depends on their operation in an environment wherein they can acquire knowledge, technology, learn it, implement it and create new associated knowledge and hence innovate. Petrobras, of Brazil, in its deep water drilling and even our own Tucker Engineering in the new technology of fracking are classic examples.

Traditionally, our foreign investment-driven energy sector has concerned itself locally with learning the operating and maintenance skills while the development, implementing and innovative skills have been left to the foreign investor.

Petrotrin has adopted the same business culture and in both of the above failures did not have the benefit of a local knowledge base or such an institution, thus making poor choices of technologies and virtually inexperienced suppliers.

So much so that Petrotrin was unable to justify to a joint select committee of the Parliament why it proposed and eventually used an untested technology for its envisioned GTL plant, now built and deemed scrap.

The lesson to draw from this is that any restructuring of Petrotrin has to include the establishment of a centre of excellence which can provide, not only to Petrotrin, but for any existing and future forays into the energy/technologically based business activities — one of the tasks for which the NEC was originally designed.

The UWI and UTT entities that are engaged in petroleum studies are not involved in the detailed technological development of the companies’ projects — R&D in these institutions are not directly about economic development.

A further justification for this kind of technological support is its importance in planning the longer-term future of the company given both the depletion of petroleum locally and the impact of climate change on the use of fossil fuels. It is worth noting BP’s comment that its name also refers to “Beyond Petroleum”, a recognition of its business future — the comment is also relevant to Petrotrin.

But to return to the issues to be addressed; the company has to rationalise its labour force given the immediate tasks ahead, its new management has to be cognisant of the strategic path the company has to tread given its depleting natural resource base, the global concerns on fossil fuels and our need to earn foreign exchange.

The finances of the company have to be restructured, particularly the huge debt that will constrain the company in its necessary new investments (the shareholder has to offer some debt relief).

Still, if the company is to become globally competitive in this energy field where the future is about the reduction of the use of fossil fuels and a growth in the use of renewables, it has to have access to the relevant knowledge, technology in its proposed upgrades which can engender a dynamic and innovative company.

Some claim that such business discipline may be beyond a State enterprise as we know it, but the examples of China and Norway are beacons to which we can aspire.

Mary K King St Augustine