(Argus, 23.Sep.2019) — Trinidad and Tobago’s government agreed to sell its mothballed 160,000 b/d Pointe-a-Pierre refinery to a company partly owned by the oil workers’ union.
Finance minister Colm Imbert confirmed the $700mn sale to Pet, a firm created by the labor group OWTU in December 2018 as a special purpose vehicle to acquire the refinery, in a bid to reopen it. At the time, the union said the new company’s shareholders would include Suriname-based private equity firm SunStone Energy and UK independent Mak England. Neither company has responded to a request for comment or confirmation of participation in the company that will buy the refinery.
The union has not indicated when the refinery would reopen or how it would finance the purchase, asserting that it is constrained by a non-disclosure agreement.
The government shut the money-losing refinery in November 2018.
Pet outbid two short-listed competitors in the refinery sale — US private equity firm Beowulf Energy and private-sector commodities trader Klesch Group, Trinidad’s government said.
“We saw Pet as the most suitable buyer over Beowulf Energy and the Klesch Group,” Imbert said.
While Pet had offered $700mn for the refinery, Beowulf offered a $45,000 monthly lease over 15 years and Klesch proposed to pay for the facility through future taxes, Imbert said.
Besides Pet, Beowulf and Klesch, proposals were presented by Swiss commodity trader Glencore and US private equity firm Edgewood Holdings, the government said.
Pet has until the end of October to tell the government how it intends to complete the transaction.
The company has received a three-year moratorium on all payments of principal and interest towards the purchase of the refinery, and a further 10 years to complete the payment, the government said.
The government received 77 expressions of interest to operate the Pointe-a-Pierre facility, it said in July 2019. This was narrowed down to 25 bidders, then reduced to eight that were invited to submit non-binding offers.
While in operation, the refinery supplied domestic and neighboring island markets with gasoline, kerosene, aviation fuel, diesel, fuel oil and LPG.
But the century-old facility’s plans for upgrading several units fell behind schedule and went over budget, with the government saying the complex could be viable only if the upgrades were done.
The most significant of these is an incomplete 40,000 b/d ultra-low sulphur diesel unit that the refinery’s former owner, state-owned Petrotrin, had contracted Korea’s Samsung Engineering to deliver for $200mn.
Petrotrin cancelled the deal in 2016 after the energy ministry said the partially competed unit was defective. But the company had already spent $421mn on the plant, and said it would need another $300mn to complete it.
In closing the refinery, Petrotrin said the facility needed a cash injection of $3.9bn to stay alive, “and even if it got this, left as it is, it is projected to continue losing about $310mn/yr.”
Among the challenges for Pet is access to feedstock. Trinidad produced 59,300 b/d of crude in January-July 2019, down by 11.5pc from a year earlier, according to the energy ministry.
Trinidad last imported crude for the refinery in October 2018. Among the imported grades were Russian Urals, Gabon’s Oguendjo, Brazil’s Lula and Roncador, and Colombia’s Vasconia.
“The new operators will have to solve the problems that have stifled the necessary upgrade of the refinery, and access to imported crude,” the energy ministry told Argus today.
“These are two matters that will challenge the refinery’s profitability, even with a planned reduction in operational capacity to 140,000 b/d.”
Caribbean refinery woes
Trinidad is one of several Caribbean countries that has been looking for new investors or operators for their aging refineries.
In Dutch-controlled Curacao, state-owned RdK has contracted Klesch to enter into exclusive negotiations for a contract to operate its dormant 335,000 b/d Isla refinery.
The plant is operated by Venezuela’s struggling national oil company PdV whose lease expires in December.
In Jamaica, the government has taken over PdV’s minority stake in 35,000 b/d Petrojam in anticipation of a likely shutdown and conversion into a fuel terminal. The future of the refinery was made more doubtful this month with the government’s decision to shut down state-owned PCJ that owns and operates the refinery.
The Dominican Republic has also indicated interest in offloading its 34,000 b/d Refidomsa refinery in which PdV retains a minority stake.
A project by PdV subsidiary Citgo to refurbish a mothballed 280,000 b/d refinery and terminal on Aruba has stalled. ***