Petrotrin Loses Board Member

(Trinidad and Tobago Newsday, Yvonne Webb, 20.Sep.2018) — Days before Petrotrin’s refining operation ceases and workers are retrenched, a member of the board who would have participated in the restructuring exercise, has become the first casualty of the plan.

An internal circular from the company to all employees confirmed board member Randhir Rampersad has ceased to be a member of the board of directors. No reason was given for his departure, causing speculation among some workers.

The memo, signed by Sharon Morris-Cummings, advised employees to amend the director listing on the company’s letterheads to only reflect the remaining members – chairman Wilfred Espinet, deputy Reynold Ajodhasingh, Anthony Chan Tack, Nigel Edwards, Joel Harding, Selwyn Lashley, Eustace Nancis and Linda Rajpaul.

The Oilfield Workers Trade Union (OWTU), which also received a copy of the memo yesterday, said this warrants a probe. A spokesman said it is unusual at this point in the process of restructuring, for a Board member to leave without a reason. The trade union said it raises a lot of questions as to whether Rampersad was fired or if he resigned; and why.

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Pemex CEO Launches Management System at Cangrejera Petrochemical Complex

(Pemex, 19.Sep.2018) — The CEO of Petróleos Mexicanos, Carlos Treviño Medina, launched the Management Assessment System at the Cangrejera Petrochemical Complex, located in the state of Veracruz that will help increase the production value of oil products processed in this center, through the identification of critical inventory items, oversight the plant´s operation, inputs and consumables for production, maintenance and financial performance.

Following up on the visits he has made to strategic Pemex facilities around the country, on Sept. 20 Treviño Medina toured the Cangrejera Complex and the “Lázaro Cárdenas” Refinery in Minatitlán, to oversee operations and get a first-hand account of the concerns and needs of the oil workers stationed in these work centers.

Regarding the Control Center and the Management Assessment System of Pemex Etileno (Pemex Ethylene), the CEO of the state-owned productive company pointed out that launching this system will allow the company to anticipate and manage changes promptly, solve problems and make better decisions using a single system that allows for real-time monitoring of all processes simultaneously from a single location.

He explained that the automated management system is based on information technologies that promote the coordination of efforts through the periodical exchange and analysis of electronic data providing the characteristics of various different analysis and decision-making systems in a single application. “With this system, we integrate key operating, logistics and financial information for online and prompt decision-making,” he said.

In recent weeks, Treviño Medina has kept up an intense schedule of visits to various strategic facilities to oversee their operation. During July and August, he visited the Storage and Dispatch Terminal (TAD) in the state of Querétaro and the Tanker Vessel Calakmul, which is docked at the facilities of the Integrated Port Management of Puerto Progreso, in the state of Yucatán.

He awarded acknowledgments to both facilities for their outstanding compliance with the Order and Cleanliness Campaign.

He also toured the Antonio M. Amor Refinery, located in Salamanca, in the state of Guanajuato, as well as the Dos Bocas Maritime Terminal in the state of Tabasco, where he learned of the progress made on the Command and Control Center that will safeguard this strategic facility.

He was recently at the “Antonio Dovalí Jaime” Refinery in Salina Cruz, in the state of Oaxaca, where he oversaw the progress of the ongoing reconstruction efforts of several facilities that were damaged during the earthquakes that occurred on September 2017.

During his visits, Treviño Medina has expressed his deepest recognition tothe oil workers, who, with their daily effort, commitment and capabilities, have turned Pemex into the largest company in Mexico and one of the most valued Latin American brand names.

“A time of great change is coming, but what we have sown here will endure forever, because Pemex is one of the foundations of Mexico thanks to the strength you have given this great company, which is a source of pride and wealth for the country,” he affirmed.

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More Than TT$1 Billion in Compensation for Petrotrin Workers

(CMC, 19.Sep.2018) — The Trinidad and Tobago g overnment Monday said the compensation package for workers being laid off by the closure of the oil refinery of the s tate-owned company, Petrotrin could be more than TT$1 billion (one TT dollar=US$0.16 cents).

But energy minister, speaking in the Senate, said while he would not want to provide an accurate figure, the workers’ representatives, the Oilfields Workers Trade Union and the Petrotrin board of directors will meet on Tuesday to discuss termination packages for the affected workers.

“I personally said the packages will cost upward of one billion dollars and if you take the collective agreement and you do some basic calculations, it is obviously more than one billion.

“But the government and the board of Petrotrin are willing to sit down with the union and go through all the numbers and possibly offer some enhancement to that package,” he told legislators.

Last month, the government announced that it would be closing down the oil refinery after indicating that it was losing an estimated two billion dollars annually.

The Keith Rowley administration said that more than 2,500 workers would be laid off as a result and Khan told the Senate that the figure was 4,700.

“The termination packages and the benefits therein are currently being negotiated by the board of Petrotrin and the Oilfield Workers Trade Union, and a meeting is carded for tomorrow. So, in a sense, I wouldn’t want to pre-empt or prejudge what package they will come up with.

“As to the number of employees that will be impacted, the total number of permanent employees that will be impacted from the Petrotrin restructuring is approximately 3,500 permanent workers and approximately 1200 non-permanent workers,” he told the Senate.

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Expert Says Closure of Petrotrin Refinery Will Decimate Trinidad

(Trinidad Express, 17.Sep.2018) — Former Director of Energy Industries at Industrial, Jim Catterson, says closure of the Petrotrin refinery makes no economic sense. He said the closure would decimate south Trinidad.

Catterson said unemployment would rise and poverty would spread across the nation.

Speaking at a press conference at the Oilfield Workers Trade Union (OWTU) headquarters in San Fernando, Catterson said the Government must consider the proposal presented by the OWTU last week.

“Tens of thousands of people would be unemployed. These people would no longer contribute to the national economy through taxes. They would no longer contribute to the national economy. There would be a downward spiral of the economy into poverty,” he said.

Catterson said it was important that the government have further discussion with the OWTU and Petrotrin management.

“Get around the table and discuss the future of this industry and economy. It is the only way to resolve this situation. Find a way for the country to survive,” he said.

Catterson questioned why a government wanted to close the refinery and import petroleum products.

“Where would you get the foreign exchange to buy the things you need? And when you can produce these products yourself,” he said.

Catterson said oil workers were highly skilled, educated and knowledgeable and should be paid accordingly.

But he dismissed reports by Energy Minister Franklin Khan that salary and wages totalled 52 per cent of Petrotrin’s operating cost.

He said, “Salary and wages is under 10 per cent of the company’s operating cost. Oil workers are highly skilled, educated and handles equipment worth millions and potentially dangerous. So they should be highly paid.”

IndustriALL Global Union is a global union federation representing more than 50 million working people in more than 140 countries, working across the supply chains in mining, energy and manufacturing sectors at the global level.

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Barbados Hunting New Suppliers Following Closure of Petrotrin Refinery

(Jamaica Gleaner, 14.Sep.2018) — Barbados says it is holding discussions with a number of suppliers to replace the energy arrangements it had with oil refinery Petrotrin.

The refinery, based in Trinidad & Tobago, is locking down operations, a measure it blamed on increasing financial losses. The closure has led to the retrenchment of more than 1,700 employees.

In a statement on Wednesday, the Barbados National Oil Company Limited, BNOCL, said it currently imports gasolene from and sells its crude oil to Petrotrin, while diesel and fuel oil are sourced extra-regionally. It said kerosene is imported by the oil companies Sol and Rubis.

BNOCL said that at the time of the Petrotrin announcement regarding the closure of the refinery, it was exporting 260,000 barrels of crude oil annually to the Trinidad refinery and importing 60,000 barrels of gasolene on a monthly basis.

It said the annual contract with Petrotrin entailed the exchange of the crude oil for gasolene, which aided in the reduction of the foreign exchange cost, as the value of the crude offset the outlay for the gasolene.

BNOCL said its storage capacity for gasolene is 80,000 barrels. However, as of Wednesday, September 12, its gasolene stock was at 53,582 barrels, “which is enough inventory for 25 days”.

The inventory is expected to rise to 38 days’ supply, when Petrotrin delivers another 30,000 barrels of gasolene on Saturday, September 15.

BNOCL expects to receive its final shipment from Petron over the period September 24-28 of around 30,000 to 35,000 barrels.

Altogether, assuming the shipments arrive as scheduled, the oil company expects to have enough inventory to supply local needs to November 5, assuming a “usage rate of 2,000 barrels a day.”

The Ministry of Energy and Water Resources said that through BNOCL, it has been in discussion with a number of suppliers with a view to employing a similar arrangement to that with Petrotrin.

“The goal is to ensure that this country has a consistent supply of gasolene at an affordable price, while securing a market for Barbados’ crude oil. BNOCL has never had a stock-out of petroleum products and always has adequate inventory to service Barbados, and is ever mindful of the need to do so, particularly during the hurricane season,” the ministry said.

The Mia Mottley-led government also sought to assure Barbadians that “despite the closure of the Petrotrin refinery, there will be no shortage of gasolene in Barbados,” saying it was keeping on top of the situation.

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NP CEO Says No Fallout On Refinery Closure

(Trinidad and Tobago Newsday, Sasha Harrinanan, 12.Sep.2018) — Most everyone knows about the 1,700 workers who will be out of a job once Petrotrin closes its oil refinery in Pointe-a-Pierre. What fewer people know is that when confirmation of this came on August 28, some National Petroleum Marketing Co Ltd (NP) workers feared they too would lose their jobs.

This was revealed by Bernard Mitchell, CEO of NP during an interview with Business Day at St Christopher’s gas station, Wrightson Road, Port of Spain on September 5.

“There was some anxiety because when the story broke, there wasn’t clarity about what the implications would have been for NP. So there was a bit of anxiety but what we’ve done is engage our employees – indicate there’s no need to be concerned – at a staff meeting last week.”

Seated in a conference room on the first floor of the popular NP-branded gas station, Mitchell said NP’s customers too can rest assured the refinery’s closure will not affect their fuel supply.

“Whether it’s using the seabridge to Tobago, your car or your travel internationally, nothing has changed in terms of the delivery of fuel. Based on what Petrotrin has indicated, it’s their intention to purchase fuel and sell to us, (so) nothing really changes. If, however, we do have to purchase fuel ourselves, we might want to use a larger vessel to deliver more fuel to our sufferance wharf, rather than making more frequent trips on a smaller vessel.”

NP’s sufferance wharf – a licensed private wharf where dutiable goods may be kept until the duty is paid – is behind its head office in Sea Lots, Port of Spain.

Petrotrin will begin transitioning out of the refining business on October 1, but it has not said when the refinery is expected to cease operating. This is one of the questions Mitchell will ask Anthony Chan Tack – interim oversight team member and director in charge of refining and marketing at Petrotrin – when the two meet.

“We are one of their primary stakeholders, so Petrotrin would be meeting with us soon to determine whether there’ll be any changes and if we need to do things differently. Mr Chan Tack is my point of interface there because he’s the one overseeing the refinery side, so the delivery of fuel is through his area.”

Mitchell and Chan Tack held an initial conversation shortly after the August 28 meeting between Petrotrin and the Oilfields Workers Trade Union (OWTU) at the company’s corporate headquarters, Southern Main Road, Pointe-a-Pierre.

Chester Beeput – general manager of aviation and marine fuels at NP – joined the interview via speaker phone at one point to answer Business Day’s questions about possible upgrades to the sufferance wharf.

“We use an ocean-going vessel to transport refined fuels from Petrotrin to Sea Lots. It brings in roughly 25,000 barrels of product and (the wharf’s) draft is five metres. Dredging the channel down to seven metres allows you to go from 25,000 to between 30,000 and 35,000 barrels, depending on the vessel. The other element to consider is, if we dredge down to seven metres, we would now be restricted by the length. The current length of our vessel is roughly 100 metres. We can go up to a maximum of 120 metres,” Beeput said.

Mitchell added to this, explaining that if dredging is required, it would fall under the purview of the National Infrastructure Development Co Ltd (NIDCO).

“We have been in contact with NIDCO and they are in the process of looking at the issue…It’s only if the opportunity arises for us to purchase fuel internationally, that there would be some urgency in doing that (dredging). Remember, the model is for Petrotrin to continue supplying us with refined fuel, so there’s no need to dredge at this time.”

The supply of aviation fuel to state-owned Caribbean Airlines Ltd (CAL) and all other airlines which refuel in TT was also discussed.

Beeput said after the announcement, several airlines expressed concern about the possible impact on jet fuel supplies.

“They asked if we anticipated any disruptions. I explained that for all intents and purposes – based on the information we have – there would be no disruption because whether Petrotrin provides fuel via refining or via importation, the net effect on the airlines would be zero.”

Petrotrin sells jet fuel to NP, then NP sells that to airlines from its tanks at Piarco International Airport, Piarco and ANR Robinson International Airport, Crown Point.

Beeput said CAL pays NP in TT dollars while foreign-based airlines/aircraft pay in US dollars.

During his September 2 televised address to the nation, the Prime Minister said the OWTU “will be given the first option to own and operate (the refinery) on the most favourable terms.” Dr Keith Rowley’s offer was rejected the following day by OWTU president general Ancel Roget, who accused the PM of already having a potential buyer for the refinery.

Asked if NP was considering entering into a partnership with another entity to purchase the refinery, Mitchell immediately replied, “No, no, no.”

He later said this was “an unlikely scenario, at this point in time, because we have absolutely no information on that refinery. To make such a decision would involve detailed, in-depth analysis. Also, it’s not part of our core business.”

“We don’t have the expertise, we don’t have the background information and we don’t see what that’s going to do to add value if we change our business model to include (refining),” Mitchell told Business Day.

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PDVSA to Reopen Damaged Port Dock by Month’s End -Documents

(Reuters, Marianna Parraga, 12.Sep.2018) — PDVSA expects to reopen the south dock of Venezuela’s main oil port Jose by the end of September, easing strains on crude exports delayed due to a tanker collision last month, according to internal trade documents from the state-run oil firm seen by Reuters.

Last week, PDVSA began diverting tankers to Puerto la Cruz for loading, but the South American country’s crude exports have remained slow in recent weeks as few customers have accepted the 500,000-barrel-per-cargo maximum neighboring terminals can handle.

Besides Puerto la Cruz, tankers waiting to load a total 2.65 million barrels of Venezuelan upgraded and diluted crudes also plan to be serviced this month by two monobuoys at Jose, including cargoes scheduled for U.S.-based Chevron Corp and Russia’s Rosneft, the documents showed.

But a 1-million-barrel cargo of diluted crude oil (DCO) scheduled to be lifted by Rosneft at Jose between late September and early October was cancelled, according to the documents.

Rosneft and PDVSA in April agreed to a “remediation plan” to refinance an oil-for-loan agreement after delays to deliver cargoes of Venezuelan crude on time. DCO shipments scheduled since then belong to that plan.

PDVSA did not immediately reply to a request for comment.

At least three other 500,000-barrel cargoes for Valero Energy and PDVSA’s U.S. refining unit Citgo Petroleum plan to be loaded at Jose’s available docks and monobuoys in the coming days, after delays.

Valero also would pick up two additional 600,000-barrel cargoes of Morichal crude after a maintenance project that would halt the 150,000-barrel-per-day Petromonagas crude upgrader in August was again postponed, allowing more production.

PDVSA and its joint ventures exported 1.292 million barrels per day (bpd) of crude last month, a 7.7 percent decline versus July, according to Thomson Reuters trade flows data.

The country’s oil output fell again in August to 1.448 million bpd, according to numbers reported by OPEC on Wednesday. Venezuela’s accumulated annual production this year is 1.544 million bpd, the lowest since 1950. (Reporting by Marianna Parraga in Mexico City Editing by Marguerita Choy)

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Jamaica: Gas Prices Down $0.72, Diesel Down $0.35

(Jamaica Gleaner, 12.Sep.2018) — Gas prices are to go down by $0.72 tomorrow Thursday, September 13

The state-owned oil refinery, Petrojam, says E-10 87 will sell for $137.82 per litre and a litre of E-10 90 will sell for $140.65.

Automotive diesel oil will go down by $0.35 per litre to sell for $140.50.

The price of Kerosene will move down by $0.28 with that fuel to sell for $123.22.

In the meantime, propane cooking gas will go down by $0.35 to sell for $58.73, while butane will go down by $0.62 to sell for $64.75 per litre.

Retailers will add their mark-ups to the announced prices.

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AMLO to Continue Drilling Service Contracts

(Bloomberg, Amy Stillman and Eric Martin, 6.Sep.2018) — Mexico’s next president said he will continue with tenders for drilling service contracts starting when he takes office.

“We are preparing the rescue plan for the oil industry that will consist of producing more crude oil soon, and we will need these companies that have experience, most of them national companies,” President-elect Andres Manuel Lopez Obrador told reporters on Thursday in Mexico City. “We are already preparing tenders for the drilling of wells, and we are getting ready because we are going to launch those tenders from the first days of December.”

Lopez Obrador said he will travel to his home state of Tabasco on Saturday to meet with representatives from oil service companies. The meeting will take place with his pick for energy minister Rocio Nahle and the next chief executive officer of Pemex, Octavio Romero, according to a spokesman for Lopez Obrador who asked not to be identified, citing internal policy.

Mexico’s National Hydrocarbons Commission plans to hold auctions for more than 40 blocks and Pemex farm-out deals on February 14.

The leftist leader had previously indicated that future oil auctions, which have lured some of the world’s biggest oil companies, could be suspended or canceled as his government seeks to strengthen Pemex and focus on expanding refining capacity. He has also said that more than 100 oil contracts already awarded to companies such as Royal Dutch Shell Plc, Exxon Mobil Corp and BP Plc are being reviewed.

Pemex’s crude oil output has declined every year since 2004, which Amlo has pledged to turn around with an additional 75 billion pesos ($3.9 billion) for exploration and production investment.

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AMLO Plans Massive New Oil Refinery

(OilPrice.com, Irina Slav, 5.Sep.2018) — Mexico’s President Andres Manuel Lopez Obrador has plans to build the country’s largest refinery with a capacity to produce 400,000 barrels of gasoline daily, Reuters reports, citing comments by Obrador during a meeting with businessmen in Monterrey.

The refinery would cost US$8 billion to build and construction could start soon, which would see it complete within three years. Though Reuters quoted Obrador as saying, “400,000 bpd of gasoline,” it added in its report that the comments did not made it clear whether he was referring to the crude oil processing capacity of the future facility or its gasoline production capacity.

Currently, Mexico’s refineries have a combined processing capacity of a maximum 1.6 million bpd of crude but, Reuters notes, it has been working at just 40 percent capacity since the start of the year because of accident-caused outages and operational issues. Pemex, which operates the six refineries, also exported more crude as prices improved internationally. In July, the state oil company produced 213,000 bpd of gasoline.

Earlier this year, Rocio Nahle, an adviser to Obrador and the most likely candidate for the Energy Minister job, said “In a three-year period, at the latest, we need to try to consume our own fuels and not depend on foreign gasoline.” This would be bad for U.S. refiners, who export the biggest portion of their production to Mexico. In the last few years, Mexican imports of gasoline and diesel have risen to more than 800,000 bpd, representing over 66 percent of domestic demand.
Mexico’s current oil production stands at about 1.84 million bpd, of which 60 percent is exported. At the same time, according to Reuters, the country imports around 1 million bpd of refined products.

“The commitment is to produce gasoline in Mexico,” Obrador said at the Monterrey meeting. “We want to produce gasoline because we have the raw material, we have crude oil.”

Regarding production, last month Obrador said all oil auctions would be suspended until contracts awarded by the previous government over the last three years are reviewed.

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An Iconic Legacy Petrotrin – Not Too Big To Fail

(Trinidad and Tobago Newsday, Melanie Waithe, 5.Sep.2018) — Petrotrin has been in operation for over 97 years, and now our legacy refinery as we know it, will close. Its transition is set to begin next month. The announcement was made on the eve of our 56th anniversary of independence and Ancel Roget, president of the Oilfield Workers’ Trade Union (OWTU) commented that a move to privatise the company would bring the country back to “plantation days.”

I offer the proposition that this decision of the Petrotrin board and Cabinet was not the best option, notwithstanding the massive debt with which the company has found itself burdened, due to decisions taken over the last decade. Unfortunately, the major stakeholders could not find common ground.

However, some experts believe there are wider and deeper economic and social implications that are hinged to this decision. I heard a former energy minister ask a pertinent question: was the decision based on the company’s balance sheet, or did stakeholders consider the effects on the economy. So, what were the other options available to the board?

Joint Trade Union Movement (JTUM) members responded to the news via a press conference and issued a statement in support of the plight of their fellow OWTU members. They took the news as a declaration of war on the trade union movement.

The OWTU had proposed a plan to focus on increased productivity, accountability, and achieving production targets, with employees taking full responsibility for performance. Its plan also addressed quick-win projects yielding an additional 2,000 barrels of oil daily, and multiple other initiatives in land and offshore areas. Increasing refinery efficiencies and reviewing from whom TT imports crude were among aspects of this plan.

OWTU’s education and research officer Ozzie Warwick said the Lashley team, chaired by permanent secretary in the Ministry of Energy Selwyn Lashley agreed with the union’s recommendations and commented, “It’s strange it didn’t recommend closing the refinery. But our plan will ensure Petrotrin’s survivability.”

According to reports, Petrotrin is heavily over­staffed, with deficiencies in technical competencies in key disciplines. Manpower costs accounted for between 47 and 50 per cent of recurrent expenditure. It’s net debt at financial year-end 2017 amounted to $11.4 billion while taxes and royalties owed to Government amounted to $3.1 billion. The company is projected to continue accumulating losses at a rate of about $2 billion a year, and left as is, a $25 billion cash injection is needed to keep Petrotrin afloat. Petrotrin also needs to improve the integrity of its assets, estimated to cost around $7 billion to prevent oil leaks for example. This is indeed a dying company.

An unfortunate circumstance is that now the company is apparently bordering on insolvency, as it has been operational only due to its non-payment of taxes, and the Government’s guarantees of short-term loans.

The Government had commissioned the now termed Lashley Report and a strategic review and transition report from McKinsey and Company Inc. After the Lashley Report was received by the energy sub-committee of the Cabinet, it was passed to the ministries of energy and finance and Petrotrin for deeper reviews and analysis, following which a new board was appointed to come up with a plan to turn the company around.

The Lashley Report recommended splitting the company into three divisions: land-based production; its marine operation, Trinmar; and refining and marketing. Energy Minister Franklin Khan had said no options are off the table, but the report failed to propose staffing cuts and steered clear of privatisation. These were glaring weaknesses in the Lashley recommendations. Is it because Lashley assumed that both options would meet trade union resistance? The restructuring proposal would also prove inconsequential.

In September 2017 Cabinet had agreed that the company engage the recognised majority union to discuss cost reduction and survival strategies.

The Prime Minister claims he had formally invited Roget for discussions in an attempt to work out a way forward but the invitation was declined. The union was also apparently invited to sit on the board, and that too was declined. When Government hosted the Spotlight on the Energy Sector at the Hyatt Regency Trinidad, the union once again declined the Government’s invitation.

I seriously question the union’s motives in its unavailability to consult and participate in good faith in discussions to find workable solutions for such an important state-sector company. Was this the best representation the union could have made in the interest of its members and our citizens? Was there sufficient consultation to generate the best ideas given the real-time situation at Petrotrin?

At the worker level, we all should sympathise and offer our collective support as their lives will be altered due to decisions made by others. Given the vacuum created, and the absence of business suggestions to offer alternative opportunities, we would be left with higher unemployment and affected communities.

The Government has now made a bold poker move by “bluffing” the union when the PM publicly offered to sell Petrotrin’s refining assets to the OWTU. This offer should not have surprised anyone, as all reports dealt with the asset integrity of the company, given that the plant is close to 100 years old and carries little, if any, value on Petrotrin’s books. Mothballing the plant would simply not be a strategic economic option, and therefore its sale to a private operator was always on the cards.

The question then is, if the refinery is sold, would the successor company inherit the terms and conditions of the collective agreements? In other words, would any new refining company be viewed as a legal successor to Petrotrin.

This move I think is a well played one, as it now challenges the union to “put its money where its mouth is”. It also provides the Government with the public relations and politically defensive cover of being worker sensitive, while at the same time putting the union into the space to do what they have been calling on Government to make happen.

What is now very clear is that the Petrotrin refinery is not too big to fail, as we have survived both the dismantling of CL Financial, as well as the closure of Caroni Ltd. This too we will survive.

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Bail out Petrotrin

(Trinidad and Tobago Newsday, Vashtee Achibar, 5.Sep.2018) — Industrial relations consultant Gerard Pinard wants to know whether Government considered every available option before it took the decision to close down the state-owned Petrotrin refinery. He said the decision was not a good one and will hurt the economy and the society because of the important role Petrotrin plays in the country.

Speaking with Business Day, Pinard a former chemical engineer with Trintoc, the predecessor of Petrotrin, said more information should have been made available for such an important development. He cited the announcement by the majority trade union in Petrotrin, Oilfields Workers Trade Union (OWTU) that it had taken them by surprise.

He said while everyone expected something to happen, no one expected it would be as drastic as sending home 2,500 people. He recalled OWTU leader Ancel Roget referring to a memorandum of agreement signed with the Government prior to the last general election, and a joint committee being set up to look into ways and means to make the company viable.

The IR consultant said Petrotrin is duty-bound to consult with the recognised trade unions and must engage them in matters that involve their future. He said the decision to close the refinery cannot be done unilaterally, and if this was the case then the employer (Petrotrin) could be found guilty of an industrial relations offence in the Industrial Court.

“I do not have the information. The union is saying that it came like a thief in the night. If that is so, then it was badly handled. If in fact there were discussions that it was going to happen the union is entitled to put forward alternative options and asked for continued discussions,” he said.

Continuing to press the point that the closure was not handled well, Pinard said it is not only about the workers who are to be sent home.

“There are over 6,000 retirees, over 5,000 contract employees, over 20,000 people who rely on the medical services mostly retirees and former employees and their families. The company runs a hospital and they provide medical benefits at subsidised rates for all these people. We do not know what is going to happen now to them. Will it continue? We don’t know.”

Apart from people directly connected to Petrotrin, Pinard said people in fence line communities of Petrotrin will feel the full impact of the closure.

“Tens of thousands of people from the southern communities, the whole of San Fernando, Pointe-a-Pierre, Marabella, Point Fortin, Santa Flora and Fyzabad depend directly or indirectly on Petrotrin for their livelihood. I don’t know how much thought has gone into that. You have to have job losses but we don’t have the information to say whether this was really the only alternative or the best alternative.”

Pinard said he was puzzled why a bailout, as was done in the case of Clico, was not used. “So my question really is whether TT, as an oil and gas based economy, did not think that our oil industry was strategically important enough to find some ways to save it.” He said Government could have considered writing off part of the debt or taking over part of the debt temporarily as was done in the case of CL Financial.

Pinard said he is not in agreement with Petrotrin chairman Wilfred Espinet that there must be a higher level of oil production to keep the refinery running.

“For the chairman to be talking about we only have 45,000 bpd production and saying the refinery needs 160,000 bpd and therefore you cannot run a refinery profitably, there are countries which have no oil at all and who have refineries operating because they have to import everything to process and refine. So that by itself could never be a reasonable conclusion. We are located right next to the country with the largest oil reserves in the world. Have they considered importing crude from Venezuela?”

He called on Government to explore every available option before taking such a drastic decision to send home workers. He said retrenchment and laying off should always be the last resort.

In an address to the nation on Sunday, Prime Minister Dr Keith Rowley Government had little choice but to close the refinery, stating Petrotrin would need a $25 billion cash bailout to stay alive. Petrotrin loses $2 billion a year, on a recurring debt of $11 billion.

He said the refining assets of would be placed in a new company for potential buyers, including the OWTU, while Petrotrin will focus on extraction and exportation of oil. The Prime Minister is due to meet trade unions, led by the OWTU, today, mostly likely to discuss the state of Petrotrin and the movement’s call for all workers to engage in a day of rest and reflection tomorrow in protest of Government’s economic policies.

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Kamla Floats Guyana Help for Trinidad Refinery

(Stabroek News, 2.Sep.2018) — Trinidad Opposition Leader Kamla Persad Bissessar has raised the prospect of Guyana oil being used to rescue the beleaguered Petrotrin refinery but Prime Minister Keith Rowley last evening said the aged facility had no reasonable prospect.

Defending the decision by his government to close the over 100- year-old refinery, Rowley yesterday said he had no choice as the climbing debt was too much to saddle his country’s taxpayers with.

“Petrotrin was overburdened with debt. The net debt at financial year-end 2015 amounted to TT$11.4 billion,” Rowley told the twin-island nation in an address which was live streamed.

According to the Trinidadian Prime Minister, “Left as it is, Petrotrin will require an immediate TT$25 billion cash injection just to stay alive” and “there is no way that the company can find this money” as “no financier will lend it because the company simply will not be able to repay such an additional loan.”

He believes that it would be more feasible for the country to focus on exploration and production and export the 40,000 barrels of oil equivalent per day it produces and import the 25,000 barrels it needs for consumption.

“Today with a refining capacity of 140,000 barrels per day, the local production available for refining is 40,000 barrels. We really depend, mostly, on a daily importation of 100,000 barrels per day, which we refine at a significant loss.”

He would later add, “We consume less than 25,000 (barrels) of refined products. It makes far more sense to export the 40,000 that we produce and import what we need. Each barrel will be sold externally on the open market.”

Last week Tuesday it was announced that Petrotrin’s refining and marketing operations would be shuttered. With TT$8 billion in losses in the past five years and a bullet payment of US$850 million due in 2019, Petrotrin chairman Wilfred Espinet had 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. Petrotrin also owes the Trinidad Government more than TT$3 billion in taxes and royalties.

Rowley’s position last evening came even as that country’s former Prime Minister, Persad Bissessar called on him to pursue negotiations with Guyana to refine its oil there in order to save the company.

“I understand Guyana has found another well … can we not group in some way and find a way to work together as a CARICOM where we can help them refine their oil,”  she told reporters on Saturday at her Legal Clinic Siparia Constituency Office and which was reported by the Trinidadian newspaper Newsday. Guyana won’t begin pumping oil before 2020.

“I am calling on him to let good sense prevail to be very cautious in making such a drastic and dangerous move, this will have a ripple effect throughout the economy and the country…of course they (Guyana) will build their own refinery but we have one and many of the units in the refinery at Petrotrin are new, so a lot of money has been invested on the refinery side and now they are shutting it down. It is total nonsense,” she added.

Currently, it is still unclear what the Guyana Government would do with its share – 12.5%  – of profit oil from 2020 onwards, from its agreement with ExxonMobil but one government official said that several options are being explored.

One Minister yesterday said that it “Is an ongoing discussion and several workshops and engagements have been held. The options are to ask Exxon or to market, do our own marketing or take our share in kind and send it for refining somewhere. Several proposals have been received and the final decision-making process will be guided by the Department of Energy.”

Stake

Sources have told this newspaper that it has been suggested to the government that Guyana “takes a stake in the Petrotrin refinery and in this way acquire a strategic asset.” In that way, according to one source, Guyana could have its share of oil from the agreement with ExxonMobil and affiliates refined closer to home and secure jobs for persons in both countries.

But while it is still too early to tell what the Guyana and Trinidad governments will decide, a source said, “Guyana may gain a controlling or sizeable share and develop refining capacity and meet many of the outcomes from having a refinery without having to pay as much. Additionally, we can ensure that a percentage of labour is Guyanese who will have to be trained and also we can address some CARICOM integration goals.”

Last evening, the Trinidad PM  made no mention of Guyana or even hinted at restarting the refinery although he said that Petrotrin’s refinery assets would be placed in a separate company.

“We largely operate a business that is largely dependent on foreign oil inputs. All the other refineries in the region that had this same business model, Aruba, Curacao and St Croix have long since closed because they saw it as not a viable business,” Rowley said.

“Our Pointe-à-Pierre refinery is 101 years old and has reached the end of its commercially viable days it is now at a state where it is haemorrhaging cash and the cost of rehabilitating it is way more than its potential to ever be potentially viable, competitive or sustainable. The only commercially sound and viable option is to close the refinery, export Petrotrin’s oil and to import products,” he also noted.

The government of the US Virgin Islands last month approved a proposed US$1.4-billion operating agreement between itself and Arclight Capital Partners LLC, Boston, to restart the former Hovensa Refinery at Limetree Bay, St Croix. The refinery is scheduled for opening by the end of 2019. With an initial crude processing capacity of about 200,000 barrels per day according to the USVI government, the investment is expected to create 1,200 local jobs during construction and as many as 700 permanent jobs upon restarting the facility. The Hovensa refinery was a joint venture between Hess Corporation and Petroleos de Venezuela until it closed in 2012.

Rowley said that the Petrotrin model has outlived its usefulness and it was now time to accept that and equip the company to stand the test of the ever changing global economy.

“Petrotrin’s model has become obsolete and uncompetitive and its operating practices are inefficient. The company was nowhere in line with global industry standards and best practices. In fact the company’s operations are identified as being among the most inefficient in the world. The company if left as it is would continue to operate at a loss at a rate of aboutTT$2B a year. It is not a viable option, to do so is to saddle future generations with a huge debt burden. If not dealt with now, the negative effects will get worst and it simply cannot work. To break even would cost TT$7B and would involve significant staff cuts and an ultra-low sulphur refinery,”

He believed that the “Gross mismanagement of the national patrimony within the last decade” such as many cost overruns and delays in projects for the company  was part of the reason government is now saddled with the large debt.

A committee, headed by TT’s former Energy Ministry Permanent Secretary, Selwyn Lashley, had reported on the dismal state of the company since 2016 and the report showed that in addition to receiving huge subsidies from the state, Petrotrin was not paying its fair share of taxes collected to government.

“Taxes and royalties owed to Government amounted to $3.1 billion as at February 28, 2017. The company was not complying with the tax laws and even when it collected taxes from companies that paid their taxes to Petrotrin for onward transmission to the Ministry of Finance, Petrotrin was huffing and utilizing those monies in its own operations.”

“Money that should be turned over to the Ministry of Finance is held within the company and that is illegal,” he added.

***

Energy MoU Soon Between Guyana, Trinidad

(Stabroek News, Marcelle Thomas, 2.Sep.2018) — A long-delayed Memorandum of Understanding (MoU) between Guyana and Trinidad on energy cooperation is expected to be signed in the coming weeks, according to Trinidad and Tobago’s Minister of Energy, Franklin Khan.

“The Government of Trinidad and Tobago is due to sign a memorandum of energy cooperation in the coming weeks, most likely there in Georgetown,” Khan told Sunday Stabroek via telephone.

The minister did not go into the details of the agreement and said that would be disclosed after the signing. He, however, emphasised that his government is willing to offer its assistance as this country prepares for first oil. “When the Government of Trinidad and Tobago is in Guyana, yes we will offer help and advice to the Government of Guyana on your emerging oil and gas sector and obviously seek their concurrence…,” Khan said.

No official from government was available for comment or to give details on what the agreement would contain. Minister of State Joseph Harmon, who is the minister responsible for oil and gas matters, was out of the country and would not be back until next week, his office said. Several calls to the recently-appointed Head of the Department of Energy, Dr Mark Bynoe, went unanswered.

Since 2016, discussions commenced between Guyana and Trinidad on an MoU under which the latter would provide various forms of support to the oil and gas sector in Guyana. Initiated during a visit here in 2016 by a Trinidad and Tobago delegation led by the then Energy Minister Nicole Olivierre, the MoU was expected to be signed at the end of that year but that did not happen. At the time, Minister of Natural Resources Raphael Trotman had said that the pact would see Guyana receiving support in a range of areas, including advanced technical training for local personnel in the industry.

News of the proposed energy cooperation agreement between Georgetown and Port-of-Spain comes days after the Trinidad and Tobago government inked an agreement with Venezuela to import natural gas from the Spanish-speaking country. That agreement would see the twin-island republic purchasing some 150 million standard cubic feet of natural gas per day from Venezuela’s prolific Dragon Field.

Meanwhile, sources told Sunday Stabroek that it has been suggested to government that Guyana “takes a stake in the Petrotrin refinery and in this way acquire a strategic asset.” In that way, according to one source, Guyana could have its share of oil from the agreement with ExxonMobil and affiliates refined closer to home and secure jobs for persons in both countries.

Last Tuesday, it was announced that Petrotrin’s refining and marketing operations would be shuttered. With TT$8 billion in losses in the past five years and a bullet payment of US$850 million due in 2019, Petrotrin chairman Wilfred Espinet had 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. Petrotrin also has a TT$12 billion debt and owes the Trinidad Government more than TT$3 billion in taxes and royalties.

According to the Trinidad Guardian newspaper, the Oilfield Workers’ Trade Union (OWTU) leader, Ancel Roget, had warned that the refinery will be sold to private investors, but Espinet had dismissed this, saying, “There is no likelihood of that refinery being sold.”

Khan told Stabroek News that Petrotrin’s closure does “not really” affect the opportunity for Guyana to still look to T&T to refine its oil or look elsewhere. “We have decided to close the refinery because of its present configuration and cost structure. It is losing money and it’s not sustainable in its current form,” he said. “However, other business models could be proposed,” he added.

‘Mindful’

But while it is still early to tell what the Guyana and Trinidad government will decide, a source said, “Guyana may gain a controlling or sizeable share and develop refining capacity and meet many of the outcomes from having a refinery without having to pay as much. Additionally, we can ensure that a percentage of labour is Guyanese who will have to be trained and also we can address some CARICOM integration goals.”

A government official believes that Guyana has to be mindful of such a move, given the recent agreement Trinidad inked with Venezuela and this country’s longstanding border controversy with Venezuela. “We have to be mindful of a growing relationship between Venezuela and Trinidad and Tobago and won’t want to compromise our energy security by having the asset in a nation where the government grows uncomfortably close with our main detractor…Venezuela may try to influence the [Trinidad and Tobago’s] relationship with Guyana,” the official said.

Khan was asked about possible perceptions and future implications of his country’s agreement with Venezuela but would only say, “We know of all the geopolitics and so on and will answer those questions then.” As to whether the government of Guyana ever discussed acquiring a stake in the now defunct Petrotrin refinery with Port-of-Spain, Khan said neither him nor his government has ever had that discussion.

Currently, it is still unclear what government would do with its share – about 14 percent – of profit oil from 2020 onwards, from its profit sharing agreement with ExxonMobil. As of last year, before the Department of Energy was formed, 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.

ExxonMobil was asked by this newspaper if it has decided on a refining company to whom it would sell its share of crude. Through its Public and Government Affairs Officer Deedra Moe, the company responded: “We sell crude oil on the open market. ExxonMobil has an equity crude oil marketing group – an integrated operations, logistics and trading team – that operates around the world and is responsible for marketing ExxonMobil’s global production of crude oil and condensates.”

And while Guyana prepares for first oil in 2020, the government of the US Virgin Islands last month approved a proposed US$1.4-billion operating agreement between itself and Arclight Capital Partners LLC, Boston, to restart the former Hovensa Refinery at Limetree Bay, St Croix. The refinery is scheduled for opening by the end of 2019. With an initial crude processing capacity of about 200,000 barrels per day according to the USVI government, the investment is expected to create 1,200 local jobs during construction and as many as 700 permanent jobs upon restarting the facility. The Hovensa refinery was a joint venture between Hess Corporation and Petroleos de Venezuela until it closed in 2012.

Hess is one of the partners in ExxonMobil’s 6.6 million acres Stabroek Block operations, which last week announced its ninth oil discovery.

Moe was asked if ExxonMobil was looking at refining in St. Croix and responded, “I am not aware of anything regarding St. Croix.”

***

Petrotrin Severance to Cost at Least $1 Bln

(Trinidad and Tobago Newsday, Carla Bridglal, 31.Aug.2018) — Severance packages for Petrotrin workers will cost upwards of $1 billion, Energy Minister Franklin Khan estimated yesterday. But compared to the Pointe-a-Pierre refinery’s annual loss—estimated at $2 billion—that’s a small price to pay.

Khan said the company was still “crunching the numbers” but will offer early retirement for people over 55, as well as “exit packages” for young workers.

“That formula is still being worked out. The figure will be huge because the base salary at Petrotrin is big.”

While the wages at the refinery aren’t necessarily the highest in the company, he said that department did have the highest overtime bill, but overtime doesn’t come into play in the determination.

Khan acknowledged the human impact of the 101-year-old refinery’s closure, saying as a former employee, he empathised with them.

“The numbers did not stack up, otherwise we would have put the economy at risk. Having said that, no matter what spin you put on it there are approximately 3,000 families affected. I am very much conscious of it, and so is the Prime Minister. My entire career was at Petrotrin. I know most of those workers. I supervised some of them. I have a great deal of empathy for them. That is why we would be working out proper packages. We want a spin-off effect like what happened in Couva and Chaguanas after Caroni (1975) Ltd closed down.” Even if the refinery is closed, there will still be lots of activity in the exploration and production side. “I’m not too concerned about La Brea, Santa Flora and Point Fortin. The South Western peninsula is good. The major challenges are the communities of Marabella and Gasparillo, the catchment areas for the refinery.”

The refinery will initially be transformed into a terminalling facility to import fuel in bulk for onward shipping to the Caricom market.

Khan added that even though the company will have to now import fuel, there will be no change to the fuel subsidy. The fuel subsidy is estimated to be $900 million this fiscal year. There’s also a subsidy on liquefied petroleum gas (LPG) or cooking gas, for about $500 million. Petrotrin absorbs the LPG subsidy, but state-owned fuel distributor, National Petroleum, absorbs the fuel subsidy, so the change at Petrotrin will not impact the current subsidy model.

Khan also defended the government’s reticence to publicly comment on the decision to close the refinery. Dr Rowley is expected to address the nation on Sunday. “The announcement was made by the board of directors. Everybody in this country says it’s political interference that killed Petrotrin, so we empowered the board. We gave them the autonomy to act. They made a proposal, it was approved by Cabinet. We don’t have to be on a ball-by-ball commentary in that regard because the very thing the population is accusing the politicians of is what you are asking me to do.”

***

Lennox Petroleum to Take Legal Action Against OWTU

(Trinidad and Tobago Newsday, Yvonne Webb, 31.Aug.2018) — Lennox Petroleum Services Ltd has initiated legal action against members of the Oilfield Workers Trade Union (OWTU), one day after they protested inside the company’s Princess Margaret Street, San Fernando office. CEO Wayne Persad has also applied for an injunction to prevent the union from trespassing on his premises or continuing “their illegal actions.”

In a statement, Persad claimed that on Wednesday, about 40 members of the OWTU forcibly entered the compound, assaulted a security officer and then searched the compound. He said they shouted his name and asked him to come out.

Persad said, consistent with their company’s emergency policies and procedures, the police was notified of the “intrusion” and responded within minutes of the report being made.

OWTU’s chief labour relations officer Lyndon Mendoza, who led the demonstration, questioned the large complement of heavily-armed officers who arrived in about six or seven marked police vehicles, when all the workers did was hold hands, pray and sing union songs. He said they went to Lennox Petroleum, an off-shore company, to deliver a letter on behalf of workers who were owed retroactive payment dating back some three years ago. He said collective bargaining arrangements were signed to this effect. He said the union was there to show solidarity with the workers.

In his statement, Persad said the acts committed were extremely unwarranted and were designed to intimidate management and staff.

He explained that by letter, dated August 27, the company was informed by the OWTU that the dispute which gave rise to the protest was reported to the Ministry of Labour. Given that the company was invited by the ministry to meet with the union on September 11, Persad said Wednesday’s action showed disrespect to the Industrial Relations Act and its process. He said the protest action was a clear attempt to circumvent the procedures stipulated under the act.

“At present, our company is in a transitional period as our majority shareholder/director/founder, Pamela Persad passed away on August 18. The timing of the protest less than a week after the burial of Mrs Persad was extremely insensitive.”

Persad also denied that it employs over 250 workers or that any of their workers are members of the OWTU. He said none of the protestors were employees of his company, neither were they authorised to be on the compound.

***

Shut-Down of Historic Petrotrin Refinery

Petrotrin refinery. Source: Petrotrin

(Trinidad and Tobago Newsday, Carla Bridglal, 30.Aug.2018) — On the eve of the country’s 56th anniversary of Independence, the board of Petrotrin announced it was shutting down the state oil company’s refinery and marketing operations, choosing instead to focus on exploration and production.

Over 2,500 jobs will be affected, and all refining jobs — about 1,700 — will be terminated as the company begins its transition period on October 1.

The tragedy of Petrotrin goes beyond the immediate impact of job losses, though. One of the major casualties of this decision is the 101-year-old Pointe-a-Pierre refinery – once the crown jewel in a collection of state enterprises that has now lost its lustre, a beacon of nationalism whose light is now dulled.

“We are now 101 years old in the refinery business and the purpose of getting into it is no longer relevant, but we are holding on to it because there are emotional ties. And because it is there, what we’ve done now as a board is look at it hard and said, ‘Hey, let’s start from a clean sheet’,” chairman Wilfred Espinet told a media conference on Tuesday.

In the beginning

The Pointe-a-Pierre refinery has had a storied history. First set up in 1917, it was once the biggest in the British Empire. During World War II the refinery was identified as an asset to be “protected at all cost” as a major supplier of aircraft fuel for the Allied forces. In 1940, refining capacity in Trinidad and Tobago was recorded at 28.5 million barrels per year.

In 1956, US company Texaco acquired the refinery, and in 1985, the government, through Trintoc (1974) bought over Texaco’s assets except Trinmar. In 1993, Trintoc and Trintopec were incorporated into Petrotrin. The board had most recently claimed that as part of the restructuring, initiated on March 1, it would split the company’s operations into two arms — exploration and production and refining and marketing. The announcement to shut down the refinery, then, came as a surprise to most.

It’s a bold move, because the nostalgia surrounding Petrotrin and Pointe-a-Pierre is palpable — especially for south Trinidad. The livelihoods of thousands more than 5,000 direct employees of the company are intertwined with the refinery — from restaurants to the technical service providers who have had their base in and around the San Fernando/Marabella area, including Vistabella and Gasparillo.

“It’s a whole domino effect,” said president of the San Fernando Business Association, Daphne Bartlett.

Local historian Prof Brinsley Samaroo has likened the refinery’s end to the closure of Caroni (1975) Ltd, which also had rippling effects throughout local communities of south and central Trinidad.

“The refinery was crucial to the development of Trinidad, from Claxton Bay to San Fernando and beyond. The whole area was developed when the refinery was opened and the opportunities it provided,” he told Business Day.

It’s likely we’ll see a repetition of the economic displacement that happened after Caroni was shut down, and similar areas, like south and central, he said. This time may even be worse though — when Caroni closed, the refinery was still running, providing an economic buffer for the area.

“People in south depend directly on the oil industry. The whole economy hinged on the oil industry since the closure of the sugar factory and we haven’t been able to diversify the economy since then, so we continue to depend on oil. The closure of the refinery is not a good sign and I think we are in for a rough period for the whole country,” Samaroo said.

Many questions to answer

For the wider economy, though, there are still questions that need to be answered. The Petrotrin refinery provided cheap fuel for the local market. Now the country will have to import the equivalent of 25,000 barrels of oil per day to supply the economy, although the amount will hopefully be offset by the how much the company produces — about 40,000 barrels per day. Nonetheless, this will likely require some adjustment, most notably to the fuel subsidy. According to the TT Energy Chamber, over 90 percent of Petrotrin’s sales to the local market have been fuel — 46 per cent is from gasoline, 37 per cent from diesel, and 11 per cent from jet fuel. Five per cent is from liquefied petroleum gas (LPG or cooking gas), but the company has said it will continue to supply this.

“About 20 per cent of the refinery’s output is consumed locally. The refinery is our sole source of gasoline, diesel, and jet fuel. If we don’t have an operational refinery we will of course have to import fuel. Another 17 per cent is exported to Caricom with the main markets being Jamaica, Barbados and Guyana. These countries will have to source fuel extra-regionally,” former energy minster and now consultant and lecturer Kevin Ramnarine said.

He was also concerned about the uncertainty of the subsidy. “The fuel subsidy is based on the ex-refinery price. Since there will be no refinery there will be no ex-refinery price. So, what happens to the subsidy? The country will likely spend about $900 million this year subsidising liquid fuels to the population,” he said.

Rooting out debt ‘cancer’

Petrotrin’s lack of competitiveness has consistently been cited by the board as the fundamental reason for restructuring. In February, during a presentation to a joint select committee of Parliament, the board noted that the company’s key performance indicators, when placed against international benchmarks put the company at the “lowest of the low” in terms of competitiveness.

The refinery has a nameplate capacity of 140,000 barrels of oil per day — it therefore has to import 100,000 barrels a day to remain viable, making it a net consumer of foreign exchange.

“We had a continued programme of looking at all sorts of ways to make this work. We came to the conclusion that if we wanted to be able to pay back the debt, and if we wanted to be able to have a profitable company that could be sustained over time, we would have to take out what was the cancer of the operation and that would have been the refining and marketing.”

And the company has a lot of debt: over $10 billion — including $3 billion to the government. It requires a $25 billion cash injection to stay alive, and next year, a US$850 million bullet payment on a bond issue comes due. In dire tones on Sunday, Energy Minister Franklin Khan said the company had the potential to bankrupt the country.

Even some of the government’s biggest critics have agreed that something needed to be done to get the company back to profitability.

“Things definitely needed to be restructured,” said Bartlett. Ramnarine agreed, especially in the context of the debt burden of the company

Save the refinery

Despite the board’s claims then, that it needed to cut out the “cancer” of the refinery, though, Ramnarine and Bartlett believe the refinery could have been salvaged.

“I don’t think Petrotrin would have bankrupted the country. Petrotrin and its refinery are completely redeemable but there is a need to push for efficiency and cost reduction. US refineries are currently experiencing a ‘golden age’ and are running at record levels in response to robust domestic and international demand for gasoline and fuel oil. The paradigm in the refining business is competitiveness. Having said that we need to appreciate that the country spent US$1.6 billion on the refinery in the last decade and we have some relatively new plants there such as the continuous catalytic reforming plant (Cat Cracker), the iso plant and the acid/alkyl plant,” he said.

Bartlett said instead of shutting the refinery, the country should have instead looked towards improving it to take advantage of opportunities in places like Guyana, which is currently experiencing the first waves of an oil boom.

“We know it can be viable because of what’s happening in Guyana. State-owned companies do not belong to politicians. A decision like this should have been made with open discussion. It makes me wonder, did they think this decision through or did they just want to get rid of it?”

***

Petrotrin Concerned: Ramnarine and Seepersad-Bachan

(Trinidad and Tobago Newsday, Sasha Harrinanan, 29.Aug.2018) — Former energy ministers Kevin Ramnarine and Carolyn Seepersad-Bachan, both of whom served under the previous administration, are asking if Petrotrin’s board considered the wider impact of closing its refinery.

Ramnarine, in a statement after the board’s announcement yesterday, said “the closure of the refinery has to be considered against the impact it has on the economy, (including) the impact on hundreds of contractors and energy service companies who also employ thousands of people. There is the impact on the fence-line communities of Marabella, Vistabella, Gasparillo and San Fernando.”

Seepersad-Bachan, speaking with Newsday, asked if Petrotrin had “considered the possibility of other job cuts related to the refinery’s closure. What about all the other small contractors and spin-off service operations that support Petrotrin’s refinery at this point in time?” Expressing concern about how meaningful planned consultations can be in such a relatively short period – the refinery’s operations will start being phased out from October 1 – the Congress of the People (COP) political leader said her party will soon hold a series of “national conversations” on the matter.

Ramnarine highlighted the supply impact locally and regionally of the impending closure.

About 20 per cent of the refinery’s output is consumed locally. It is TT’s “sole source of gasoline, diesel, jet fuel et cetera. If we don’t have an operational refinery, we will of course have to import fuel.

***

Petrotrin Financials, Details About Pointe-a-Pierre Refinery

(Energy Analytics Institute, Ian Silverman, 29.Aug.2018) — It’s official: Petrotrin or the Petroleum Company of Trinidad and Tobago Limited will cease to operate its lone refinery located at Pointe-a-Pierre.

What follows are details about the company, as per its website.

OUR COMPANY

We are an integrated oil and gas company, engaged in the full range of petroleum operations including the exploration for, development of and production of hydrocarbons, and the manufacturing and marketing of a wide range of petroleum products.

Our position in the energy sector is strengthened by more than 100 years of predecessor experience in crude oil production and manufacturing in this country. (See Our History)

Our organization, Petroleum Company of Trinidad and Tobago Limited (Petrotrin) was incorporated on January 21, 1993 to consolidate and operate the petroleum producing, refining and marketing assets of State-owned enterprises: Trinidad and Tobago Oil Company Limited (Trintoc) and Trinidad and Tobago Petroleum Company Limited (Trintopec). In 2000, these assets were further extended with the acquisition of Trinmar Operations.

As a state-owned Company, Petrotrin is under the direct control of the Minister of Finance acting as Corporation Sole.

The Ministry of Energy and Energy Affairs is the line ministry that provides the specialized technical analyses and statutory approvals for the Company’s operations, while ensuring adherence to the Government’s policy guidelines. (See Governance)

Today, we are Trinidad and Tobago’s largest crude oil producers. We also have an interest in some natural gas production. Our operations and partnerships cover most of the island of Trinidad and much of the waters surrounding the island of Tobago.

We operate Trinidad and Tobago’s only petroleum refinery. Our refinery has a full conversion capacity of up to 168,000 bpd and average throughput of approximately 112, 974 bpd. Our petroleum products are sold locally and as well as to customers across the Caribbean, Latin America and the eastern seaboard of the United States of America. (See Our Operations)

We are one of the largest employers in Trinidad and Tobago with a dedicated workforce of more than 5,000 people. Our team is committed to optimizing our energy resources for the benefit of our stakeholders. As such, we are committed to operational excellence, personal accountability and sustainable practices throughout our operations. (See Sustainable Development)

Together, our people, rich history, extensive operations, sustainable practices, long standing relationships and strategic mid-Atlantic location have strengthened customer confidence in our position as a leading supplier of petroleum products.

Petrotrin’s Board of Directors

FREQUENTLY ASKED QUESTIONS

What is Petrotrin’s main business?

Petroleum Company of Trinidad and Tobago Limited (Petrotrin) is an integrated oil and gas company engaged in the full range of petroleum operations including the exploration for, development of and production of hydrocarbons, and the manufacturing and marketing of a wide range of petroleum products.

When was Petrotrin incorporated?

Petrotrin was incorporated in January 1993, merging selected assets of state owned Trinidad and Tobago Oil Company (TRINTOC) and Trinidad and Tobago Petroleum Company (TRINTOPEC).

Our roots can however be traced to the beginning of commercial oil production in Trinidad and Tobago through predecessors who were listed among the nation’s earliest prospectors in oil and gas.

Who owns Petrotrin?

Petrotrin is a limited liability company, wholly owned by the Government of the Republic of Trinidad and Tobago. The Company is under the direct control of the Minister of Finance as Corporation Sole. The Ministry of Energy and Energy Affairs is the line ministry that provides specialized technical analyses and statutory approvals for our operations while ensuring adherence to Government’s policy guidelines.

How many people are employed by Petrotrin?

Petrotrin has a combined workforce of more than 5,000 employees, the majority of whom are in the core operating areas. Indirect employment is also provided for thousands more.

Where is Petrotrin’s Refinery located?

Our Refinery is located at Pointe-a-Pierre, on the west coast of Trinidad on 2,000 acres of land, approximately 56 kilometres north of San Fernando along the coast of the Gulf of Paria.

What types of products are processed at Petrotrin’s refinery?

Our main refined petroleum products include Liquefied Petroleum Gas, Aviation Fuel, Motor Gasoline, Diesel and Fuel Oil.

Where are Petrotrin’s E&P operations located?

Petrotrin’s E&P operations are spread across the southwestern peninsula of Trinidad. The Company also has E&P operations offshore. Petrotrin operates several E&P offices located at Santa Flora, Point Fortin, Penal, Guayaguayare and Forest Reserve.

OUR PRODUCTS

Avjet Kerosene

Aviation Jet Fuel is a grade of kerosene intended for aircraft powered by turbine engines due to its high flashpoint.

Aviation Gasoline

Aviation Gasoline or Avgas is a grade of gasoline used in the internal combustion engines of aircraft. With a higher octane than Motor Gasoline, Avgas is highly refined so that it remains in a liquid state at low pressure in high altitude.

Diesel Heating Oil

Diesel is an important transportation fuel used in diesel engines found in vehicles, heavy machinery, boats and even power generators.

Fuel Oil

Heavier than diesel, fuel oil is typically used for heating, bunkering and other industrial purposes. Low and medium sulphur fuel oils are available at Petrotrin. Typically, the material is low pour, low metals with less than 8% asphaltenes.

Liquified Petroleum Gas

Liquefied Petroleum Gas or LPG is a group of gases, mainly propane and butane, that have been liquefied under high pressures. LPG is used in a variety of ways including heating, cooking and refrigeration.

Sulphur

At Petrotrin, pelletized sulphur is available for loading in bulk by conveyor belt.

Motor Gasoline

Lighter than Diesel Fuel, Motor Gasoline is the main transportation fuel used in cars and light transportation vehicles. Motor Gasoline has different grades with varying octane numbers that remark on a fuel’s resistance to knock.

We manufacture motor gasolines to customer specifications. We supply the local, regional, Latin American and US Gulf Coast markets.

LAST FINANCIAL REPORT

Petrotrin’s Balance Sheet and Income Statement

Petrotrin’s Cash Flow Statement

***

CITGO Awards Grant, Continues Restoration Work

(Citgo, 29.Aug.2018) — Through the CITGO Caring for Our Coast initiative, a program designed to boost ecological conservation, restoration and education, The Conservation Foundation (TCF) has been awarded a grant to continue its restoration work in the Heritage Quarries Recreation Area (HQRA) in Lemont.

In partnership with TCF and the Village of Lemont, the CITGO Lemont Refinery has been funding semiannual projects and working alongside local volunteers in the HQRA since the fall of 2014, removing invasive plant species and brush, and harvesting native species’ seeds for replanting.

Located half a mile east of downtown Lemont, the HQRA is situated among thousands of acres of forest preserves, which includes more than 65 miles of hiking and biking trails, as well as access to fishing and boating along the I & M Canal and the Consumers, Great Lakes and Icebox Quarries.

According to Scott LaMorte, senior advancement officer at TCF, the transformation of the HQRA, in just four years, has been remarkable.

“During a community workday last year, my group was assigned to clear a section near the picnic grove. After cutting out some of the weedy shrubs, we uncovered a pond that hadn’t been seen in decades! The ‘before’ and ‘after’ photos are just incredible,” said LaMorte.

Dennis Willig, Vice President and General Manager of the CITGO Lemont Refinery, describes the HQRA project as neighbors-serving-neighbors.

“We are proud to partner with the local community, because not only are natural resources being preserved, but residents will be able to enjoy the benefits of this outdoor recreational space for years to come,” said Willig.

***

1,700 Petrotrin Workers to be Fired, Refinery Closed

Petrotrin workers being addressed by OWTU president general Ancel Roget. Photo: Trevor Watson

(Trinidad Express, 28.Aug.2018) — It’s official. Petrotrin’s refinery is to close. And 2,600 workers will be impacted.

The Petrotrin Board of Directors met Tuesday August 28 with its employee representative unions and the Company’s management to announce plans to end Petrotrin’s oil refining operations at Pointe-a-Pierre and to redesign entirely its Exploration and Production business.

According to a statement from Petrotirn, the restructuring exercise is geared to curtail losses at the state owned oil company and get it on a path to sustainable profitability.

Approximately 2,600 permanent jobs will be affected – the redesigned Exploration and Production business will have approximately 800 workers and all 1,700 jobs in refining will be terminated. Petrotrin is committed to cushioning the effects of any fallout that occurs from the planned changes.

The announcement follows months of careful review and analysis by the Company’s Board of Directors, which was appointed last September to identify the problems at Petrotrin and take the steps necessary to make the Company self-sustainable and profitable.

Petrotrin has lost a total of about TT$8 billion in the last five years; is TT$12 billion in debt; and owes the Government of Trinidad and Tobago more than TT$3 billion in taxes and royalties.

The Company currently requires a cash injection of TT$25 billion to stay alive –– to refresh its infrastructure, and to repay its debt –– and even with that, if left as is, it is projected to continue losing about TT$2 billion a year.

Chairman Wilfred Espinet said: “With the termination of the refining operations and the redesign of Exploration and Production, Petrotrin will now be able to independently finance all of its debt and become a sustainable business.”

OWTU president general Ancel Roget. Photo: Trevor Watson

“Petrotrin is no longer producing enough oil to operate the Pointe-a-Pierre refinery efficiently: We are producing approximately 40,000 barrels of oil a day and the refinery operates at a capacity of 140,000 barrels a day, so we have to go to the market to buy about 100,000 barrels of oil to make up the shortfall. This results in a net loss in foreign exchange.”

The refining of oil will be phased out and the Company will import the refined products (gasoline, diesel, aviation fuels, etc.) that the country needs –– approximately 25,000 barrels of oil equivalent a day. All of the Company’s oil will be exported.

Espinet said: “Our goal is for Petrotrin be an internationally competitive and sustainably profitable leader in the local energy sector; and an employer of choice, that is a source of national pride.”

The period of transition will commence on October 1, 2018.

According to the company, the Board of Directors is taking all requisite steps to facilitate a smooth and efficient period of transition with safety and the security of the country’s fuel supply being its two priorities.

Petrotrin will be meeting with all of its stakeholders during the coming weeks to discuss how the proposed changes may affect them.

***

PetroTrin Refinery to Close

Petrotrin’s Pointe-a-Pierre refinery operations. Photo: Richard Charan

(Trinidad Express, Ria Taitt, 28.Aug.2018) — The Government has decided to shut down the refinery of State oil company Petrotrin.

The country can no longer afford to continue to refine oil and lose billions of dollars in this process, a senior Cabinet source told the Express yesterday.

The company will instead be expanding its operations in oil exploration and production, the source said.

The source said Oilfields Workers’ Trade Union (OWTU) president general Ancel Roget was told “in no uncertain terms that the major restructuring at Petrotrin will be that Trinidad and Tobago would be moving out of the refinery business because it does not have oil to refine”.

***

Trinidad Imports 40% of Oil from Russia

(Energy Analytics Institute, Ian Silverman, 27.Aug.2018) —Trinidad and Tobago is relying on Russia as its main source of imported crude oil.

Between January and June 2018, the small twin-island country imported over 15 million barrels of crude oil from the [Petrotrin] refinery. Of that, 40% of the crude oil imports came from Russia, 29% from Colombia, 22% from Gabon, 8% from Canada and 1% from Barbados, announced Trinidad and Tobago’s Energy Chamber in a twitter post.

Caribbean Economist Marla Dukharan commented on the situation in the following twitter post.

***

PDVSA, Citgo Evaluating Aruba Gas Plan

(Energy Analytics Institute, Piero Stewart, 25.Aug.2018) — Venezuela is evaluating a plan to implement a natural gas project with Aruba.

Officials from Venezuela’s state oil company PDVSA, and its refining arm Citgo Petroleum Corporation continue to evaluate the potential of such a project that would imply a gas interconnection between Venezuela and Aruba, reported PDVSA in an official statement.

No further details about the plan were revealed by PDVSA.

***

Aruba’s San Nicolás Refinery to Take Faja Oil

(Energy Analytics Institute, Piero Stewart, 25.Aug.2018) — Valero’s old Aruba refinery will be revitalized as an upgrader.

PDVSA announced the San Nicolás Refinery located in Aruba will be converted into an upgrader in order to process extra-heavy oil from Venezuela’s Hugo Chavez Orinoco Heavy Oil Belt, also known as the Faja.

Citgo Aruba Refinery. Source: PDVSA

The upgrader will have capacity to process 200,000 barrels per day, reported PDVSA in an official statement.

Venezuela — the country with the world’s largest oil reserves, and reeling in political, economic and humanitarian crises and suffering from the world’s highest inflation – continues to struggle to stop oil production declines. The country’s refineries and upgraders continue to suffer from a lack of investment, among other issues that continue to affect the OPEC country’s oil patch.

No further financial details related to refinery conversion were revealed by PDVSA.

***

MEEI Updates on Status of Trinidad Energy Infrastructure

(MEEI, 24.Aug.2018) — The Ministry of Energy and Energy Industries (MEEI) has been monitoring the impacts of the 6.9 magnitude earthquake which occurred on Tuesday 21st August, 2018 at 5:31 p.m. that reportedly caused some property damage across the country.

Reports from the energy sector companies have, so far, indicated that there have been no visible structural damage to offshore and onshore infrastructure, although assessments are currently ongoing.

Some companies, such has Shell, opted to shut-in offshore facilities to conduct such assessments.

In particular, with respect to Trinmar, some offshore installations have been minimally impacted, the most serious being structural damage to the Block Station Bridge on Platform 4 in the Main Soldado Field. A team of Construction Engineering personnel has since examined the damage with the aim of developing measures to rectify the situation. Plans for corrective measures to restore workmen facilities and other general utilities are also being finalized.

At the Petrotrin Refinery, there have been no reported disruptions, save and except impacts to the loading arm for loading vessels with petroleum products. As such, there is expected to be delays in loading vessels for the time being.

There have been reported impacts to office buildings in Port of Spain such as Albion Plaza, Shell House, NPMC Sea Lots, and Atlantic.

NP has assured that there is an adequate and available supply of fuel at its service stations.

The National Gas Company (NGC) has indicated that there was no damage to its facilities and infrastructure. Atlantic LNG’s facilities and infrastructure at Point Fortin were not affected and continue to produce.

Further, there have been no reported damage to any of the following organisations/facilities:

Petrochemical Plants

— Methanol Holdings Trinidad Ltd

— Point Lisas Nitrogen Ltd

— Yara & TRINGEN

— Caribbean Nitrogen Company & N2000

Natural Gas Liquids Facilities

— Phoenix Park Gas Processors Ltd Power Generation

— Trinity Power Ltd

— PowerGen

— Trinidad Generation Unlimited

The Ministry is awaiting responses from other stakeholders. As assessments continue the public will be advised on any further developments accordingly.

***

Petrobras to Start Replan Refinery Reopen in 48 Hours

(Reuters, 22.Aug.2018) — Brazil’s state-run oil company Petróleo Brasileiro SA may begin procedures to reopen its largest refinery, closed after an explosion and fire, in 48 hours, Gustavo Marsaioli, a spokesman for the oil workers’ union, said on Wednesday.

Marsaioli said Petrobras intends to reopen the Paulinia refinery, known as Replan, at half-capacity given the fire early on Monday that affected part of the facility. The unaffected part may go back into production a week after procedures for reopening are completed, Marsaioli said.

Petrobras did not immediately respond to a request for comment.

Replan accounts for about 20 percent of Petrobras’ refining capacity, processing the equivalent of 434,000 barrels of oil per day, according to the company’s website.

A Petrobras executive said the incident was serious but that the company had enough stocks to cover Replan halting operations for 15 days.

(Reporting by Roberto Samora; Writing by Tatiana Bautzer and Alexandra Alper; editing by Jonathan Oatis and Susan Thomas)

***

Esmeraldas Refinery Stoppage Delayed Until March 2019

(Energy Analytics Institute, Ian Silverman, 22.Aug.2018) – A scheduled 54-day stoppage at the Esmeraldas Refinery for the maintenance of the Non-Catalytic 1 and Catalytic 1 units will be postponed until March 2019.

The stoppage, originally planned to commence on August 16, 2018, was postponed by PetroEcuador as the contractor in charge of supplying pipes for the VH1 Furnace of the Vacuum Plant has experienced procurement delays, announced Ecuador’s Hydrocarbon Ministry in a statement on its website.

***

Petrobras Sees No Fuel Supply Shortage After Replan Fire

(Reuters, 20.Aug.2018) – A director at Brazilian state-run oil company Petroleo Brasileiro SA said on Monday a fire at the company’s largest refinery Replan, in the state of São Paulo, is not expected to compromise fuel supplies in the short run.

Jorge Celestino Ramos, the company’s refining and natural gas director, said fuel supplies are guaranteed for 15 days as other refineries may compensate any shortfall at Replan, where production remains halted since the early hours of the day.

(Reporting by Rodrigo Viga Gaier Writing by Ana Mano Editing by Chizu Nomiyama)

***

Venezuelan Oil Assets to be Seized by Creditors

(Express, Simon Osborne, 16.Aug.2018) – Venezuela’s oil assets are being targeted by angry creditors after a US court granted a Canadian mining company permission to send in the bailiffs.

Firms owed billions by the beleaguered South American country and its state-owned oil firm PDVSA are now lining up to make sure they get a pay-out.

The Venezuelan economy is crippled by hyperinflation and the discredited regime of President Nicolás Maduro faces trade sanctions from the US, EU, Canada and Latin America’s biggest countries.

The country is essentially bankrupt and creditors see its oil assets as their best bet with the biggest target being Citgo, a Texas-based oil refiner that processes Venezuelan crude oil and is estimated to be worth roughly £3.15bn.

Oil tankers could also be targeted as US hedge fund Elliott Management did with an Argentine ship in 2012 after it won a US court ruling to collect on unpaid debts.

Venezuela, which is overdue on about £4.5bn in debt payments, is reportedly transferring oil cargoes to safe harbours including Cuba to avoid such risks.

Canadian mining company Crystallex won a key battle in its attempts to force Venezuela to pay £1.1bn in compensation for expropriation of a mining project when a US judge accepted its argument that PDVSA was an “alter ego” of the Venezuelan state and gave it the right to seize PDVSA assets in the US.

Francisco Rodriguez, chief economist of Torino Capital said the ruling could serve as a precedent.

He said: “This judgment is unambiguously negative for Venezuela, given its loss of an asset of significant value. In all likelihood the ruling will spur creditors to attempt to pursue PDVSA assets.”

ConocoPhillips has already won a £1.57bn arbitration award against PDVSA from the International Chamber of Commerce, the US oil major seized the company’s assets in the Caribbean.

The seizures left PDVSA without access to facilities that process almost a quarter of Venezuela’s oil exports.

To avoid the risk of other assets being taken, PDVSA asked its customers to load oil from its anchored vessels acting as floating storage units.

Citgo’s complicated ownership – half the company is security against more than £2.36bn of PDVSA bonds and half is collateral for a £1.18bn loan from Russian oil giant Rosneft – means any immediate plundering of its assets is extremely unlikely.

Robert Kahn, a professor at the American University and a former International Monetary Fund official, said: “The ruling is a win for Crystallex, no doubt. But I’m not convinced that it immediately marks a tipping point.”

Richard Cooper, senior partner at New York law firm Cleary Gottlieb Steen & Hamilton, said: “The Crystallex ruling doesn’t mean that every Republic of Venezuela bondholder can automatically assume that PDVSA assets are available to them.”

Venezuela also owes tens of billions of dollars to China and Russia but its sole foreign-exchange generating industry is in steep decline with oil output dropping below the 1947 levels of 1.3m barrels per day.

***

PDVSA Leaves Argentine Gas Station to Fend for Itself

(Reuters, Luc Cohen, 15.Aug.2018) – As Venezuela’s state-owned oil company PDVSA saw its finances devastated by low oil prices and mismanagement, it funneled millions of dollars to Petrolera del Conosur (PSUR.BA), a loss-making Argentine gas station operator it controls.

PDVSA decided to cut off the support payments late last year, according to a person familiar with Petrolera del Conosur’s operations, as the once-proud icon of Venezuelan oil production struggled with declining output aggravated by a worsening economic crisis.

The transfers had totaled $89 million between 2013 and 2017, according to a Reuters review of filings with Argentina’s securities regulator, years that coincided with a frustrated effort by Venezuela to extend the petro-diplomacy it employed in the Caribbean to the southern cone of Latin America.

Profitability was likely never the true goal of Venezuela’s Argentina foray, said David Mares, a political science professor at the University of California, San Diego. In 2006, late President Hugo Chavez unveiled a plan to transform PDVSA from a commercial company to a domestic and international political tool.

Before oil prices crashed in 2014, Venezuela’s government used PDVSA to fund social programs at home and provide countries in the region with cheap fuel to promote its socialist model and push back on United States influence.

The most well-known example is Petrocaribe, a program through which Venezuela sends crude and fuel to Caribbean countries on generous credit terms or through barter deals. But Chavez also signed deals with governments elsewhere in the region, including Argentina and Uruguay, to sell fuel and invest in energy infrastructure.

“The idea of having a series of gasoline stations in Argentina would fit in that context. It’s to show the Bolivarian revolution benefits people at the ground level,” Mares said. “The surprise is that they’ve lasted so long, because PDVSA is broke, the country is broke.”

PDVSA in 2006 purchased a 46 percent stake in Conosur from Uruguay’s ANCAP, which it boosted to a controlling 94 percent in 2010. PDVSA’s website still boasts of a goal to run 600 stations in Argentina to gain a market share of 12 percent in the country.

Conosur’s struggles come as some of PDVSA’s other overseas ventures, most launched through a wave of overseas expansion in the 1980s or as part of Chavez’s attempts to use “oil diplomacy,” have been scaled back or shuttered.

One of the most emblematic is Hovensa, a refinery in the U.S. Virgin Islands operated jointly with Hess Corp (HES.N), that filed for bankruptcy in 2015.

‘STRATEGIC ALLIANCE’

Since 2013, Conosur has posted hundreds of millions of pesos in annual losses. Fuel sales at its PDV Sur and Sol-branded stations have plunged 86 percent, as it struggled to compete with rivals like state-owned YPF (YPFD.BA), which produce their own crude and refine their own fuel.

PDVSA also strove to become an integrated player in Argentina, but efforts to acquire upstream and refining assets never worked out, the person said.

Neither PDVSA nor PDVSA Argentina, the subsidiary that owns the Conosur stake, responded to requests for comment.

And in a sign of how Venezuela’s economic crisis has derailed its ambitions to challenge U.S. diplomatic and financial power through regional energy integration, Conosur has not notified Argentina’s stock watchdog of any payments from PDVSA since Dec. 29, 2017.

The choice to cut off support amounts to a formal abandoning of the upstream goals in favor of strengthening the existing network as part of a restructuring of the company, said the person, speaking on condition of anonymity because they were not authorized to speak publicly.

“The supports were rational when the goal was the whole supply chain,” the person said, adding the company was in talks for a strategic alliance with a fuel supplier to access cheaper refined products, rather than depending on the spot market.

That deal could be necessary to keep the company alive without PDVSA’s support.

The company posted a 177.5 million peso loss in 2017, and warned on Dec. 20 that PDVSA’s transfers had helped it avoid being dissolved in accordance with the requirements of an Argentine corporate law for companies that run out of capital.

Since then, losses have accelerated, to the tune of 226 million pesos in the first half.

Conosur’s struggles have dashed many employees’ hopes that PDVSA’s takeover would signal a new era of prosperity at the chain, which had also struggled under Uruguayan ownership.

“We saw it as a panacea,” said one former employee, laid off earlier this year with around a dozen others. “But it was more or less the same.”

Additional reporting by Alexandra Ulmer in Caracas and Marianna Parraga in Mexico City; Editing by Bernadette Baum

***

Ecopetrol Reports Higher Sales, EBITDA in 2Q:18

(Ecopetrol, 14.Aug.2018) – Ecopetrol S.A. announced the Business Group’s financial results for the second quarter and the first half of 2018, prepared in accordance with International Financial Reporting Standards applicable in Colombia.

The figures included in this report are unaudited. Financial information is expressed in billions of Colombian pesos (COP), US dollars (USD), thousands of barrels of oil equivalent per day (mboed) or tons, as noted where applicable. For presentation purposes, certain figures in this report have been rounded to the nearest decimal place.

In words of Felipe Bayón Pardo, CEO of Ecopetrol:

“During the second quarter of 2018, we saw significant operational and financial achievements for the Business Group. We posted an EBITDA margin of 51%, the highest in the business group’s history, and had the highest production of the past seven quarters, at 721,000 barrels of petroleum equivalent per day, up 2.8% from the first quarter of 2018. We were able to take advantage of the favorable environment for crude prices and at the same time confirm our technical, operational and financial capacity and our commitment to safe and environmentally responsible practices.

“Net profit in the first half of 2018 totaled 6.1 trillion pesos, with cumulative EBITDA of 15.8 trillion pesos. This achievement was possible thanks to the optimal operation of the different business segments and the financial discipline of the Group’s companies, combined with better crude prices during the period. At the close of the quarter, we succeeded in maintaining a solid cash position of 15.8 trillion pesos, even after paying out 2 trillion pesos as dividends on 2017 earnings. Risk rating agencies acknowledge our successes and have confirmed our investment-grade credit rating. Indeed, Moody’s upgraded our baseline credit assessment from ba3 to ba1.

“Our commercial strategy, announced in 2015, has succeeded in yielding tangible benefits. In the first half of 2018, we succeeded in maintaining levels close to those of the first half of 2017, even with the 35% increase in the price of Brent crude and challenging environment. For the first half of 2018, the spread on the crude sales basket was -7.7 dollars per barrel, versus -7.5 for the same period in 2017.

“Average production for the quarter totaled 721,000 barrels of oil equivalent per day, some 0.6% above the same period the previous year and 2.8% over the first quarter of 2018. We succeeded in recovering from the operational issues in the first quarter, thanks to the results of the drilling campaign in fields such as La Cira, Rubiales, Caño Sur, Dina, Quifa and Castilla. The increased activity will lead us to the path of growth and ensure meeting our annual production goal at a range of 715,000 to 725,000 barrels of petroleum equivalent per day. On the other hand, the pilot recovery programs are also advancing satisfactorily; currently 21 pilots are in operation, 16 of which are still in the expansion phase.

“In the exploratory campaign, we scored a success during the quarter by confirming the presence of dry gas and light crude at the Bufalo-1 well, in the Valle Medio del Magdalena basin. We have also completed drilling of the Coyote-2 and Coyote-3 appraisal wells, located in the Valle Medio del Magdalena, as well as Capachos Sur-2, located in the Piedemonte. These three wells are undergoing assessment to determine their commercial feasibility. We expect to drill at least 12 exploratory wells in 2018.

“As part of our Near Field Exploration strategy, in late May the Infantas Oriente field in Barrancabermeja (Santander) was declared commercial. This allowed us to incorporate in record time the reserves associated with the Infantas Oriente-1 discovery, the assessment of which was carried out at the start of the year.

“In the transport segment, I would like to note the resumption of operations on the Caño Limón – Coveñas oil pipeline in June and the stability of the transport system for heavy crudes with viscosity greater than 600 centistokes (cst – a measure of viscosity), thereby structurally reducing dilution requirements.

“The reversal strategy implemented since 2017 on the Bicentenario oil pipeline allowed for reducing the impact of the attacks and illegal valves affecting the Caño Limón – Coveñas oil pipeline, preventing deferred production in its surrounding fields. In the first half of 2018, 30 reversal cycles were completed on the Bicentenario oil pipeline.

“The Refining segment saw outstanding operational performance in the second quarter, achieving stable throughput of 374,000 barrels per day.

“In the second quarter of 2018, the Cartagena refinery continued to demonstrate the consolidation and optimization of its operations with average throughput of 153,000 barrels per day and throughput composition of 79% domestic crude and 21% imported crude, thus contributing significantly to reducing the Business Group’s cost of sales. In June, it achieved a record in the use of local crudes, at 83% of its diet. The gross refining margin for the Cartagena refinery during the quarter was USD 11.1/bl, up 44% over the same period the previous year (USD 7.7/bl), thus posting 10 consecutive months with gross margins in the double digits.

“Throughput and production at the Barrancabermeja refinery was up over 9% for the quarter versus the same quarter of 2017, thanks to the implementation of initiatives to segregate light and intermediate crudes, thus increasing their availability. The average refining margin for the quarter was USD 10.5/bl, affected primarily by the increase in the price of the crude basket versus Brent.

“In line with the Business Group’s Efficiencies strategy, in the second quarter of the year we incorporated efficiencies representing 429 billion pesos, up 17% over the second quarter of 2017. Thus, cumulative efficiencies in the first half of 2018 totaled 892 billion pesos, for a total of 8 trillion pesos since the launching of the Transformation Program in 2015.

“In addition to the above, we are particularly proud of our success in implementing operational and logistics adjustments in record time throughout the entire supply chain, in order for diesel deliveries to Medellin and its Metropolitan area to have a sulfur content of below 25 parts per million. This is in line with our commitment to the environment, thus contributing to the improvement of the city’s air quality.

“We have also committed to the massive transportation system Transmilenio S.A. to supply natural gas and B2 diesel with a maximum sulfur content of 10 parts per million for the renovation of the bus fleet of phases I and II, thus enabling the entry of EURO VI technologies.

“Together with the national and local institutions, Ecopetrol will continue to improve the quality of fuels for the whole country as set in the enhancement path established in the CONPES document for the improvement of air quality.

“In order to achieve a significant effect, it is not only necessary to improve fuels, but it is also necessary to carry out other actions such as improving the technology and age of the vehicle fleet, as well as promoting other initiatives related to road maintenance, mobility and the reduction of emissions in fixed sources, among others.

“Ecopetrol remains focused on operational excellence, value creation, a commitment to ethics and transparency, safety as a pillar of its operations and care for the environment. We are committed to profitable growth in production and reserves to deliver results that benefit the company’s sustainability and the country’s energy security.”

To review the full report please visit the following link:

https://www.ecopetrol.com.co/english/documentos/Ecopetrol%20-%20Reporte%202Q%202018%2013%2008%202018%20english%20VF.pdf

***

Webinar Panelist Discuss All Things Guyana

(Energy Analytics Institute, Piero Stewart, 15.Aug.2018) – The three promised to return to discuss all things Guyana again in six months as the small South American country eyes first oil in 2020.

A three person panel — comprised of Guyana’s Minister of Finance, the Honourable Winston Jordan, Trinidad and Tobago’s Former Energy Minister Kevin Ramnarine, and hosted by Caribbean Economist Marla Dukharan — discussed issues related to Guyana included but not limited to oil, economics, finance, supply issues, infrastructure, and migration, among others (watch the full video below).

What follows are brief highlights as posted during the webinar under the Twitter hashtag #LatAmNRG:

From Kevin Ramnarine …

— “In Guyana, we have moved from 1 to 8 discoveries,” Ramnarine says. He continued: “With an 80% success rate, only 2 wells have been dry.”

— “The whole world is talking about Guyana,” Ramnarine says.

— “Oil production in Guyana is expected to come online at 120,000 barrels per day d in 2020 and peak at 750,000 barrels per day by 2025, according to Exxon,” Ramnarine says.

— “In the early years, Exxon will likely recover Capex. Then, by 2025 we could see an exponential rise in revenues [in Guyana],” Ramnarine says.

— “An infrastructure deficit in Guyana has slowed development in the interior of the country,” Ramnarine says.

— “You want a competitive oil and gas sector that supports that sector,” Ramnarine says.

— “The private sector should take the lead to develop [Guyana’s] infrastructure,” Ramnarine says.

From Winston Jordan …

— “ExxonMobil has put Guyana on the map,” Jordan says.

— “We see ourselves as the Dubai of the Caribbean,” Jordan says.

— “Guyana has infrastructure and human capital resources deficits,” Jordan says.

— “The Guyana tax system is expected to become more efficient in the future,” Jordan says.

— “We have a lot of challenges, but none are insurmountable,” Jordan says.

— “Guyana is putting together a migration policy to give certain benefits to those wanting to return home,” Jordan says.

— “Guyana will seek a loan with the World Bank to assist in the migration process,” Jordan says.

— “There is no definite word yet about a future refinery in Guyana,” Jordan says.

(With special assistance from Melissa Marchand, who moderated the Q&A session).

***

Mexico’s Struggling Pemex Awaits New President’s Risky Fix

(Bloomberg, Amy Stillman, 14.Aug.2018) – By most financial measures, Mexico’s state oil company is seriously unwell. The country’s new leader is promising to revive it. But the treatment could end up killing the patient.

After borrowing more than $100 billion, Petroleos Mexicanos is one of the world’s most indebted oil majors. It doesn’t have much oil to show for it: Production has declined every year since 2004, and reserves are down more than half over the past six years. Its refineries lose money, and the more they refine, the more they lose.

Amid all this gloom, Pemex has managed to hang on to investment-grade credit ratings –- by cutting back on capital spending, and enlisting help from private companies to develop oil assets, in exchange for stakes in them. Investors and analysts worry that Andres Manuel Lopez Obrador will do the exact opposite.

The leftist politician won a landslide election victory on July 1, riding a wave of discontent with Mexico’s establishment parties and their austerity policies. AMLO, as he’s known, won’t take office until December. But he’s already busy outlining the change that’s coming, and filling key positions -– including in the oil industry, where his recipe is much the same as for the wider economy: Ramp up investment.

‘Risk Number One’

For Pemex, that means an additional 75 billion pesos ($4 billion) of spending on exploration and production, with the aim of boosting output by one-third over two years. There’ll be another 49 billion pesos to overhaul Pemex’s six refineries, currently producing 41 percent of their potential output. AMLO wants them operating at full capacity. And he may build new ones too.

Money to rehabilitate the refineries will come from the company’s budget, according to Lopez Obrador’s pick for energy minister, Rocio Nahle. And that’s the problem for investors who fear a return to the bad old days when the state company was saddled with outsized tax bills, tapped for spending projects that failed to generate new revenue, and steered toward less profitable areas such as refining rather than drilling.

“Risk number one for Pemex would be higher capital expenditure, from a company that is not generating that same amount in cash,’’ said Nymia Almeida, senior credit officer at Moody’s Investors Service, by phone from Mexico City.

Moody’s classifies Pemex debt as one step above junk. That rating could come into question if there’s a change in the trajectory of spending, Almeida said. While debt reached $104 billion in June, Pemex has actually been “on the right path’’ by gradually reducing the amount of new borrowing, she said. It currently plans to tap markets for $3 billion to $3.5 billion in the remainder of this year.

Bond Rout

The man chosen by Lopez Obrador to steer Pemex through these tricky waters is a longtime political ally — with zero experience in the oil industry.

Octavio Romero , an aide from AMLO’s years as Mexico City mayor last decade, was announced as the oil company’s next chief executive on July 27. The same day, Pemex reported a quarterly loss of $8.8 billion, the biggest since 2016. In the subsequent week, Pemex’s 2028 bonds posted their worst performance since they were sold.

One thing Pemex-watchers will be looking out for under the new regime is the interaction between Pemex’s finances and those of the general government -– and how sharply they’re distinguished.

Even specialists struggle to explain the formula under which Pemex pays taxes to its sole owner, the Mexican state. But whatever it is, the take amounts to a big chunk of the federal budget -– about 20 percent last year.

The figure has come down from 40 percent a decade ago. But, with crude edging back up again in the past year, tax payments are set to rise again -– and that will cancel out much of the benefit that Pemex reaps from the oil rebound, according to Sergio Rodriguez, an analyst at Fitch Ratings.

Gasolinazo

Lopez Obrador’s plans to refine more oil locally and freeze pump prices could add to the financial strain.

The cost of gasoline soared as much as 20 percent last year after the government stopped imposing a cap. The so-called gasolinazo, or price spike, triggered widespread protests. Lopez Obrador has said there’ll be no repeat under his administration, and that may require subsidies. It’s not clear whether any costs would be met by the Finance Ministry, or Pemex.

The latter would be “detrimental’’ to cash-flow, said Lucas Aristizabal, a senior director at Fitch Ratings. At the same time, if Pemex is expected to foot the bill for new refineries, “it’s a very high level of investment with a very low level of return,’’ he said. Lopez Obrador’s proposed new refinery in Tabasco, his home state, is estimated to cost $8.7 billion.

Pemex’s refining arm is making marginal financial improvements but analysts say its not enough. The company reduced its refining losses by about half last year, to a net loss of 31.6 billion pesos. Output hit the lowest level since 1990. The Salina Cruz refinery, Mexico’s largest, was out of operation for almost half the year due to flooding, fires and earthquakes, while others suffered maintenance delays.

The end of government-set fuel prices should allow Pemex to make some money from refining if ”they were competitive and if they were efficient,” said Almeida at Moody’s. ”The problem is that the company’s costs are too high.”

Pemex already spends less on the more profitable business of exploration and production than regional peers. Bringing in private cash to cover that gap was a key goal of the outgoing President Enrique Pena Nieto. His landmark measure in 2014 opened Mexican energy markets to competition after almost eight decades of state monopoly.

Lopez Obrador has a mandate to slow that process down, if not roll it back. His team is reviewing 105 already-signed contracts with private firms, looking for irregularities. Further auctions due in September and October, for exploration rights and contract-sharing with Pemex, have been postponed until February, by which time Lopez Obrador will be in office.

Stealing Fuel

One important Pemex file may land on the desk of AMLO’s police chief rather than his energy or finance ministers.

The practice of tapping pipelines has been around for decades, but it’s booming lately as drug gangs got in on the act. The result has been an increase in violence, and billions of dollars of losses for Pemex.

Lopez Obrador made the fight against corruption central to his campaign. He was often vague on the details.

“We haven’t heard much from AMLO in respect to the issue of fuel theft,’’ said Ixchel Castro, a senior analyst at energy consultant Wood Mackenzie in Mexico City. “But if you want to improve the operations of Pemex, if you want to reduce the losses of the company, this has to be one of the main priorities.’’

— With assistance by Justin Villamil

***

Mexico’s Fuel Plan Won’t Immediately Impact Texas

(Texas Tribune, Juan Luis García Hernández, 14.Aug.2018) – After a dramatic spike in gasoline prices incited widespread protests in Mexico last year, then-presidential candidate Andrés Manuel López Obrador made a promise that caught the attention of Texas officials and the state’s oil and gas industry: The veteran left-wing politician vowed, if elected, to halt the import of gasoline and diesel from the United States and other countries by 2021.

The promise — which López Obrador had previously mentioned and which he reiterated one week after winning in a historic landslide last month — was a key component of his national development platform in his third run for the presidency.

Mexican President-elect Andrés Manuel López Obrador has vowed to halt the import of gasoline and diesel from the United States and other countries by 2021.

During the race, he vowed to reverse policies pursued by his predecessor, Enrique Peña Nieto, that made the country more reliant on the international gasoline market prices. He told supporters it would result in cheaper and more dependable fuel.

“Refineries will be built, gas extraction will be promoted, and the electric industry will be strengthened,” López Obrador said in November 2016, more than a year and a half before the July 1 election. “All this to stop buying gasoline and other fuels abroad.”

Such a policy could have enormous implications for the Texas economy. The state’s refineries produce much of the gasoline and diesel imported to Mexico, where about three out of every five liters of gasoline consumed comes from the United States.

But Texas’ energy regulators, industry groups and experts downplay the potential impacts, casting doubt on López Obrador’s ability to keep his promise — at least immediately.

They say Mexico has a long way to go to wean itself off foreign fuel imports. And they also don’t see Mexico severing ties with a top trading partner.

There’s a sense that López Obrador’s promise was more political than practical, said Steve Everley, managing director of FTI Consulting. Ultimately, he said, economics — and a strong and established trade relationship — will win out.

“That doesn’t mean you don’t take it seriously,” Everley added. “You don’t look at something that’s threatening $14 billion of economic activity and just sort of whistle on past it. But I think we also need to be realistic about the interrelationship between Texas and Mexico and how valuable that is both for them and for us.”

López Obrador’s plan calls for the construction of a refinery in his home state of Tabasco in southeastern Mexico and the rehabilitation of six existing refineries to increase the amount of fuel they can produce. That would cost a combined $11.3 billion.

“It’s very optimistic,” said Texas Tech University economics professor Michael D. Noel. “I will say that in terms of Texas refineries the impact in the short term is likely to be very, very low, and the reason is that you can’t build a refinery overnight. Those things take a long time.”

Noel said Texas refineries could stand to benefit from increased Mexican energy production if it outpaces refinery construction, which may require the country to export fossil fuels to the United States for processing.

Mexico currently only meets one-third of its fuel demand domestically, said Texas Railroad Commissioner Ryan Sitton. Last year, the Mexican market consumed 797,100 barrels of gasoline per day and 365,500 barrels per day of diesel, according to data from Pemex, Mexico’s state-run oil company. Only 35 percent of that came from Mexican refineries.

The U.S. Energy Information Administration doesn’t keep track of how much of U.S. fuel exports to Mexico come from Texas refineries. However, Sitton — one of three elected officials who regulate the state’s oil and gas industry — said Texas refineries sell about 800,000 barrels of gasoline and diesel a day to Mexico, which would mean Texas provides Mexico with an overwhelming majority of its fuel.

“It’s a pretty big shot,” said Sitton. “That’s gasoline production from four or five large refineries.”

Asked a few days after the July 1 election about his ambitious three-year deadline to build a new refinery, López Obrador, who takes office Dec. 1, pointed out that India achieved a similar goal.

That country’s Jamnagar complex was able to nearly double its capacity to 1.2 million barrels per day between 2005 and 2008 by building a second refinery at a cost of $6 billion.

Experts say refinery repairs could prove to be the fastest way for López Obrador to achieve his goal.

“[Building] a refinery takes eight years to do well. A rehabilitation takes between 6 months and a year, costs much less and maybe can reach 60 percent capacity,” said Duncan Wood, director of the Mexico Institute at the Wilson Center in Washington, D.C.

Jorge Canavati, co-president of the International Affairs Committee at the San Antonio Hispanic Chamber of Commerce, said even if Mexico increases its production, market prices will ultimately dictate how much fuel it imports. “When Pemex was aggressively producing, Pemex also imported [gasoline],” he recalled.

Last year started for Mexicans with a rise in gasoline prices of 20 percent, a situation that sparked a series of protests in January.

Experts also say three years would be enough time for Texas refineries to find a new market for their products. With the lifting of a ban on most crude oil exports in 2015 and the enactment of various policies to boost natural gas exports, the United States is poised to become a top fossil fuel exporter to Asia and Europe.

Susan Grissom, chief industry analyst at American Fuel and Petrochemical Manufacturers, scoffed at the idea that the loss of the Mexican market would have a big impact on the United States.

“You know, the world adjusts,” she said.

But it would be a major hole to fill. More than half of the gasoline the United States exported in 2017 went to Mexico, according to the Energy Information Administration. And Mexico has been increasing its imports in recent years due to refining problems. Pemex, which also oversees refining in Mexico, decreased its capacity to make gasoline in the first quarter of 2018 to 220,000 barrels per day. That’s compared to 421,000 barrels per day in 2014.

Energy experts say domestic fuel production has dropped because Mexico has failed to invest in repairs to its aging refineries. Its last one was built more than 40 years ago. There are six refineries in total.

Everley said no fuel export market more sense for the United States — and Texas — than Mexico.

“The question is not whether products refined in Texas can find a market,” Everley said. “The question here is: Do we want to upset a strong trading relationship between Texas and Mexico?”

***

AMLO Pledges More Than $11 Bln for Refineries

(Reuters, 13.Aug.2018) – Mexican President-elect Andres Manuel Lopez Obrador said on Monday his administration will invest more than $11 billion to boost refining capacity in order to curb growing fuel imports.

Lopez Obrador, who will take office on Dec. 1, told reporters his government plans to invest $2.6 billion to modernize existing domestic refineries owned and operated by national oil company Pemex, and spend another $8.4 billion to build a new one within three years.

The $8.4-billion figure is higher than a $6 billion estimate provided by a key energy advisor during the campaign.

Lopez Obrador, set to become Mexico’s first leftist president in decades, did not detail how the projects would be financed or whether private capital would be involved, but he has often said he will not raise taxes or grow government debt.

Mexico is among Latin America’s largest crude exporters, but is also the biggest importer of U.S. refined products. The country’s next president has pledged to lift refining capacity, which he says has declined due to corruption and neglect.

Pemex, formally known as Petroleos Mexicanos, has six domestic refineries with a total processing capacity of some 1.6 million barrels per day (bpd), but the facilities are only operating at about 40 percent of capacity so far this year. Meanwhile, gasoline and diesel imports have sky-rocketed in recent months amid planned and unplanned refinery stoppages.

Pemex has posted losses in its refining division for years but Lopez Obrador aims to boost crude processing enough to halt imports within three years.

Lopez Obrador also said he plans to invest another $4 billion to drill new onshore and shallow-water oil wells in the states of Veracruz, Tabasco and Chiapas.

Pemex production has consistently declined in recent years to fall below 2 million bpd after hitting peak output of 3.4 million bpd in 2004.

President Enrique Pena Nieto passed a reform to open up Mexico’s state-run energy industry to private producers, which has led to a series of competitive auctions that have awarded more than 100 oil exploration and production contracts.

Lopez Obrador has said he will respect those contracts as long as an ongoing review does not find signs of corruption. He is widely expected to slow down the process of offering more contracts to private players.

Reporting by Ana Isabel Martinez; Editing by James Dalgleish

***

Venezuela’s Citgo Refineries At Risk Of Seizure

BOSTON, MA: People walk through the rain in front of the Citgo sign in Kenmore Square, Boston, July 18, 2016. (Photo by Timothy Tai for The Boston Globe via Getty Images)

(Forbes, Robert Rapie, 12.Aug.2018) – In 2007, following Venezuela’s expropriation of billions of dollars of assets from U.S. companies like ExxonMobil and ConocoPhillips, I suggested a potential remedy.

Since Venezuela’s state-owned oil company, PDVSA (Petróleos de Venezuela, S.A.) owns the Citgo refineries in the U.S., I felt the companies that had lost billions of dollars of assets could target these refineries for seizure as compensation.

These refineries have the same vulnerabilities as the U.S. assets in Venezuela that were seized. They represent infrastructure on the ground that can’t be removed from the country.

Citgo has three major refining complexes in the U.S. with a total refining capacity of 750,000 barrels per day. Recognizing the vulnerability from asset seizure, PDVSA tried to sell these assets in 2014, and valued them at $10 billion. But that value have been grossly overstated, considering that Venezuela subsequently pledged 49.9% of Citgo to Russian oil giant Rosneft as collateral for a $1.5 billion loan.

In recent years, PDVSA has lost a series of arbitration awards related to expropriations, and companies have been looking for opportunities to collect. In May, ConocoPhillips seized some PDVSA assets in the Caribbean to partially enforce a $2 billion arbitration award for Venezuela’s 2007 expropriation.

ConocoPhillips had sought up to $22 billion — the largest claim against PDVSA — for the broken contracts from its Hamaca and Petrozuata oil projects. The company is pursuing a separate arbitration case against Venezuela before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). The ICSID has already declared Venezuela’s takeover unlawful, opening the way for another multi-billion dollar settlement award that may happen before year-end.

MORE FROM FORBES

Last week, a court ruling opened the door for Citgo assets to be seized to pay for these judgments.

Defunct Canadian gold miner Crystallex had been awarded a $1.4 billion judgment over Venezuela’s 2008 nationalization of a Crystallex gold mining operation in the country. A U.S. federal judge ruled that a creditor could seize Citgo’s assets to enforce this award.

This ruling is sure to set off a feeding frenzy among those that have won arbitration rulings against Venezuela. Until the legal rulings are settled, it’s hard to say which companies will end up with Citgo’s assets. But it’s looking far more likely it won’t be PDVSA.

***

Is Venezuelan Oil Output Falling Faster Than Expected?

(OilPrice.com, Nick Cunningham, 12.Aug.2018) – The bad news from Venezuela continues.

In July, Venezuela’s oil production came in lower than PDVSA had targeted, according to Argus Media. While PDVSA had hoped that it, along with its joint venture partners, would produce as much as 1.65 million barrels per day (mb/d) in July, actual production came in at about 1.526 mb/d.

Argus says that production in the Orinoco heavy oil belt, where vast oil reserves are located, was a particular disappointment. The problem for Venezuela is that the Orinoco belt was supposed to hold up better than conventional oil production from elsewhere. The declines are a grave problem for the South American OPEC nation, and they pose an existential threat to the regime of President Nicolas Maduro, who avoided an apparent assassination attempt days ago.

But the production figure that Argus got its hands on, which came from an internal report from PDVSA, seem optimistic, even though they do point to shortfalls. After all, the June OPEC report suggested that output stood at just 1.34 mb/d – data that came from secondary sources, which includes Argus.

Against that backdrop, the 1.526 mb/d figure doesn’t seem credible. Indeed, sources from within PDVSA told Argus that officials from the company’s eastern and western divisions “systematically inflated” the data. “They play with the storage tanks and what they report is not reality,” a senior executive told Argus. In reality, production could have been as low as 1.25 mb/d.

The report is not entirely useless, however, as it does offer some clues into the company’s demise. Argus says that “scant maintenance, reservoir management, skilled labor flight and a lack of critical naptha and light crude for transport and blending” are all contributing to the steep decline in production. An estimated 1,191 wells stopped producing in July.

In a separate report from Argus, it appears that the island of Curacao is “scrambling for a lifeline to resuscitate” the century-old Isla refinery that PDVSA “has nearly abandoned,” due to the fact that ConocoPhillips moved in to seize the facility following an international arbitration decision earlier this year. Curacao says it has the capability to operate the refinery on its own, but it doesn’t have the capital nor the supply of crude oil needed as a feedstock. The refinery can theoretically produce up to 335,000 barrels per day (bpd), but in reality it can probably only produce two-thirds of that amount. For now, it is barely operational with PDVSA no longer supplying the refinery with crude oil.

From PDVSA’s standpoint, the loss of the refinery has only compounded the problems back in Venezuela since the facility was critical to blending and preparing oil for export.

The problems in Venezuela are so bad that even the Trump administration, no stranger to conflict, has decided that it does not want to kick the country while it is down. After having been on the verge of implementing sweeping sanctions – possibility targeted at Venezuela’s oil exports, or perhaps the export of diluent from the U.S. to Venezuela – the Trump administration has scrapped those plans.

In fact, the problems in Venezuela are so acute, that the attempted assassination of President Maduro barely moved the oil market, as the WSJ pointed out. That bears emphasis: There was an attempted coup in a country with the largest oil reserves in the world, a founding OPEC member and still a major oil producer, and the markets basically shrugged it off. And that is not because the oil market is oversupplied – there is a reasonable case to be made that the market could be short on supply at some point this year.

But Venezuela’s oil sector is in shambles, so oil traders are apparently already of the mind that it cannot possibly get any worse. A coup even leaves open the very remote possibility of a rebound, although, as Francisco Monaldi details, growing production by, say, 200,000 bpd per year would require a sustained effort, including investments of around $20 billion per year for a decade. Not to mention a radical change in the political context and a macroeconomic stabilization program. Needless to say, none of that appears to be in the cards anytime soon.

In any event, the coup did not succeed, so the losses are destined to continue. “The permanence of Maduro and his radical circle of collaborators is short-, medium- and long-term bullish for oil prices because the regime will fail to take the steps needed to turn production around,” Raúl Gallegos, a political analysts at Control Risks, and author of Crude Nation, told the Wall Street Journal.

Expect PDVSA to continue to miss its production targets.

***

Citgo Petroleum Company Profile

(Energy Analytics Institute, Aaron Simonsky, 11.Aug2018) – Houston-based Citgo Petroleum Corporation is the refining arm of Venezuela’s Petróleos de Venezuela, S.A. (PDVSA). What follows is a brief company profile.

Citgo, a Delaware corporation with headquarters in Houston, refines, markets, and transports gasoline, diesel fuel, jet fuel, lubricants, petrochemicals, and other petroleum-based industrial products. Citgo has 3,500 employees and is owned by Citgo Holding, Inc., an indirect, wholly owned subsidiary of PDVSA, the national oil company of the Bolivarian Republic of Venezuela, according to data posted to the company’s website.

Citgo owns and operates three highly complex crude oil refineries located in the following cities:

— Lake Charles, LA (425,000 barrels-per-day [b/d]),

— Lemont, IL (167,000-b/d), and

— Corpus Christi, TX (157,000-b/d).

These refineries process approximately 200,000 b/d of Venezuelan crudes, including supplies from Orinoco Oil Belt upgraders. The combined aggregate crude oil refining capacity of 749,000-b/d, positions Citgo as one of the largest refiners in the nation. The company owns and/or operates 48 petroleum product terminals, one of the largest networks in the country.

In 2016, Citgo sold approximately 13.6 billion gallons of refined products, including exports. The company markets quality motor fuels to independent marketers who consistently rate Citgo as one of the best-branded supplier companies in the industry. Citgo branded marketers sell motor fuels through more than 5,200 independently owned, branded retail outlets.

Citgo markets jet fuel directly to airlines and produces a variety of agricultural, automotive, industrial and private label lubricants which are sold to independent distributors, mass marketers and industrial customers as well as other clients. In addition, the company sells petrochemicals and industrial products directly to various manufacturers and industrial companies throughout the United States.

Citgo History

From the gasoline that helps your family take vacations to the advanced medical equipment at your community hospital, Citgo is fueling good, the company reported on its website.

It’s amazing the difference petroleum-based products make in our everyday lives. Based in Houston, Texas, Citgo is a refiner and marketer of transportation fuels, lubricants, petrochemicals and other industrial products. In addition to these products, there’s probably a Citgo in your neighborhood, a convenient place to fill up with gas and grab a quick snack.

The story of Citgo Petroleum Corporation as an enduring American success story began back in 1910 when pioneer oilman, Henry L. Doherty, created the Cities Service Company.

When Cities Service determined that it needed to change its marketing brand, it introduced the name CITGO in 1965, retaining the first syllable of its long-standing name and ending with “GO” to imply power, energy and progressiveness. The now familiar and enduring Citgo “trimark” logo was born.

Occidental Petroleum bought Cities Service in 1982, and Citgo was incorporated as a wholly owned refining, marketing and transportation subsidiary in the spring of the following year. Then, in August, 1983, Citgo was sold to The Southland Corporation to provide an assured supply of gasoline to Southland’s 7-Eleven convenience store chain.

In September, 1986, Southland sold a 50 percent interest in Citgo to Petróleos de Venezuela, S.A., (PDVSA), the national oil company of the Bolivarian Republic of Venezuela. PDVSA acquired the remaining half of Citgo in January, 1990 and the company is owned by Citgo Holding, Inc., an indirect, wholly owned subsidiary. With a secure and ample supply of crude oil, Citgo quickly became a major force in the energy arena.

Since 1985, Citgo has sold its various products through independent marketers. Our relationship with these individuals is really what makes CITGO different from other petroleum companies.

***

Crystallex Wins Right To Tap Citgo For Compensation

(OilPrice.com, Irina Slav, 10.Aug.2018) – Canadian gold miner Crystallex was ruled the winner in a long-running case against Venezuela, which it has sued for the forced nationalization of its assets by the Hugo Chavez government. A U.S. federal judge this week awarded the miner the right to approach Venezuela’s U.S. oil unit, Citgo, to seek its compensation of US$1.4 billion.

The Associated Press notes the ruling by Chief Judge Leonard P. Stark is unique: government assets such as Citgo’s parent, PDVSA, are as a rule protected from lawsuits targeting a state. Yet in Stark’s ruling, the judge said that Venezuela had blurred the lines between the government and the state oil firm, with a military official at the helm of PDVSA.

There is no reason to believe Crystallex will not seek to enforce the ruling as soon as possible after a decade-old legal battle. Should this happen, PDVSA, according to AP, might have to liquidate Citgo to get funds for the settlement. The company is worth a lot more than US$1.4 billion—it is valued at around US$8 billion—but cash-strapped Caracas does not have a lot of funding sources at the moment.

The judge has delayed the enforcing of the ruling for a week, possibly to give Crystallex and Caracas time to try and reach a payment agreement.

What could make matters worse for Venezuela is the fact that Crystallex is by far not the only company seeking compensation for the nationalization of its business in the country, and now more of those rulings could follow. ConocoPhillips is another one: the company earlier this year won a court order allowing it to seize PDVSA assets in the Caribbean as a way of getting US$2.04 billion in compensation for the nationalization of two projects by the Chavez government.

AP also quoted a broker from Caracas Capital Markets as saying bondholders could follow suit demanding their money, too. Bondholders are owed US$65 billion in bonds that Caracas stopped servicing a year ago.

“This was the most vulnerable low hanging fruit for debtholders to go after. It looks like Crystallex is the lucky lottery winner because they got there first,” Russ Dallen said.

***

Analysts: Only a Matter of Time Before Venezuela Loses Citgo

A tanker sails out of the Port of Corpus Christi in Texas after discharging crude oil at the Citgo refinery. Photo: Eddie Seal, Stf / Bloomberg

(Houston Chronicle, Jordan Blum, 10.Aug.2018) – Financially crippled Venezuela likely will lose control of its Houston refining arm Citgo Petroleum once a slew of lawsuits eventually are resolved, and it’s just a matter of when and to whom, finance and energy analysts said Friday.

A federal judge ruled late Thursday that a defunct Canadian mining firm can go after Citgo’s assets to collect $1.4 billion it allegedly lost from Venezuela when the government seized mining and energy assets more than a decade ago under the late socialist leader Hugo Chávez.

While the Canadian firm, Crystallex International, is unlikely to take control of Citgo’s refining and retail gasoline assets throughout the U.S., the ruling is expected to kick off an array of new legal claims against Venezuela and its state oil company – from Houston-based ConocoPhillips to other oil and gas firms – with the goal of winning Citgo as the prize, legal and finance experts said. After all, Venezuela owes a lot of money to a lot of different companies.

Whichever company eventually wins out could sell to refiners that might be interested, including San Antonio’s Valero Energy, Houston’s Phillips 66, Ohio-based Marathon Petroleum and New Jersey’s PBF Energy, said Jennifer Rowland, and energy analyst with Edward Jones in St. Louis.

“It’s not every day that a suite of refineries becomes available, especially along the Gulf Coast,” Rowland said. “Those assets would definitely fit in some companies’ portfolios.”

Citgo, which declined comment Friday, owns oil refineries in Corpus Christi, Lake Charles, La., and Illinois. The company employs about 4,000 people in the U.S., including 800 in Houston. Citgo has roughly 160 branded gas stations in the Houston area, and about 5,500 nationwide. The company is valued at nearly $8 billion.

Citgo is a U.S. company with a more than 100-year history. It was acquired by Venezuela’s state-run oil company three decades ago. The state oil company, Petroleos de Venezuela SA, is known as PDVSA.

The Citgo assets are seen as the crown jewel for companies targeting PDVSA legally because they’re the most accessible assets outside of Venezuela, said Craig Pirrong, a University of Houston finance professor specializing in energy markets. Thursday’s court ruling opened the door for many more claims made against Citgo by those owed money by Venezuela, he said, because the judge allowed Venezuela’s debts to extend to its U.S. refining assets as an “alter ego” of the government.

“It’s going to be like a feeding frenzy going after Citgo,” Pirrong said.

And now a series of complex legal battles will ensue, possibly dragging out into next year, said Franciso Monaldi, a fellow in Latin American Energy Policy at Rice University’s Baker Institute for Public Policy.

“I don’t expect PDVSA to immediately lose control of Citgo, but I think eventually it will happen,” Monaldi said. “It’s really just a matter of who will get it.”

Venezuela has suffered a financial and geopolitical freefall under Chavez’ socialist successor and current president, Nicolas Maduro. Many thousands of people have fled the country, fearing starvation and violence, including some PDVSA workers, as the country’s oil production has plummeted.

As he’s consolidated power in the destabilized nation, Maduro jailed an opposition lawmaker this week after a failed assassination plot that involved two flying drones with explosives.

Citgo has faced increasing uncertainty since November, when its acting president and five other Houston-based executives with dual citizenship were arrested in Venezuela on corruption charges.

Maduro installed Chávez’s cousin, Asdrúbal Chávez, as the new Citgo president. Although he remains in charge, the new Citgo leader was ordered in July by the U.S. State Department to surrender his U.S. visa amid an ongoing probe into PDVSA. Citgo said Chávez would continue in his role remotely for now.

The future of Citgo is further complicated because 49.9 percent of Citgo is pledged to Russian oil giant Rosneft as collateral for a $1.5 billion loan. The U.S. government would fight losing control of Citgo to Russian interests, analysts said.

As for Crystallex, Thursday’s ruling doesn’t actually hand Citgo over to the defunct firm. But it does position Crystallex to force a large settlement from Venezuela, Monaldi said.

He added that ConocoPhillips could make a stronger claim for Citgo because it’s already won a $2 billion ruling against PDVSA, and not just Venezuela as a whole. In the spring, ConocoPhillips won court orders to seize PDVSA assets on Caribbean islands, quickly taking action against refining and oil storage assets in the Caribbean islands of Curacao, Bonaire and Sint Eustatius.

But ConocoPhillips said it is still a good ways off from recouping the full $2 billion. ConocoPhillips also argued PDVSA has transferred some petroleum products to Citgo to prevent their seizure.

“It’s looking bleak for Venezuela,” Pirrong added.

***

Crystallex Court Win Against Venezuela Aided by Finding

(Reuters, Brian Ellsworth, 10.Aug.2018) – Crystallex’s victory in a legal battle with Venezuela that paves the way for it to collect a $1.4 billion award hinged on a finding that state oil company PDVSA is not separate from the Venezuelan government, court documents showed on Friday.

The U.S. District Court for the District of Delaware granted Crystallex’s request to take ownership of shares in PDVSA subsidiary of PDVH, which owns U.S.-based refiner Citgo, as part of a decade-long dispute over the 2008 nationalization of Crystallex assets.

“Crystallex has met its burden to rebut the presumption of separateness between PDVSA and Venezuela and proven that PDVSA is the alter ego of Venezuela,” wrote Judge Leonard P. Stark in the decision.

The issue has been closely watched by investors holding billions of dollars in Venezuelan bonds, which are almost all in default as the OPEC nation struggles under the collapse of its socialist economy.

Legal experts had generally believed that creditors of Venezuela, which has few foreign assets available to be seized by creditors, would have a difficult time pursuing claims against PDVSA because the two were considered separate.

Venezuela two years ago put up 49.9 percent of Citgo shares as collateral for a $1.5 billion loan from Russian oil major Rosneft. The remaining 50.1 percent was set aside as collateral for PDVSA’s 2020 bond.

Judge Stark said the court had not yet determined when it would issue a writ allowing Crystallex to assume ownership of the shares of PDV Holding Inc, or what mechanism should be used to sell those shares.

“The decision could make it more complicated if other courts ignore the boundary between the government and PDVSA,” said Mark Weidemaier, a professor at the University of North Carolina School of Law. “It expands the pool of creditors that could go after PDVSA and casts a shadow over its ability to keep its oil receivables safe.”

PDVSA did not immediately respond to a request for comment.

Information Minister Jorge Rodriguez, asked by a reporter about the decision during a press conference on Friday, declined to comment on it.

Legal counsel for Crystallex declined to comment.

PDVSA’s 2020 bond dropped 4.500 points in price to 85.500 on Friday

Bonds issued by PDVSA and Venezuela were down slightly, in line with a broad selloff in global markets on Friday.

( Additional reporting by Jonathan Stempel in New York, Editing by Paul Simao and Cynthia Osterman)

***

U.S. Judge Authorizes Seizure of Venezuela’s Citgo

(The Wall Street Journal, Andrew Scurria and Julie Wernau, 9.Aug.2018) – A U.S. federal judge authorized the seizure of Citgo Petroleum Corp. to satisfy a Venezuelan government debt, a ruling that could set off a scramble among Venezuela’s many unpaid creditors to wrest control of its only obviously seizable U.S. asset.

Judge Leonard P. Stark of the U.S. District Court in Wilmington, Del., issued the ruling Thursday. However, his full opinion, which could include conditions or impose further legal hurdles, was sealed. A redacted version is expected to be available at a later date.

The court order raises the likelihood that Venezuela’s state oil company, Petróleos de Venezuela SA, will lose control of a valuable external asset amid the country’s deepening economic and political crisis. The decision could still be appealed to a higher, federal court.

Attorneys for PdVSA weren’t available for comment. Citgo declined to comment.

Crystallex International Corp., a defunct Canadian gold miner that filed the legal action, is trying to collect on a judgment over lost mining rights involving Venezuela’s government. It has targeted Citgo, an oil refiner, because this is the largest U.S. asset of the cash-strapped and crisis-riven country.

Many other creditors of Venezuela are also circling Citgo, but Crystallex is the first to win a judgment authorizing its seizure. Crystallex had argued that Citgo was ultimately owned by PdVSA, which is an “alter ego” of Venezuela that is liable for the South American country’s debts. The judge’s decision in favor of Crystallex allows it to take control of shares of Citgo’s U.S.-based parent company, the first step toward a sale of the company.

Venezuela and its various state-controlled entities together have $62 billion of unsecured bonds outstanding, with approximately $5 billion so far in unpaid interest and principal. Analysts estimate that the government has approximately $150 billion total in debt outstanding to creditors around the world.

Venezuela and its state-controlled entities including PdVSA began missing bond payments last year and have since spiraled into a widespread default. U.S. sanctions bar creditors from engaging the Venezuelan government in any kind of restructuring or buying new debt.

For Venezuela, losing control of Citgo could jeopardize one of its only remaining sources of oil revenue, the U.S. At the same time, investors in Venezuela’s defaulted debt—as well at least 43 companies pursuing legal claims against the government—risk losing one of the few obvious assets in the U.S. that can be seized for repayment.

The only payment made this year by Venezuela was $107 million on its PdVSA bonds, due 2020, for which Citgo is pledged as collateral. That was a clear move by Caracas to protect that asset, analysts have said.

Without ownership of Citgo, investors worry PdVSA would have little incentive to continue to pay on the debt

Any sale of Citgo stock would require U.S. Treasury Department approval, and Crystallex needs to clear other legal hurdles before the shares could be sold.

In trying to lay claim to Citgo, creditors are following a familiar playbook. Hedge funds led by Elliott Management Corp. did something similar when they went after Argentine assets following that country’s 2001 default, the largest sovereign default at the time, on more than $80 billion in sovereign debt.

When Argentina refused to pay settlements arising from the default, the hedge funds sought out Argentine assets to seize and argued that everything from the assets of its central bank to its state-controlled oil company were an “alter ego” of the state.

Elliott in 2012 persuaded a Ghanaian court to impound a training vessel of the Argentine Navy, and in 2014 asked a California court to block Argentina from launching satellites into space. Argentina settled with the hedge funds in 2016, delivering gains of as much as 900% on some of their original principal investments.

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Crystallex Can Go After Venezuela’s US Refineries

(Associated Press, 9.Aug.2018) – A Canadian gold mining company on Thursday won the right to go after Venezuela’s prized U.S.-based oil refineries and collect $1.4 billion it lost in a decade-old take-over by the late socialist President Hugo Chavez.

Chief Judge Leonard P. Stark of the U.S. Federal District Court in Delaware made the ruling in favor of Crystallex, striking a blow to crisis-wracked Venezuela, which stands to lose its most valuable asset outside of the country – Citgo.

Chavez took over the gold mining firm and many other international companies as part of his Bolivarian revolution that’s left the country spiraling into deepening economic and political turmoil.

Venezuelans struggle to afford scarce food and medicine as masses flee across the border. In a sign of rising political tensions, current President Nicolas Maduro threw an opposition lawmaker in jail this week, charged in a failed assassination plot using two drones loaded with explosives.

The latest order by the U.S. judge could set off a scramble by a long list of creditors owed $65 billion from bonds that cash-strapped Venezuela has stopped paying within the last year, said Russ Dallen, a Miami-based partner at the brokerage firm Caracas Capital Markets.

“This was the most vulnerable low hanging fruit for debtholders to go after,” Dallen said. “It looks like Crystallex is the lucky lottery winner because they got there first.”

Chavez in early 2009 announced Venezuela’s take-over of the Canadian mining operations in Bolivar state, a mineral rich region with one of the continent’s largest gold deposits. He accused mining companies of damaging the environment and violating workers’ rights.

Crystallex spent years trying to negotiate a deal with Venezuela before making its case in 2011 to a World Bank arbitration panel, which sided with the Canadian firm, despite Venezuela’s vigorous fight.

U.S.-based Citgo, part of the state-run oil company PDVSA, has three refineries in Louisiana, Texas and Illinois in addition to a network of pipelines. If the order is carried out, Crystallex won’t get all of Citgo – valued at $8 billion – but Venezuela could be forced to liquidate it to make good on the court order.

Today, the gold mining region once operated by Crystallex is largely lawless and dangerous, run by rogue miners who blast the earth with water and mercury to expose gold nuggets and sell them to government forces, often leading to deadly conflicts.

The judge’s ruling is unique, because government assets, like PDVSA, are normally protected from lawsuits against a sovereign nation. But the judge found that Crystallex can attach Citgo’s parent because Venezuela has erased the lines between the government and its oil firm, now run by a military general.

Upon issuing the order, the judge delayed enforcing it for a week, which Dallen said could be a move to give Crystallex and Venezuela time to reach an agreement, such as returning to payment terms of an earlier resolution, Dallen said.

“This gives Venezuela the chance to honor its settlement agreement,” Dallen said. “Or they’ll lose Citgo.”

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Pemex’s Salina Cruz Refinery Halts Operations

Salina Cruz Refinery in Oaxaca. Source: Bloomberg

(Energy Analytics Institute, Ian Silverman, 9.Aug.2018 – Pemex’s Salina Cruz refinery halted operations Wednesday night due to a power outage.

The refinery, located in Oaxaca, is one of six refineries owned by Pemex, and is currently processing 238,000 barrels per day (b/d), reported the daily newspaper El Financiero. The refinery has a refining capacity of 330,000 b/d, the daily added.

The refinery “is in the process of being started,” reported El Financiero, citing a Pemex spokesperson. The name of the official wasn’t revealed by the daily.

Operations at the refinery are expected to resume shortly, the official added.

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Venezuela Dodges Oil Asset Seizures

(Reuters, Marianna Parraga, Mircely Guanipa, 7.Aug.2018) – Reuters) – Venezuela’s state-run oil company PDVSA has limited the damage from an unprecedented slump in crude exports by transferring oil between tankers at sea and loading vessels in neighboring Cuba to avoid asset seizures.

But the OPEC member nation is still fulfilling less than 60 percent of its obligations under supply deals with customers.

Venezuela has been pumping oil this year at the lowest rate in three decades after years of underinvestment and a mass exodus of workers. The state-run firm’s collapse has left the country short of cash to fund its embattled socialist government and triggered an economic crisis.

PDVSA’s problems were compounded in May when U.S. oil firm ConocoPhillips began seizing PDVSA assets in the Caribbean as payment for a $2 billion arbitration award. An arbitration panel at the International Chamber of Commerce (ICC) ordered PDVSA to pay the cash to compensate Conoco for expropriating the firm’s Venezuelan assets in 2007.

The seizures left PDVSA without access to facilities such as Isla refinery in Curacao and BOPEC terminal in Bonaire that accounted for almost a quarter of the company’s oil exports.

Conoco’s actions also forced PDVSA to stop shipping oil on its own vessels to terminals in the Caribbean, and then onto refineries worldwide, to avoid the risk the cargoes would be seized in international waters or foreign ports.

Instead, PDVSA asked customers to charter tankers to Venezuelan waters and load from the company’s own terminals or from anchored PDVSA vessels acting as floating storage units.

The state-run company told some clients in early June it might impose force majeure, a temporary suspension of export contracts, unless they agreed to such ship-to-ship transfers.

PDVSA also requested the customers stop sending vessels to its terminals until it could load those that were already clogging Venezuela’s coastline.

Initially, customers were reluctant to undertake the transfers because of costs, safety concerns and the need for specialist equipment and experienced crew.

But PDVSA has managed to export about 1.3 million barrels per day (bpd) of oil since early July, up from just 765,000 bpd in the first half of June, according to Thomson Reuters data and internal PDVSA shipping data seen by Reuters.

That was still 59 percent of the country’s 2.19 million bpd in contractual obligations to customers for that period, and some vessels are still waiting for weeks in Venezuelan waters to load oil.

There were about two dozen tankers waiting this week to load over 22 million barrels of crude and refined products at the country’s largest ports, according to Reuters data.

“We are not tied to one option or a single loading terminal,” PDVSA President Manuel Quevedo said on Tuesday of the company’s exports. “We have several (terminals) in our country and we have some in the Caribbean, which of course facilitate crude shipping to fulfill our supply contracts.”

CUBAN CONNECTION

PDVSA has also used a route through Cuba to ease the impact of the Conoco seizures. That route is for fuel rather than crude.

The Venezuelan company has used a terminal at the port of Matanzas as a conduit mostly for exporting fuel oil, according to two people familiar with the operations and Thomson Reuters shipping data. Venezuela’s fuel oil is burned in some countries to generate electricity.

Two tankers set sail from the Matanzas terminal for Singapore between mid-May and early July, Reuters data showed. Each ship carried around 500,000 barrels of Venezuelan fuel, Reuters data shows.

In recent months, Venezuela has been shipping fuel to Matanzas in small batches, according to the data.

PDVSA and Cuba’s state-run oil firm Cupet have used Matanzas to store Venezuelan crude and fuel in the past but exports from the terminal to Asian destinations are rare.

That is in part because vessels that use Cuban ports cannot subsequently dock in the United States due to the U.S. commercial embargo on Cuba.

Cupet did not respond to requests for comment.

PDVSA has also used ship-to-ship transfers to fulfill an unusual supply contract it has with Cuba’s Cienfuegos refinery.

The refinery dates from the 1980s – when Cuba was a close ally of the Soviet Union during the Cold War – and the facility was built to process Russian crude.

PDVSA typically uses its own or leased tankers to bring Russian crude from storage in the nearby Dutch Caribbean island of Curacao to Cienfuegos. But it is now discharging the imported Russian oil at sea in Cayman Islands’ waters via these seaborne transfers.

ConocoPhillips last month ratcheted up its collection efforts by moving to depose officials from Citgo Petroleum, PDVSA’s U.S. refining arm, arguing it had improperly claimed ownership of some PDVSA cargoes.

Citgo declined to comment.

ConocoPhillips is also preparing new legal actions to get Caribbean courts to recognize its International Chamber of Commerce arbitration award. If it succeeds in those efforts, it would be able to sell the assets to help satisfy the ruling.

Reporting by Marianna Parraga in Houston and Mircely Guanipa in Punto Fijo, Venezuela; additional reporting by Marc Frank in Havana; Editing by Simon Webb and Brian Thevenot

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US Abandons Sanctions to Avoid Owning Venezuela Collapse

(S&P Global Platts, Brian Shield, 7.Aug.2018) – Just more than a year ago, it was not a question of ‘if’, but ‘when.’

As Venezuela’s leftist leader Nicolas Maduro consolidated power in an election derided as a fraud by the international community, the Trump administration readied exacting sanctions on the South American nation’s oil sector.

“All options are on the table,” said a senior administration official during a July 2017 briefing with reporters, adding that sanctions could be imposed in a matter of days. “All options are being discussed and debated.”

Analysts widely expected sanctions on diluent the US was exporting to Venezuelan refineries first, followed by a prohibition, perhaps phased in over a matter of months, on imports of Venezuelan crude into the US. It was unclear if US refiners, who had long imported Venezuelan crude, would be allowed to continue under an interim “grandfathered” arrangement, but analysts mostly agreed that sanctions were coming.

At the time, the US was importing about 800,000 b/d of Venezuelan crude and the administration was mostly concerned about the impact an import embargo would have on US Gulf Coast refineries, which would need to look for new sources of heavy crude.

Oil sector sanctions from the US seemed so likely that then-US Secretary of State Rex Tillerson told reporters that the administration was looking at ways to soften the impact of the sanctions once they were imposed.

“We’re going to undertake a very quick study to see: Are there some things that the US could easily do with our rich energy endowment, with the infrastructure that we already have available – what could we do to perhaps soften any impact of that?” Tillerson, the former CEO of ExxonMobil, said.

A year later, the US is importing less crude from Venezuela (about 530,300 b/d in July, according to preliminary US Customs data), but Gulf Coast refiners, particularly Valero, continue to rely on these imports.

In fact, US refiners may be importing even more, if Venezuela’s oil sector was not seemingly in a death spiral. Roughly one if every five barrels of oil imported by US Gulf Coast refiners comes from Venezuela.

The EIA forecasts Venezuelan oil production to fall below 1 million b/d by the end of this year, down from 2.3 million b/d in January 2016 as joint ventures fall apart and PDVSA, the state-owned oil company, struggles to feed, let alone pay, its workers. PDVSA has notified international customers than it cannot fully meet crude supply commitments and the country’s active rig count has fallen below 30, according to Baker Hughes International Rig Counts.

By the end of 2019, Venezuelan crude oil output is expected to plummet to 700,000 b/d, making it likely that it will produce less than the US state of New Mexico.

“We’ve never seen an industry or a country collapse this fast and this hard,” said EIA analyst Lejla Villar in a recent interview with the S&P Global Platts Capitol Crude podcast. “We’ve never seen anything like this.”

Industry collapse

The downfall of Venezuela’s chief industry, coupled with International Monetary Fund predictions that inflation in the country will skyrocket to 1 million percent by the end of this year, have created an unusual scenario, in which Maduro may even welcome US sanctions on its oil sector. As Venezuela’s economy continues to unravel, leading to surging prices and rampant hunger, Maduro could try to pin the blame on sanctions.

“If you break it, you buy it,” said George David Banks, a former international energy and environment adviser to President Trump. “The White House doesn’t want to own this crisis.”

The US has sanctioned individuals in Venezuela, including Maduro; prohibited the purchase and sale of any Venezuelan government debt, including any bonds issued by PDVSA; and banned the use of the Venezuela-issued digital currency known as the petro. But oil sector sanctions are viewed as the most powerful penalty remaining and one the Trump administration is more hesitant than ever to use.

“There’s already a humanitarian crisis, but we don’t own that, the Maduro government owns that,” Banks said. “We don’t want to lose the people of Venezuela and you don’t want to pursue a policy that jeopardizes that.”

David Goldwyn, president of Goldwyn Global Strategies and a former special envoy and coordinator for international energy affairs at the US State Department, speculated that it would take extreme action, such as a military assault on a civilian rebellion, for the US to now impose oil sector sanctions. “The system is collapsing and this administration does not want to own the collapse,” Goldwyn said.

The path ahead for Venezuela’s oil sector has, likely, never been less certain. And it remains to be seen what a full collapse of an economy looks like. It is clear, however, that the US wants to avoid blame for accelerating that collapse and has abandoned, at least for now, consideration of oil sanctions.

When Venezuela’s oil sector hits rock bottom, the US does not want to be accused of dragging it there.

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Pemex Has or Doesn’t Have Money?

(Energy Analytics Institute, Aaron Simonsky, 1.Aug.2018) – If Mexico’s Pemex doesn’t have the necessary funds to invest in deep water or shale activities, how is it the state oil company will have funds to invests in new refineries as proposed by President-elect Andrés Manuel López Obrador?

Join the discussion below or on Reddit:

 

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Citgo Raises $$750,000 for Muscular Dystrophy Association

The Plasman family with MDA and Jim Cristman, CITGO Vice President of Refining, thank Diamond Sponsor Midwest Tankermen for their dedication to the golf outing and the MDA. Source: Citgo

(Citgo Petroleum Corporation, 31.Jul.2018) – The Muscular Dystrophy Association (MDA) depends on partnerships to fulfill their mission, and as their largest corporate sponsor, Citgo Petroleum Corporation hosts the annual MDA Driving for a Cure golf outing for employees and contractors from the Citgo Lemont Refinery.

This year, on June 26, 2018, more than 450 golfers raised a record-breaking $755,542 for the MDA. Held at the Cog Hill Golf and Country Club in Lemont, Illinois, the event included 18 holes of golf and a special dinner reception where an MDA family is traditionally asked to share their story and talk about the role the MDA plays in their fight against the effects of muscle-debilitating diseases.

“The Driving for a Cure Golf Outing is truly a special event because of the MDA family represented. They are what this is all about and it’s an honor and a privilege for Citgo to contribute to the cause for a cure through this fundraiser,” said Jim Cristman, Citgo Vice President, Refining.

One important and unique characteristic of the MDA is its policy requiring all locally-raised dollars be spent locally. As a result, life-saving research programs at Lurie Children’s Hospital, Northwestern University and the University of Illinois will benefit. One example of the impact of this policy is former MDA Goodwill Ambassador for Illinois Lizzie Chamberlain who annually kicks off the golf outing by singing the national anthem.

“This was the first year that Liz was not able to attend and sing at the outing because she is receiving a new treatment that the FDA recently approved for her form of muscular dystrophy. It was the MDA that helped fund the beginning stages of the research that brought this treatment to fruition,” said Amanda Konopka, MDA Director of Distinguished Events.

About the Citgo Lemont Refinery

For more than 90 years, Citgo Lemont Refinery has employed more than 750 Chicago area residents on a full-time and contract basis in support of the local economy. In addition to producing high quality fuels for a large portion of the network of more than 5,200 locally-owned Citgo stations across the country, Lemont Refinery employees also make a major positive impact on the community. Each year, more than 2,500 volunteer hours and thousands of dollars are given in support of community programs such as Muscular Dystrophy Association, United Way and a variety of environmental and preservation programs. Operations at the Lemont Refinery began in 1925 with a major expansion, doubling the facility, in 1933. Over the years, new units were added to meet the demand for a better quality of gas for automobiles, aviation fuel for WWII, and the production of asphalt. Petróleos de Venezuela,S.A., PDVSA, acquired 100% ownership of the refinery in 1997 and began operations as Citgo Lemont Refinery. For more information, visit www.citgorefining.com/Lemont

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Mexico Oil Output to Trend Upwards in 2027

(Energy Analytics Institute, Aaron Simonsky, 31.Jul.2018) – Mexico’s oil production will cease to decline in 2025.

That’s according to details of a report published by S&P Global Platts Energy Analyst and Consultant Manager Javier Díaz during an energy forum.

Díaz announced details of projections for Mexican crude oil production until 2040 that showed national crude production stabilizing in 2025; starting to rise in 2027, and reaching 2 million barrels per day through 2035, according to the daily newspaper El Financiero.

Reaching these goals, said Díaz, will depend to a large extent that in the “new era” the following will occur in the energy sector: foreign investment will continue to flow into Mexico, and the tendency to reverse the fall in production and continue the liberalization of the markets will also continue to improve market efficiency.

“These are the focal points that we see that can make the energy market more effective for Mexico,” said Díaz during an interview.

When questioned about the profitability of the possibility that Mexico’s President-elect Andrés Manuel López Obrador would build two new refineries and modernize the existing infrastructure, Díaz said that in the first instance a technical and financial study should be done regarding the possibility to modernize the infrastructure taking into consideration the age and conditions of the refineries.

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