Saturday March 20th, 2010
- Last update:9 min 16 sec ago
Petrotrin boss: We must be leaner
...It’s the only way the company will survive
Published: 28 Oct 2009
Kenneth Allum
President of Petrotrin Kenneth Allum has painted a gloomy picture of the way forward for the State-owned energy company.
After suffering massive cost overruns on several ambitious projects, Allum told a South Chamber meeting, yesterday the company now has to become meaner and leaner if it is to survive in a competitive market. He said he did not see the price of crude oil moving from between $60 to $80 any time soon. He later told reporters the alternative was shutting down the company. “It is easy to shut it down,” he said. Allum, who recently succeeded Malcolm Jones as Petrotrin’s head, said they would have to take what ever action was necessary to become cost competitive and improve its position for growth. He said he recognised that Petrotrin has been referred to in the past as “a sweetbread company,” but that culture had to change.
Addressing a group of energy investors and experts at the Cara Suites Hotel and Conference Centre, Claxton Bay, Allum said they anticipated a significant loss in their revenues for the fiscal year 2009 and even 2010. Petrotrin contributed more than six billion dollars in Government revenues in fiscal 2008. “For fiscal year 2009, at the end of August, our year to date revenue is just over US$3 billion. It is a great difference from the previous year,” he said. In this regard, Allum added, the operating profit has moved from 14, 15, 16 per cent to three per cent to date. He said earnings before taxes and other deductions, at the end of August stood at about US$193 million. coming down from over one billion a year. Its net income, which in 2008 was just under $400 million, is just under six million at the end of August.
He said September was not a good month and they expected a small loss at the end of this month. Baring all before his audience, Allum pointed out that from 2,000 wells on land and 300 at Trinmar, they were producing just under 50,000 barrels of oil, and gas, even though the refinery has a capacity to produce 150,000 barrels a day. “This tells you that we are producing very little from each well, that the wells are very mature.” The company also has 21 joint venture arrangements, on and off shore, which contributed over 30 per cent of its equity, he said. Allum said as it went forward, the greatest challenge would be the refining margins. He said: “Our challenge is to increase our equity crude to as much as we can towards meeting 150,000 barrels a day. “Our local consumption of petroleum products is just about 22,000 barrels. We are an export refinery. It means our competitors are international, who we have to compete with in the international market.
“To become cost competitive we have got to become a leaner company in all respects. We have to look at our cost structure, we have got to look at all aspects of our company and take what ever action is required to bring that down.” He said while it continued to improve its operating efficiency, it had to also improve the relationship with shareholders to get support as it went forward in the challenging period. Turning to the Gas Optimisation Plant which will improve its efficiency, Allum admitted that scope changes, delays in the Environmental Impact Assessment Certificates, overheating of the construction industry, as well as equipment supply, had pushed the cost from US$350 million in 2003 to US$1.3 billion to date. Allum said, however, they have learnt that they should properly scope out their projects before they enter into them.
You have to ask wey all the
You have to ask wey all the profits from Petromann's good years gone. Just a couple weeks ago we read where they held a lavish party for the man who was presiding over all of these losses and even commissioned specially made and ornate chocolates from abroad for this champagne and caviar event in honour of rewarding failure.
Let's hope this new CEO will run PetroMann with some good business practices without political interferences.
I have often said that what
I have often said that what we have in Trinidad and Tobago is no longer a democracy but a "KLEPTOCRACY" and therein lies the answer to the current state of affairs at Petrotrin.
Kleptocracy, is a term applied to a government that extends the personal wealth and political power of government officials and the ruling class (collectively, kleptocrats), via the embezzlement of state funds at the expense of the wider population, sometimes without even the pretense of honest service. Political corruption is closely tied to the internal workings of a Kleptocracy.
"Describing Malcom Jones as a good friend, Prime Minister Patrick Manning yesterday defended the $70,000-plus salary of the Petrotrin executive chairman, saying the salary was “quite in order” given Jones’ experience.
“He undoubtedly is (a friend)... and a better friend I don’t have. Except my wife, of course,” the PM said at a post-Cabinet news conference yesterday.
“Government considers itself very fortunate to obtain his expertise and managerial experience. He’s the only man in T&T who has worked in every aspect of the petroleum energy sector,” Manning said." (Patrick Manning May 2003)
http://legacy.guardian.co.tt/archives/2003-05-02/news1.html
Mr Allum, I am saying again
Mr Allum, I am saying again and again, the Venezuelan El Furrial field runs under Trinidad and I am sure the reservoir BHP found is by extension linked to El Furrial, This oil field just does not stop at the Venezuelan borders. Remember Bakken where the oil majors said its barren and packed up and left, Note one geologist was sure the oil ran under Montano all the way to Saskachewan, he worked from his basement and found the Bakken 1, a huge reservoir all the way to Canada, with estimates to challenge Saudia Arabia, Then drilling deeper by directional horizontal they found Bakken II, Why dont you employ some good geologists from Halliburton and Schlumberger and University of Houston which just developed a sesimic sound waves filtering system to find the oil reservoir under Trinidad. Its there Mr Allum.
Mr Smith, everyone in the
Mr Smith, everyone in the local Geological fraternity knows about the potential of finding an analogue of the Furrial trend in Trinidad and exactly where it can be found. However this venture is exremely costly and the management at Petrotrin is very risk averse. They prefer to share the risk with a foreign partner rather than shoulder the full cost of a deep exploration well.
Fissureman I'm not sure I'm
Fissureman I'm not sure I'm following you. You stated that "the local Geological fraternity knows about the potential of finding an analogue of the Furrial trend in Trinidad and exactly where it can be found. However this venture is exremely costly and the management at Petrotrin is very risk averse. They prefer to share the risk with a foreign partner..."
If as you stated, the geological frat knows exactly where this can be found, how is this venture then a risk? I can see it being costly, but not a risk?
Because to drill a well to
Because to drill a well to 20,000' is VERY risky. The Furrial trend will be significantly deeper in the Gulf of Paria than on the Venezuelan Mainland. Remember you can only make best guesses of what pressures and temperatures you will encounter at those depths based on analogue and models. NOBODY in the world can accurately predict what will be encountered and the potential for being wrong increases with depth. Globally the success rate for exploration wells is 10%. Do any of you think that the Trinidad government/Petrotrin management will be willing to spend 1 Billion dollars on 10 dry holes and have nothing to show for it at the end of the day....then again they did host the summit!
Thanks for the info...I
Thanks for the info...I guess you can tell that I don't know much about the subject matter.
Desmond Smith also posted a response to your initial comment, it's at the bottom of the comment thread.
Kleptocracies are often
Kleptocracies are often dictatorships or some other form of autocratic and nepotist government, or lapsed democracies that have transformed into oligarchies. A kleptocratic ruler typically treats his country's treasury as though it were his own personal bank account.
Crown Jewel No More
Crown Jewel No More !!
Petrotrin was once the Crown Jewel of the Caribbean oil industry. This is clearly no more - and we can no longer blame the former owners for sending the profits offshore to the U.S.
Just drive by the refinery site, and see the dilapilated state of the tank farm and the process equipment. Not only is it an embarrasment, but likely a safety incident waiting to happen.
A refinery with a capacity of 150 K BBls per day, refining at only 50 K BBls cannot realize economies of scale, nor expect to compete with internaltional refiners in Canada, US and the Middle East. With their under utilized capacity, their cost / barrel would be uneconomical. Add that to the cronyism we hear about at Petrotrin, plus low productivity - Mr. Allum is quite right to wave the red flag.
So much for Malcom Jones being 'the most knowledgeable man in the oil business'. If that is true, lord help us with the future of this refinery.
Mr Allum - your first order of the day is to get Malcolm Jones off Petrotrin's payroll. I think he has a more than adequate pension plan !!
I'm surprised to learn that
I'm surprised to learn that T&T is only producing 50,000 bbl/pd. I recall Francis Prevatt when he was minister of petroleum & mines in the mid-1970s telling someone in my company that T&T was producing 320,000 bbl/pd which he said equated to a quarter of one percent of world oil production at the time. I take it he was including Amoco's off-shore production most of which was for their own use.
There was a time we had to import oil from places like Nigeria and Venezuela to satisfy our upgraded refinery. Apart from depletion of known reserves, what has gone wrong? Seems if we dont retain some of our oil in the ground as strategic reserves for our domestic consumption, we'll soon become dependent on foreign supplies, especially if it becomes uneconomic to attempt tertiary methods and other more costly and difficult methods of recovery. There has already been talk of oil production from heavy oil sands.
Instead of alienating Chavez, we might as well cultivate good neighbourly relations with neighbouring Venezuela as we may soon have to resort to its Caribbean oil facility. In fact, we should be entering into closer collaboration with Venezuela to import more oil for the under-utilised capacity of Petrotrin's refining facilities. Mexico and other Latin American countries need also to be explored. This is a matter that could have been discussed bilaterally with those Latin American leaders who came for the recent Summit of the Americas rather than allowing the absent Cuba to dominate proceedings.
And do you know Prince in my
And do you know Prince in my days in mid sixties P-a-P refinery was the largest in the Commonwealth doing over 500 KBOPD, if memory helps me. We had sophistication then with Texaco Trinidad- a lube oil plant, petrochemical plant, own power stations, sulphur plant, sulphuric acid plant, a n Paraffins plant. We refuelled the British Navy and the US Navy and fuelled the US airforce by shipment via product tankers. IT was a buzzing refinery.This is where I learnt my stuff in refining. What have they done with it?, Glad you noticed tha safety hazards.
Desmond oil was never my
Desmond oil was never my area of expertise. I did have a passing interest in the politics of oil and OPEC. But I do remember reading about the importance of the early discovery of oil in Trinidad as a contribution to the war effort when warships were no longer powered by wind but by bunker oil. And our asphalt from the pitch lake also came in handy for caulking these vessels even going back to the days of Walter Raleigh.
Don't believe it's a
Don't believe it's a necessarily a problem with reserves. It's mainly a case of the refinery not operating at capacity due to shutdowns, workovers, low productivity, safety issues etc.
Fissureman, I am happy
Fissureman, I am happy someone replied at last and even more from the Geological fraternity. I worked El Furrial for years from drlling and development and chemical treatments. The reservoir is high pressured, PDVSA just found the gas, that we, Exxon found called Columbus in the Venezuela Gulf, now refound by Agip. All these run off the El Furrial. Offshore exploration costs 150 MM$, am sure going to 25K feet on Trinidad on land will cost less, THe Bakken was ignored by the majors, but a simple geologist found it. Now the majors tried Trinidad, Exxon did, how come they did not find the analogue? Now seismic has greatly improved from 20 years ago, Hence one reason I said the Min of Energy needs its own R&D in exploration, as its an oil and gas country, as we agree the oil is there but we dont have the funds to find it. I doubt a major will join with TT on this. To make it worse the Columbus runs off TT's N Coast too. What is TT doing about these probabilities?
Our reserves are being
Our reserves are being depleted and we are trying to give the remainder away to foreigners, WHY???