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Know how in Petrotrin

Published: 
Sunday, March 11, 2018

Petrotrin has found itself in a difficult situation; high debt due in part to massive project failures, an outdated refinery that needs upgrading even now to satisfy export demands, low investment in its upstream and production unit and some say it is overstaffed with highly paid operatives.

In particular, however, the failure of Trintomar which was seen as being very important to the future of T&T, wherein an investment of some US$151.5 million was made that produced very little and was eventually sold to EOG for US$20million.

Still, the view exists that if we cannot develop the capacity to exploit our own oil and gas we would have lost the capacity to control our destiny and though exploration and production are high risk activities we would then have to depend on the Repsol, BP, Shell etc. to survive.

The restructuring plan for Petrotrin as decided by its current board is to split the company into two parts—upstream and refinery—and to seek the collaboration of the stakeholders to make these parts viable in the face of high debt, old plant and the need for further investment. This does not seem to be a strategy to get Petrotrin back on its feet.

The immediate question is: why has Petrotrin failed when others, both national and private sector petroleum companies, have done very well in other parts of the world?

If we were to look into Petrotrin’s history we will see that it is made from a series of acquisitions and mergers (some say to save jobs) from/with some of the major oil companies of the world, resulting eventually in a wholly owned national company spanning the upstream, exploration and production, to refining.

I have stressed that in our diversification thrust it is of fundamental importance that our competitive advantage, our survival, depends on acquiring the knowledge, its application and even innovation in the production of our export goods and services. This applies also to the conventional oil/gas companies even though the specialist work for these companies may be done by highly specialised contractors.

Though such work is done by contractors the oil/gas company has to be knowledgeable, be at the top of the technologies in its decision making, investing and project supervision. This may have prevented Petrotrin from making a bad business decision with respect to the World GTL on the gas to liquid plant, which is now virtually scrap.

Let us look at a few of the successful companies in the context of their knowledge, but moreso the systems they use to ensure this capability.

Consider the Brazilian national oil company Petrobras.

This company has a research and development institute which pioneered many deep sea technologies under its “pre-salt” programme. This R&D institute ensures that up to date and evolving technologies are available to the operating, managing and planning entities of Petrobras.

Aramco, the national oil company of Saudi Arabia, runs a network of centres of excellence in exploration, production and petroleum engineering. Qatar is working together with Shell and Exxon Mobil in using and developing advanced technologies to help unlock new resources.

Norway via legislation demands that companies using natural resources in that country have to form R&D partnerships and joint development programmes with Norwegian companies engaging in local content and knowledge development. Hence Norwegian oil/gas companies develop leading state of the art technologies and as a result many of the international companies have located part of their R&D chain in Norway.

Petronas, the national petroleum company of Malaysia, with businesses in 35 countries, owns Petronas Research Sdn Bhd, which is responsible for its technology portfolio management, technology delivery and commercialisation.

Suriname’s national oil company, Staatsolie, holds sole rights to exploit oil/gas in that country. In the absence of in-country expertise Staatsolie uses instead production sharing contracts with the international companies. It depends exclusively on the expertise of these global companies which reduces its risks and receives in turn part of the income from the exploitation of the resource. The established global companies, Shell, BP, Exxon-Mobil etc all run R&D institutions across the world to ensure their operating companies are at the top of the technologies.

Petrotrin on the other hand has no institution that it owns and/or is dedicated to R&D in its areas of activity. So much so that some of its decisions on expansion etc are suspect with respect to choice of technologies, contractors, for example, in the failed upgrades of its refinery. Though there are two universities in Trinidad that profess to be offering courses in petroleum technology, neither of them is owned by Petrotrin in the sense that Petrobras or Aramco owns and directs their R&D institutions.

R&D at our local universities are at the whims and fancies of the staff. Petrotrin may have the expertise to operate its aging plants but is not at the top of the technology that drives the development of the company and hence its desired sustainability.

For example, Petrotrin even at this stage has found itself with a refinery that is unable to produce product to the standard that it is required by the market and even in its parlous financial state is being forced to upgrade its plant.

But this may not be a business culture restricted to Petrotrin. When the government of the day took the decision to build the Pt Lisas plants, Prof Percy Bruce of UWI unsuccessfully called for the parallel establishment of a petroleum Institute to provide the R&D in support of the petrochemical plants. This was ignored and we avoided the Petrotrin type of fiasco at Pt Lisas simply because we were forced to sell the plants in a recession.

Still, in the larger sphere, we have not understood the place of knowledge and its exploitation via innovation in our hoped for diversification—just look at government diversification plans.

Mary K King

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