Trinidad and Tobago’s state-owned Petrotrin is blaming the shale gas revolution in the US and lower crude prices at Cushing, Okla., for its decision to significantly reduce its refinery throughput to 120,000 bo/d from 180,000 bo/d.
Petrotrin Pres. Khalid Hassanali told OGJ that the decision was an attempt to limit the company’s losses at its Point a Pierre refinery and to avoid going out of business like two other Caribbean refineries.
Refineries in both Aruba and the US Virgin Islands have been shuttered as Caribbean refineries are facing higher prices for crude on the international market than many US refineries, which are benefiting from the continued bottleneck at Cushing.
While the 30% reduction in refinery throughput is hurting the company’s bottom line, Hasannali insists that Petrotrin—an integrated company—is allowing its exploration and production arm to carry the ball for the time being.
Mado Bachan, Petrotrin vice-president of refining and marketing, said there are significant challenges now facing the company’s R&M business. He explained that Petrotrin has imported 60% of the crude needed for refinery feedstock, while 40% of the crude has come from domestic production.
Bachan explained that with global spare refinery capacity averaging nearly 20 million bbl of refined products in 2014, it puts a cap on margins.
He said, “It’s your gross margins that affect your profitability, because it is from your gross margins that you have to find money for your operating costs including utilities, inputs, labor, and so on.”
Bachan said the closure of refineries in the Caribbean was not necessarily a global trend because there continues to be construction of modern, highly efficient refineries. As an example, he pointed to Saudi Arabia, which is adding refining capacity as it seeks to refine even more of its own crude.
He said the shale development is happening against a backdrop of the US not being able to export its crude but being able to export refined products. Bachan argued that this meant US oil producers can largely only transport crude to refineries in the US.
Petrotrin recently completed a billion dollar upgrade of its refinery including the construction of a gasoline optimization plant. The company’s president, however, said even this was not helping since recently gasoline was being sold at less than the cost of a barrel of crude. He said the company was also engaged in the construction of a diesel plant that it hoped would help it survive the challenge.
In addition, Petrotrin has reduced its sales of refined product to the US East Coast market, instead concentrating on its premium markets in the Caribbean. Hassanali said the solution was more domestic crude production, which will reduce the refinery’s reliance on higher-priced crude.