Trinidad and Tobago gives conditional nod to new grassroots refinery

Aug. 19, 2002
The Trinidad and Tobago government has granted conditional approval for the construction and operation of a 224,000 b/d full-conversion export oil refinery and ancillary infrastructure.

By an OGJ correspondent

PORT OF SPAIN, Aug. 19 -- The Trinidad and Tobago government has granted conditional approval for the construction and operation of a 224,000 b/d full-conversion export oil refinery and ancillary infrastructure.

It is expected to cost $2 billion, with the targeted completion date yearend 2005.

If constructed, the refinery would be one of the largest in the world, with a 17.4 million bbl terminal and port facilities.

Already state-owned National Gas Co. of Trinidad & Tobago Ltd. (NGC) has agreed to provide the refinery with 50 MMscfd of natural gas, while a site close to the Atlantic LNG export plant has been identified for the refinery.

Second effort
This is the second time that the Caribbean republic has come out in support of what would be the country's third oil refinery. It was last year that the twin-island nation's previous government had announced it was in negotiations with the project promoters, the little-known Bahamas-based Soreco Inc., but the refinery was never greenlighted. While the present government headed by Prime Minister Patrick Manning publicly expressed confidence that the project would, this time, come to fruition, there are those in both the country's ministry of energy and NGC who privately expressed doubt.

Manning admitted that the project would not be easy to come to fruition but said it is not impossible. He told OGJ: "When in 1992 we decided to get into LNG, we all knew that it was not an easy project to bring to Trinidad and Tobago, but we pursued it, we brought it here, and now we are negotiating a fourth train. So with entrepreneurship and commitment, anything is possible."

Manning said Soreco's Chairman and CEO Barry Brokaw made a presentation to his cabinet's energy subcommittee and, as committee chairman, he said he was impressed and felt confident the project is viable.

Trinidad and Tobago Energy Minister Eric Williams also came out in support of the project, explaining that it would be a "grassroots refinery designed from the ground up to make low sulfur transportation fuels and to be a merchant producer of alkylates."

But ministry officials who did not wish to be identified have described the project as "pie in the sky," saying it would be nearly impossible to bring it to fruition. They pointed to the difficulty of securing the $2 billion loan for the project when refining margins are so low and with products markets still so volatile in the wake of the slowdown in the world economy following the Sept. 11, 2001, terrorist attacks on the US.

Challenges ahead
Trinidad and Tobago Director of Energy Planning Vernon De Silva said it would be a challenge to bring the refinery to Trinidad and Tobago.

"If the project does not succeed, it would not be for a lack of government support, since the government is aware that it would create jobs and wealth in the country, but its really is up to the promoters of the project," he said.

De Silva added: "A refinery is a risky business. I do not know of any refinery which has been built in this part of the world for a long time now. Added to that, a refinery operates with small margins, so there is a question of profitability."

De Silva also noted that Soreco would have to secure a supply of crude oil and markets for the refinery's products by bringing together all links of the chain. He added: "While there is no need to have 20-year, long-term contracts as exist in LNG, I would imagine for that kind of money to be loaned, bankers would want to see at least medium-term contracts, and that is not easy to come by at this time."

De Silva it is not easy for an independent company to break into the market because the multinationals "have it cornered." He said: "The multinationals produce the crude, refine it, they have a network of service stations to sell and market it, so Soreco Inc. would have to do its work. But the government will support them."

Promoter responds
But Soreco's Brokaw insisted that the project is viable. He said already Soreco had secured conditional financing for the project from several export banks located in the US, Japan, the UK, and France.

"Within the next 2 weeks we expect final approval (of financing)," He said. "Getting the finance is not a problem, and certainly we have the markets for the products."

Brokaw argued that it was in the interest of the major multilateral export banks to support the project, because not only is the project viable, but he claimed it would lead to European and American contractors getting additional work at a time when orders are down.

He said already his company had secured oil from Ecuador, Russia, Saudi Arabia, and Venezuela that would be refined at the export refinery.

Brokaw said, "The beauty of this thing is that all the tankers (bound for Caribbean region) pass in the path of Trinidad and Tobago, so it is not difficult to get the crude here."

Soreco's CEO was not specific about his markets but identified the US Gulf and West coasts as possibilities. Some of the refined products are also expected to be shipped to the European Union.

Brokaw said his company would not be competing with Trinidad's remaining state-owned refinery, the 160,000 b/d refinery at Point-a-Pierre, Trinidad, operated by state petroleum company Petroleum Co. of Trinidad & Tobago Ltd. (Petrotrin).

The existing Petrotrin refinery exports 85% of its products, mainly into the Caribbean region, and once had been operated by Texaco Inc. as a major export refinery with throughput capacity of 355,000 b/d (OGJ, Mar. 25, 2002, p. 24). A second refinery, a 70,000 b/d hydroskimming refinery at Point Fortin, was shut down in 1995, with much of its operations consolidated at Point-a-Pierre.