U.S. Market Beckons as Trinidad & Tobago Look to J/V’s for Refining Expansion

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Researched by Industrialinfo.com (Industrial Info Resources; Houston, Texas). The combined total of oil and gas reserves in Trinidad and Tobago (T&T) is in the neighborhood of ten billion barrels of oil and growing, but the country’s intention to capitalize on the oil component of this resource has been cautious, hampered by a lack of investment and slow expansion of processing and refinery facilities.

In the first three months of 2005, the U.S. imported 482,000 barrels per day (bpd) of petroleum products from the Caribbean, but T&T’s Pointe-a-Pierre refinery was struggling along, with a capacity of 165,000 bpd. At a previous period of peak production, when Petrotrin acquired the refinery from Texaco in the 1970’s, the refinery processed 350,000 bpd, but the major product was fuel oil with smaller amounts of gasoline and other fuel products.

Early this year, Petrotrin’s Executive Chairman Malcolm Jones said that the refinery was in bad shape, especially in terms of old equipment and a ‘serious look’ would have to be taken at tackling problems. Refining at the Pointe-a-Pierre site goes back to 1917 and the refinery now has to adapt to the prospects of the clean fuel age or shut down.

There is now a plan to invest $350 million over a four-year period leading to the production of cleaner fuels with lower sulfur content, less aromatics and lower benzene content. In the past, a figure of $1 billion has been been an estimate for a complete revamp of the facility. Petrotrin currently is looking at prospects for a joint venture to bring in a partner to take on the refurbishment, or it may have to face the financial risks of going it alone.

The state company already has joint venture projects running with a number of companies in the field, including British Gas (NYSE:BRG) (Reading, UK), Talisman (NYSE:TLM) (Calgary, Alberta), Repsol (NYSE:REP) (Madrid, Spain), PetroCanada (NYSE:PCZ) (Calgary, Alberta), and Canadian Superior (AMEX:SNG) (Calgary, Alberta). Most of the joint ventures cover exploration and oil production in newly opened blocks, with PetroCanada joining Petrotrin in a production sharing contract for oil found along the northern Gulf of Paria.

In 2005, the company’s project management group began to examine the design and engineering necessary and move towards a cost estimate. These studies and reviews covered an isomerization unit addition, a continuous reformer unit addition, an SF Alky unit, the project scope of a diesel hydrotreater unit, a spent sulfuric acid regeneration unit, and expansion of a fluid catalytic cracker.

Nearly a century of organic growth has seen the refinery site spread over a large area. If a thoughtful decision was made to construct a new refinery, this could be placed on the existing site, in space released by the upgraded facility, and take advantage of the infrastructure, including the storage tanks and the tank berths at the refinery harbor. The company is also constructing a GTL pilot plant at the refinery to see how the potential to match output and open up new opportunities for the old refinery.

Despite its image as a fuel rich country, T&T has been a net importer of crude oil for processing with an import bill moving towards $1 billion a year on some occasions in the last decade. If the increased exploration activity leads to greater oil production then this could give Petrotrin the courage to invest in the future of a gasoline producing refinery, compatible with the crude product, which would have markets in the U.S. and the Caribbean. One way or another something has to give to put the years of impasse and indecision behind.

At the beginning of 2005, the Caribbean region had a combined refining capacity of 1.7 million bpd and the Hovensa refinery on the U.S. Virgin Islands, jointly-owned by Venezuela’s PDVSA and Amerada Hess, was the largest refinery with a capacity of processing 495,000 bpd of crude oil. This was followed in size by the 320,000 bpd Emmastad in the Netherlands Antilles, which is operated by PDVSA. There are currently a number of refinery expansion and construction plans under consideration moving in the matrix of U.S. demand and Caribbean politics.

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