VZCZCXRO7796
RR RUEHGR
DE RUEHSP #0430/01 3071821
ZNR UUUUU ZZH
R 031820Z NOV 09
FM AMEMBASSY PORT OF SPAIN
TO RUEHC/SECSTATE WASHDC 0008
INFO EC CARICOM COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 PORT OF SPAIN 000430 
 
SENSITIVE 
SIPDIS 
SANTO DOMINGO PASS TO REGIONAL COMMERCIAL OFFICE 
 
E.O. 12958: N/A 
TAGS: EPET ENRG EINV ECON KIDE TRGY BTIO PGOV TD
SUBJECT: SETTLEMENT OFFER ON GTL DISPUTE IN TRINIDAD 
 
REF: PORT OF SPAIN 401 
 
BUSINESS SENSITIVE INFORMATION; PLEASE PROTECT ACCORDINGLY 
 
 
 
¶1. (SBU) SUMMARY:  The commercial dispute continues between 
U.S.-based fuel processing company World GTL (WGTL) and Trinidad 
and Tobago's national oil company Petrotrin (ref).  In recent 
weeks, the CDA has urged the GOTT to be flexible and consider a 
commercial settlement during separate conversations with the 
Foreign Minister, Trade minister and other officials.  Pol/Econ 
Chief delivered the same message on October 27 to Petrotrin's 
president, who insisted he was in no position to settle because 
WGTL had not communicated with his firm since the project went into 
receivership in mid-September.  We immediately relayed that 
information to WGTL's president, who told us on November 2 that the 
company would forward a settlement proposal to Petrotrin and the 
GOTT Attorney General on or about November 3, and would wait 30 
days before filing a lawsuit in New York or seeking international 
arbitration against Petrotrin alleging expropriation, breach of 
contract and fraud.  We received a copy of a letter from WGTL's 
attorney to the GOTT on November 3 that seeks $50 million to settle 
the dispute.  END SUMMARY. 
 
 
 
A FAILURE TO COMMUNICATE 
 
------------------------ 
 
 
 
¶2.  (SBU)  Pol/Econ Chief met with Petrotrin president Kenneth 
Allum on Oct 27 to advocate for a reasonable settlement to the 
ongoing dispute between the parastatal and U.S.-based World GTL 
(WGTL).  Allum said WGTL had yet to communicate any demand to 
Petrotrin since their joint venture gas-to-liquids (GTL) project 
went into receivership in mid-September.  In July, Petrotrin 
assumed an outstanding loan against the project on which WGTL 
subsequently defaulted (ref).  Allum and several company executives 
defended Petrotrin's actions, asserting WGTL had repeatedly failed 
to deliver on its contractual obligations and proved to be an 
unreliable partner.  They insisted that calls to WGTL and its 
president and CEO David Loring have gone unanswered, and that they 
were aware that WGTL attorneys were prepared to file a lawsuit or 
seek international (ICSID) arbitration against Petrotrin only 
through conversations with the Embassy. 
 
 
 
¶3. (SBU)  We immediately relayed Allum's comments to Loring, who 
told us on November 2 that WGTL lawyers would forward a proposed 
settlement to Petrotrin and the GOTT Attorney General on/about 
November 3, giving them 30 days to respond before filing suit.  The 
draft complaint alleges Petrotrin expropriated WGTL property when 
it assumed the project's loan and took control of the joint 
venture, and that its actions amounted to a breach of contract and 
fraud.  We received a copy of the cover letter, which demands $50 
million.  Loring indicated the settlement proposal is roughly 
equivalent to a developer's fee previously agreed to between the 
parties, and that WGTL would cede all ownership and operational 
interests in the project. 
 
 
 
WRONG PARTNER 
 
------------- 
 
 
 
¶4.  (SBU)  For his part, Petrotrin's Allum opined he had come to 
believe that Petrotrin "found the wrong partner" for the GTL 
project, and listed numerous examples of how, according to him, 
WGTL failed to fulfill its contractual obligations, forcing 
Petrotrin to expend extra money on the joint venture when WGTL ran 
short.  He discounted WGTL's claim that sulfur emissions from 
Petrotrin's adjoining refinery caused lengthy delays in 
construction that led to the loan default, and insisted that, 
regardless of the number of days construction was delayed due to 
emissions, WGTL had chosen the site against Petrotrin's original 
recommendation and had had full control over technical aspects of 
the project, as well as a majority management stake.  An 
 
PORT OF SP 00000430  002 OF 002 
 
 
engineering consultant similarly told Charge on October 31 that no 
feasibility study had been done in advance of the project, in part 
because at the time oil and gas profits were rising and Petrotrin 
could simply "throw money at the project." 
 
 
 
¶5.  (SBU)  Loring has told us repeatedly that Allum and others in 
Petrotrin were originally opposed to the project and never fully 
committed to it even after the Prime Minister voiced his support. 
Allum reiterated on October 27 that Petrotrin had gone out of its 
way to make the joint venture successful with a large inflow of 
cash and several project delivery deadline extensions.  He said 
that, in retrospect, Petrotrin had "waited too long" to sever ties 
with WGTL, given the large amount of money it was owed by Loring's 
firm.  Allum and his team told us that, with construction overruns 
and the need to replace what they said was WGTL's faulty 
technology, the cost of the GTL plant has risen from $125 million 
as estimated in 2001 to almost a half-billion dollars today.  Allum 
also asserted that WGTL officials had told him during negotiations 
in July that they wanted to cash out of the venture in order to 
raise capital for other projects. 
 
 
 
¶6. (SBU) When asked why Petrotrin chose to pay a premium to assume 
the outstanding loan on the project rather than simply pay it off, 
executives said they had had to consider the company's cash flow, 
balance sheets and credit ratings for other investments.  They also 
insisted that Petrotrin had already sunk significantly more money 
than originally anticipated into the venture, and that it would be 
irresponsible for Petrotrin to pay yet another large sum to bail 
out WGTL.  Allum also said that Petrotrin balked at Barclays' 
refinancing proposal (ref) because its terms would have placed 
Petrotrin in a position of guaranteeing a favorable price for the 
diesel product, and would have forced Petrotrin to give gas to 
Barclays whenever market fuel prices fell or production lagged. 
 
 
 
THE FUTURE OF GTL IN TRINIDAD 
 
----------------------------- 
 
 
 
¶7.  (SBU) Loring told us October 28 that someone close to the 
Petrotrin Board suggested that the T&T firm would simply close the 
plant after a settlement with WGTL is reached or a lawsuit is 
filed, but Allum told us that the project must continue because his 
company has already sunk too much money into it.  Allum said 
construction on the plant continues, and we saw what appeared to be 
ongoing work on the plant as we passed it October 27. 
 
 
 
ADVOCACY CONTINUES 
 
------------------ 
 
 
 
¶8.  (SBU) In addition to discussions with Petrotrin described 
above, the Charge has urged the GOTT to be flexible and work toward 
a commercial settlement with WGTL in separate conversations with 
Foreign Minister Paula Gopee-Scoon, Minister of Trade Mariano 
Browne (who is also the Minister of State for Finance), and MFA 
Director of Bilateral Relations Gerard Greene.  Similarly, the 
Pol/Econ section has been working its contacts.  In light of WGTL's 
specific settlement offer, we will continue to deliver this message 
to the GOTT and Petrotrin officials as we likewise continue to 
discuss the matter with WGTL. 
KUSNITZ