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PDVSA close to selling 49% stake in Petrojam: Jamaica willing to give up majority control

Published:Wednesday | February 18, 2015 | 12:00 AM
A section of the Petrojam oil refinery in Kingston.
The entrance to the Petrojam oil refinery in Kingston.
Phillip Paulwell

Minister of Science, Technology, Energy and Mining (MSTEM) Phillip Paulwell said on Monday that Jamaica may just be one month away from learning which entity has made a firm offer for the 49 per cent stake in Petrojam held by PDVCaribe, a subsidiary of Petroleos de Venezuela (PDVSA).

The Venezuelan oil company advised the Jamaican Government in June 2014 that it would be selling its minority stake in the refinery, a decision that came after a years-long push to have PDVSA assume majority ownership and control of the asset, which is in need of upgrading.

Paulwell said on Monday that Jamaica was still willing to give up a portion of its ownership in Petrojam to the new owner, which, he said, appears likely to be from China.

"We are aware of interested parties. As you can appreciate, these are matters which are held by the Venezuelan government. I wouldn't really want to comment on it," said the energy minister.

"I am aware that certain proposals have been submitted. In 30 days or so, I will be in a position to say something definite on it," he said.

Petrojam is owned 51 per cent by the Government of Jamaica, through the Petroleum Corporation of Jamaica, and 49 per cent by PDVCaribe, a subsidiary of Petroleos de Venezuela SA.

The refinery supplies 80 per cent of the local-non bauxite market and 70 per cent of the national market, and is currently selling about 50,000 barrels of refined products per day, Petroleum Corporation said at a forum in Jamaica, most of which are refined at the Kingston plant. Some of the sales are from imports.

The Petrojam refinery has the capacity to refine 35,000 barrels of oil per day, but Jamaica had wanted to grow that capacity to 50,000 barrels under a project that would also position the plant to refine heavier and cheaper crudes.

According to an environmental report submitted to the planning authority about six years ago, an engineering study completed in 2008 had determined that the project would require capital US$758 million, funds that Jamaica lacked.

The alternative plan for Caracas to take an additional two per cent stake, and therefore majority control in Petrojam, also faltered.

Petrojam imports about nine million barrels of crude per year, mostly under concessionary terms from Venezuela. It also imports refined products as needed.

Pressed for details about possible buyers, Paulwell said, "I think you know that Jamaica has been very attractive to the Chinese. I think that they might be looking at it closely, but I won't say much more than that."


ja ready to give more


PDVSA paid US$63.5 million for the 49 per cent in 2008, then valuing the refinery at about US$130 million, but Paulwell said he was unaware of the current asking price, but added that in any event, he would "not be able to speak about what is happening now".

Still, he said that Jamaica was prepared to give up an even bigger piece of its stake to the new buyer than the two per cent that was initially offered to PDVSA.

"We are flexible; we are flexible in terms of the future role of the Government. I still believe that it is important for us to have a presence, but it need not be majority," the minister said.

However, any equity to be surrendered to a new investor would depend on their proposal, and Jamaica's analysis of the terms, said Paulwell, with a side nod to procurement rules.

"We have to analyse them and also consult our National Contracts Commission, but we are flexible now. We do not have to have a majority holding in the refinery," he said.

Paulwell said the pending sale by PDVSA would provide the resources for the expansion of the refinery.

"It will enable us to move forward with the upgrade and expansion of the refinery," he told Wednesday Business. "We believe that it will happen as it is the only way, I suspect, that we are going to get the expansion and the upgrade done."

Contemplated from 2006 when an agreement was hammered out between Caracas and Kingston, the planned expansion will enable production and export of LPG, gasoline, and low sulphur diesel, as outlined by Paulwell in June 2013.

A byproduct, petcoke, is projected to enable the generation of 100 megawatts of cheap electricity.

Paulwell also said then that upgrading of the refinery will ensure its viability in the long term and allow for the installation of treatment facilities to meet new environmental specifications for diesel oil and gasolene.

Other energy sources said Jamaica did not make an offer for the 49 per cent stake because it lacked the funds for the purchase, but would have to approve the buyer.