Private Sector Organisation of Jamaica calls for transparency on prospective Petrojam sale
Jamaica's top business lobby is concerned about the effective monitoring of energy were the Government to give up majority control of the Petrojam oil refinery, and is further implying that the company's pricing structure may be deliberately couched to attract investors.
The Private Sector Organisation of Jamaica (PSOJ) went public with its concern on Thursday, a day after Wednesday Business reported Energy Minister Phillip Paulwell as saying a buyer for Venezuela's stake in Petrojam was likely a month away from disclosure and that Jamaica was also willing to sell a portion of its holdings to the new investor.
The business group called for more transparency on the proposed sale, saying "such an important entity to the Jamaican economy could place the entity in third-party hands without appropriate debate and consultation with other stakeholders and the Jamaican public generally, bearing in mind the impact Petrojam has on the economy and the cost of petroleum inputs."
The PSOJ has been engaged in a public debate with Petrojam on the pricing of its products, insisting that levels of adjustment over time were not in line with the fall in the price of oil on the market. Petrojam has consistently pushed back, saying its pricing is based on US Gulf Coast Reference.
"We are also concerned that this pending sale could be seen as a driving force behind the lack of transparency of the price-setting mechanism used by Petrojam and could be used as a means of increasing the profitability of the company, in order to improve the value to be gained from the sale, to the detriment of consumers and the economy on a whole. This at a time when the economy and the fiscal accounts need all the help it can get to spur growth."
A response from Petroleum Corporation of Jamaica, the parent of Petrojam Limited, regarding the assertions by the PSOJ was not forthcoming up to press time.
Petrojam is owned 51 per cent by the Government of Jamaica and 49 per cent by Petroleos de Venezuela SA.
PSOJ noted that the last available financials for Petrojam Limited were for financial year ended March 2012, which would mean that their disclosures are two years behind and affects the public's ability to examine the company "transparently".
The PSOJ, apparently, fears that access to information on Petrojam would be even more limited were the state refinery to be taken over by a non-Jamaican entity.
Quoting Wednesday Business' story that the refinery "supplies 80 per cent of the local non-bauxite market and 70 per cent of the national market", the PSOJ said that, already, the market controlled by Petrojam "has the feature of a monopoly in that it sets the prices of fuel each week, which the market follows."
In that regard, it urged further consultation on the pending sale and also indicated that it wants assurances from Minister Paulwell that "transparency will be applied to any divestment of Petrojam".
Paulwell said earlier this week that the sale of PDVSA's stake would provide resources for the expansion of the refinery. Documentations on the stalled expansion programme indicate that the project would have needed more than US$750 million of capital.