Petroleum Corporation of Jamaica hunts new revenue sources
Petroleum Corporation of Jamaica (PCJ) says it hopes to become less dependent on inflows from the petroleum levy, in the wake of its conversion to a tax this fiscal year.
Revenue from this source is expected to be slashed in half as a result.
Previously, a one per cent cess was payable to PCJ by oil refinery Petrojam. That has been replaced by a $2/litre special consumption tax on petroleum products, with a portion of
the proceeds to flow to the Consolidated Fund.
PCJ said in a statement in response to queries from Wednesday Business that the expected reduction in revenue from the $2 SCT will not unduly affect operations, as it has well advanced plans for additional revenue generation.
The PCJ collected approximately US$16.4 million (about J$1.7 billion) from the one per cent cess for fiscal 2013-14, which was used to defray administrative expenses, including some related to the PetroCaribe Fund, while the
latest Jamaica Public Bodies report indicate a estimated
$1.5 billion of inflows for fiscal 2014-15.
The replacement tax is expected to generate income of more than $900 million, PCJ told Wednesday Business. The Public Bodies report appears to suggest that the funds will flow to PCJ in the form of a grant - projected at $912m for this fiscal year - whereas the cess was previously classified as revenue.
Its new sources of revenue will include fees from energy services to public-sector bodies, including schools. The agency also intends to reduce its many charitable projects, as a means of cutting expenses while offering its expertise to public bodies to retrofit their operations for energy efficiency at prices below the general market.
Over the longer term, the corporation is also engaged in several hydroelectric projects from which it hopes to earn income in time.
In the projections in this year's Public Bodies report, PCJ's overall revenue is estimated to fall from $2 billion to $570 million, while its net surplus is expected to be cut in half from $1.3 billion to $662 million.
The new $2 SCT will not apply to crude oil, jet fuel, Bunker C fuel and fuel used by Jamaica Public Service Company, independent power providers and the bauxite sector.
Tax specialist Brian Denning warned at a forum in late March that the energy body would see funds redirected from its coffers to the Consolidated Fund.
prepared for fallout
The PCJ, when asked to comment, indicated that it was prepared for any fallout, saying its "budgets and business plans were predicated on these changes and as a result, we are placing greater emphasis on increasing revenue from other sources".
The PCJ group includes subsidiaries Petrojam Limited, Petrojam Ethanol Limited, Petroleum Company of Jamaica Limited, Jamaica Aircraft Refuelling Services, and Wigton Windfarm Limited.
Its assets include a 1054.5 hectare property at Font Hill in St Elizabeth on which it has pursued a biodiesel experiment.
"We will be seeking to increase income from our assets especially property, and we will also be working more closely with our subsidiaries in an enhanced group structure to streamline our operations
for greater efficiency and improved cost management," the energy agency said, adding that it would now focus on providing energy solutions "with a heightened emphasis on revenue generation as opposed to benevolence".
"The above notwithstanding, the PCJ also remains focused on our larger mandate which is the development of Jamaica's energy resources. To this end we will continue the implementation of projects such as the 24MW expansion of our subsidiary Wigton Windfarm and the management of our production sharing agreement with Tullow Oil for oil and gas exploration in Jamaica's offshore areas," it stated.
PCJ adds that it will also continue to form partnerships for oil exploration in open blocks, and aims to attract investment to develop more than 26MW of hydro capacity.