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Petrojam penning paper to show need for CET protection

Published:Friday | April 10, 2015 | 12:00 AM

The Financial Gleaner understands that technocrats within oil refinery Petrojam Limited are now preparing a paper to demonstrate the economic impact on its operations were Jamaica to succeed in the removal of the Common External Tariff (CET) on petroleum products.

The refinery began the analysis following public utterances by the Ministry of Science, Technology, Energy and Mining that appeared supportive of arguments for removing the tariff on petroleum imports.

"The removal of the CET will affect Petrojam. They are doing a paper now that will show how this will impact them," our source said.

The energy ministry has signalled that it is inclining towards the view that the removal of the CET on petroleum imports from non-Caricom sources may be one way of cutting energy costs for Jamaican consumers.

That view aligns with the top advocacy group for corporate Jamaica, whose president William Mahfood has said the CET essentially creates an excuse for Trinidad to sell energy products to its Caricom neighbours at higher prices, and that the pricing policy is, in effect, a subsidy to Jamaica's energy-producing trading partner.

However, those arguing against the removal of the CET say should the tariff be lifted before Petrojam executes its expansion project, the refinery might go under.

Petrojam hopes to grow refining capacity from 35,000 barrels per day to 50,000 bpd, and to retool the plant to handle heaver but cheaper crudes. At least two Chinese investors are reportedly lined up to bid for the project.

Petrojam operates the only petroleum refinery in Jamaica, processing crude into various finished products, including liquefied petroleum gas or LPG, automotive diesel oil, turbo fuel, heavy fuel oil, asphalt and unleaded gasolene. It receives supplies of crude primarily from Venezuela but it also buys from Mexico and Ecuador, while finished products are imported mainly from Trinidad and Tobago. There are two additional profit centres, shipping and bunkering, which are complementary to the refining operation.