Mon | Sep 25, 2017

Howard Hamilton | Petroleum industry in chaos

Published:Sunday | November 27, 2016 | 11:00 AM

The recent explosion at an illegal gas-filling plant on Jacques Avenue in the Mountain View area has once again highlighted the unregulated nature of the petroleum industry.

The illegal gas trade has been an ongoing problem for quite a number of years. A recent article by Ryon Jones in The Sunday Gleaner of November 6, 2016, was most revealing. He reported that there are more than 100 illegal gas-distribution points in Kingston and St Andrew alone. The police need to be more vigilant in identifying these illegal operations, take the appropriate action to close them down, and arrest the perpetrators.

The minister of science, energy and technology, Dr Andrew Wheatley, is conscious of these operations and has stated: "The new regulations coming will make it more difficult for persons who operate illegally ... . The existing legislation needs strengthening, and new legislation needs to be put in place to protect the chain of petroleum products."

 

Gas trade

 

He also said that a special inspectorate would be established and have investigative powers to eradicate the illegal gas trade.

The 'liberalisation' of the petroleum market has come without the proper inspectorate and enforced regulations. A total revision of this aspect of the industry is needed urgently. When the market was controlled by the multinationals - Shell, Esso and Texaco, there was an imperative that international standards be maintained. We were subjected to regular safety and environmental audits, and quarterly reports were mandatory. Now, every Tom, Dick, and Harry can get a licence to market and import petroleum products.

It was the practice then that only companies with the infrastructure to store, handle, and distribute petroleum products were allowed to import. That is not the situation today, where importers are marketing products to facilities that are owned by others. This has placed a serious problem on investment decisions of some marketing companies. Regulations that are enforced should be in place to cancel the licence, not only from those who purchase, but also those who poach on others' storage and distribution equipment and facilities.

It is still beyond my comprehension why the Government is allowing importation by entities other than those with the facilities to store and distribute products. This puts the government-owned oil refinery in a most invidious position, especially when it faces a shrinking market with one of their major customers for fuel oil (the major product produced by the refinery's hydro-skimming operation) now converted to liquefied gas. What are they going to do with the fuel oil that should be finding a market in the expanding bunkering trade now controlled by independent importers? Is this the case of the right hand not knowing what the left hand is doing?

On the subject of importation, my time at Shell is still remembered by the unsavoury Shell waiver scandal, which was a creation of the media. There was no attempt at proper investigative reporting, which would have revealed that all importers of petroleum products, including the government-owned refinery, were subject to a tax.

The importers sought, and received, a waiver of these taxes each time they imported. In fact, this was a laborious, time-consuming process achieving nothing. The World Bank and the International Monetary Fund insisted that the tax be removed. This was eventually done after the fiasco of the Shell waiver scandal.

 

Unpleasant period

 

You will recall that both the minister of finance and the minister of energy resigned in disgust at what was being portrayed politically. In the case of the minister of finance, who was then deputy leader of the party, this was a particularly unpleasant period since investigation would have revealed that his resignation had nothing to do with the importation by Shell.

Powerful influences convinced the ailing and soon-to-retire leader of the People's National Party and prime minister, Michael Manley, that this was an excellent opportunity to get rid of his deputy since "he could not allow the legacy of his father, Norman Manley, to pass to Patterson and his black mafia". This was an absolutely disgusting, distasteful, and prejudicial act.

I remember some months after, confronting Michael Manley at a dinner and asking him why he had done what he did. His reply, even more distasteful, was: "Politics, my son. One day you will understand politics."

May I recommend our journalists to see the movie Spotlight. then they will understand the power of proper investigative journalism.

Given the importance of the petroleum industry to the economy, and the various challenges being faced by liberalisation, there must be a structured approach that will ensure professional conduct of all stakeholders.

The development and enforcement of national petroleum safety standards are an imperative. The Government has to promote and enforce full registration of all industry participants.

Professional audits must be introduced to make sure that each importer and marketer fulfils the terms and conditions of his licence, certification, and/or registration commensurate with ideals of fairness and transparency.

The Government must insist on the Development of initiatives that ensure the evolution of an industry that is more efficient, effective, and economically viable, in keeping with the national development goals.

 - Howard L. Hamilton is the former head of the Shell Company (WI) Ltd. and is currently the executive chairman of Petcom. Email feedback to columns@gleanerjm.com.