Fri | Jan 18, 2019

Mark Ricketts | Blowing a fortune on Petrojam

Published:Sunday | December 16, 2018 | 12:00 AM

Whenever sloppiness and indiscipline occur, things careen so fast that they can slip over the edge if one is not careful. Evidence of this was on display following the recent report by the auditor general of corruption and waste at the state-owned oil refinery, Petrojam.

That was followed by the fiasco in the House of Representatives last week where disorder and confusion and vulgar attacks by members of parliament at each other stood in stark contrast to the innocence of students seated in the visitors' gallery.

Many observers and people airing their views on talk radio decried what took place at Petrojam and in Parliament. In a way, it shouldn't really have come as a surprise because power corrupts, and absolute power reveals the inevitable negative outcomes when your politics is rooted in tribalism, your green-and-orange-wearing MPs are weaned on the politics of patronage; your parties function as cults frequently draped in party colours; and so many statutory bodies function as slush funds, disorderly constructs of ministerial power, and reward-granting agencies for those who are loyal.

No wonder in post-independence, when we should be establishing a new domestic order and vision, we have essentially lurched from one corruption scandal to another. Each time we embed new rules in a political system fraught with inherent weaknesses, which we refuse to discard, yet we hope for better.

What we get, however, is a new bout of corruption, waste, and inefficiency, as if no one is minding the store. We also get another coarse and objectionable display of tribal politics in Parliament. It is like pouring new wine into old bottles.

On this occasion, in reference to the last 10 days, we have descended to new lows - but it seems that on every occasion, we find ways to descend to a new low. As people get upset and are agitated about the level of mismanagement, we proclaim that this should be a watershed moment for transparency. The Gleaner editorial of Tuesday, December 11, 2018, pleaded that we should draw a line in the sand at Petrojam.

But how are we going to do better when we lack a political culture strong on management and good governance? We do not have an administrative structure laser-focused on competence, expertise, data, and technology. We do not have a political system undergirded by transparency, accountability, and responsibility; and those entrusted with authority seem to ignore the duty of care and fiduciary responsibilities to the public at large. Somehow, our sugar-coated promise of a cleaner and brighter tomorrow is shredded by carelessness in performance.

 

BEACON ON THE HILL

 

Look at Petrojam, for instance, it could have been our beacon on the hill. How could it stoop so low as to wallow in its own cesspool of corruption? Petrojam, a large corporation that up to 2016 - the latest figures we have access to - recorded turnover of nearly US$1 billion and profits of US$35 million. Petrojam's parent company, Petroleum Corporation of Jamaica (PCJ), is a large conglomerate that owns Wigton Windfarm, Petrojam Ethanol Ltd, and Jamaica Aircraft Refuelling Services.

Such a formidable enterprise would imply that most Jamaicans would feel assured leaving it up to their Government to do the right thing in terms of management, leadership, and oversight. Surely, Government would not mess things up here.

When multinational oil giant Esso, which owned the operations, bluffed by offering it for sale if certain concessions weren't given, Edward Seaga called their bluff and purchased it.

With local ownership of a capital-heavy monopoly enterprise in the all-important energy sector, with its massive flow-through impact affecting all areas of the Jamaican economy, this would redound to the good of Jamaica in terms of asset quality, earnings, and employment growth; use of technology to gain efficiencies; expanded investment options through islandwide networking of gas stations, mergers, and acquisitions in allied areas of the energy sector; retrofitting of the physical plant; and research and development driving an evolution of higher-valued products.

 

HORROR COME TO LIGHT

 

But what started out with a bang has now, in the words of T.S. Elliot, ended with a whimper, with Petrojam literally limping to the finish line. While there was always underhand chatter about the novel ways in which the surrounding communities and creative minds inside and outside of Petrojam siphoned off the refinery's product offerings, the horror show really came to light during the summer.

A parliamentary committee unearthed reckless spending, nepotism, cronyism, and corruption of gargantuan proportions. Then came the auditor general's report, and Jamaica was stunned, especially as Prime Minister Holness came into office in 2016, pledging a new order of transparency and public accountability.

Things went downhill from there when the prime minister, in his address to Parliament on Monday, literally told Jamaicans that their oil refinery was worth nothing. He didn't use those words, but see if you agree with me.

He said:

1) Failure over several years to upgrade the refinery may spell its doom, and result in increased losses.

2) The refinery, which celebrated its 36th year of operations in 2018, is an old plant in need of retooling to remain viable.

3) The linings of the largest tank have deteriorated over time, and the tank had a significant leak. The price tag for repair has been put at US$10 million.

4) In 2006, to get an immediate injection of cash and find a partner who could assist in a much-needed upgrade, Government sold 49 per cent of its ownership to Petroleos de Venezuela, SA (PDVSA). However, renewal of the refinery has been delayed for 12 years, and if this continues, the refinery could end up being obsolete. In fact, it is near obsolescence now.

5) Oil losses will not only continue, but they are likely to increase.

6) Three years ago, Phase 1 of the upgrade would have cost US$1 billion.

7) The purchase of equipment to offer natural gas to its largest user is on hold.

This is the company that throws binge parties, makes large contributions to political parties, doubles staff employment, and parachutes in unqualified, politically connected personnel. I suppose Petrojam's motto is, 'if you are going down, take as many taxpayers with you as possible'.

Petrojam, which could have been the best of Jamaica, is yet another story with a sad ending.

The unfortunate thing is that Parliament, in trying to address Petrojam's misdeeds, was itself caught up in its own fiasco. Tempers flared over whether a committee meeting was convened in accordance with the Standing Order of Parliament.

The drumbeat goes on over failure and losses here.

- Mark Ricketts is an economist, author, and lecturer. Email feedback to columns@gleanerjm.com and rckttsmrk@yahoo.com.