Thu | Dec 8, 2016

Trafigura ghost scares PNP

Published:Sunday | November 23, 2014 | 12:00 AM
Cargill
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Government prepared to lose US$140 million rather than partner with firm involved in 2006 donation scandal

Arthur Hall, Senior News Editor

Obviously frightened by the ghost of the 2006 Trafigura controversy, the governing People's National Party (PNP) has decided to back off from a possible deal which could result in the state entity Petrojam losing some US$140 million in revenue each year.

Chairman of the board of the Petroleum Corporation of Jamaica (PCJ), Christopher Cargill, late last week confirmed that the political directorate has instructed him to drop any consideration of partnering with the Dutch firm Trafigura Beheer, which is the world's third-largest private oil and metals trader.

Trafigura, which lifted oil from Nigeria for Jamaica, had sparked a firestorm locally after it allegedly made a financial donation to the PNP.

Cargill's confirmation came after petroleum industry sources started to circulate information that a Trafigura subsidiary, PUMA, would be fronting a deal involving Petrojam.

When contacted by our news team, Cargill said Trafigura was one of four international firms which Petrojam was having discussions with as possible partners to bid for the contract to supply liquid petroleum gas (LPG) to the Jamaica Public Service (JPS) plant in Bogue, St James.

REGION'S BIGGEST PLAYER

However, as news of the proposals spread in the industry, the PCJ was instructed to walk away from any possible partnership with Trafigura, which is the biggest player in the region.

An obviously disappointed Cargill defended his decision to include Trafigura among the potential Petrojam partners, even as he indicated that he would not buck the instructions.

"My duty is to the people of Jamaica who are the ultimate shareholders, and I could not let special interests stop me from doing my job and allow the Petrojam to lose US$140 million each year," declared Cargill.

Petrojam's loss would stem from the fact that it now sells heavy fuel oil to the JPS, which would no longer be needed for the Bogue plant with the switch to LPG.

Trafigura controls 90 per cent of the LPG out of Trinidad, 100 per cent out of Chile and Peru, plus it has its own terminal.

The company moves one and a half million tons of LPG in the region each month while Carib LPG, which now supplies the product to Petrojam, moves an estimated 4,000 tons.

The JPS will require an estimated 20,000 tons of LPG each month and is expected to save more than US$30 million each year after it switches from heavy oil, and industry insiders argue that Trafigura could possibly be the lowest priced and most reliable supplier to the light and power company.

"I understand the political issues but Trafigura controls the majority of the LPG in the region, and using any other company could mean higher prices," argued one energy expert who asked not to be named.

"The JPS will go with one of the suppliers, and even though Petrojam has the advantage with its infrastructure and right of way, without Trafigura as its partner it might not offer the JPS a package that is attractive enough," added the expert.

Trafigura hit the front page in 2006 when the then Opposition Jamaica Labour Party revealed that the firm, which traded oil for Jamaica on the international market, had donated $31 million to an account operated by Colin Campbell, who at the time was the general secretary of the PNP.

The money was transferred to the account just prior to the PNP's annual conference that year.

The Dutch firm said the money was part of a commercial agreement, while the PNP maintained that it was a donation to the party.

Campbell resigned in the wake of the controversy while investigators in the Netherlands have tried, without success, to get senior officials of the PNP to testify about the matter in open court locally.