Fri | Jul 19, 2019

Petrojam needs an upgrade - PM says urgent action required, as oil refinery is in danger of becoming obsolete

Published:Tuesday | December 11, 2018 | 12:00 AMPaul Clarke/Gleaner Writer
Prime Minister Andrew Holness addressing yesterday’s quarterly press briefing at Jamaica House on the issues affecting the state-run oil refinery, Petrojam.

Prime Minister Andrew Holness said the Petrojam oil refinery is in danger of becoming obsolete.

The state-run entity was laid bare by a stinging auditor general's report last week.

Speaking at yesterday's quarterly press briefing at Jamaica House, Holness said that failure to rapidly address the issue of an upgrade at the refinery may spell its doom, and result in increasing oil losses.

The prime minister also said that he has ordered a forensic audit into the $5-billion unaccountable oil losses at Petrojam, where, according to Auditor General Pamela Monroe Ellis, some 600,684 barrels of oil valued at $5.2 billion over a five-year period (2013-2018) have not been accounted for.

"Some people have said it's stolen oil. It's missing oil," Holness said, adding that it could be wastage, pilferage or technical losses, and the audit should conclude the reason.

Pointing to the inefficiencies in Petrojam's operations, the prime minister said that the refinery, which celebrated its 36th year of operations in 2018, is an old plant in need of retooling to remain viable.

 

PLANT IS OLD

 

"Many of the equipment have reached their useful life, and in a meeting with the board, it disclosed that the largest tank had a significant leak, and that's just by virtue of the passage of time, and with the chemical reaction with the crude, the linings have deteriorated over time," Holness stated.

The price tag for repair has been put at US$10 million.

According to Holness, Petrojam has already started that process.

"Generally, the plant is old, so it's not operating at its true level of efficiency. Having said that, in 2006, the Government of Jamaica decided to divest 49 per cent of the ownership of Petrojam to Petroleos de Venezuela, SA (PDVSA), that is, the Venezuelan state-owned oil company," he said.

Part of the reason for the divestment, the prime minister said, was not only to get an immediate injection of cash flow at the refinery, but to acquire a partner who could assist in its upgrade.

"So the renewal of our refinery has been delayed for over a decade, and it's likely that if the current situation remains, the refinery could end up being obsolete. In fact, it is near obsolescence now," he said.

Holness told reporters that based on that assessment, it's likely that oil losses will continue to rise. Sanctions, which have been placed on Venezuela in the past three years, have also made doing business with the South American nation that more difficult.

"Back then, the upgrade would have cost somewhere in the region of US$1 billion. That would be phase one of the upgrade, and I don't want this statement being interpreted as me blaming the Venezuelan government, because both parties ought to be blamed in a sense," said Holness.

"At one point in time, we simply were not in a position to carry out a refinery upgrade. In 2009 to 2011, up to 2013 when we had that massive fiscal downturn, we would not have been able to come up with the funds to do that. But there is another element that we must consider. Since then, Venezuela has also had its own difficulties, which would have prevented them from fulfilling their end of the bargain."

paul.clarke@gleanerjm.com