Tue | Dec 10, 2019

Petrojam payout for escrow account

Published:Wednesday | February 13, 2019 | 12:27 AM
Minister of Foreign Affairs and Foreign Trade Kamina Johnson Smith (right) speaks with Paul Scott, chairman of the Development Bank of Jamaica, and Fayval Williams, minister without portfolio in the Ministry of Finance and the Public Service, at a press conference at the Office of the Prime Minister yesterday.

The Holness administration has signalled that it will press ahead with its compulsory acquisition of Venezuela’s stake in Petrojam, committing to put the funds in an escrow account in a bid to escape United States sanctions.

Jamaica’s buy-back, which will be based on a valuation conducted by an international consultant last March, would be in danger of censure from the Trump administration, which in January imposed sanctions against oil transactions with the embattled Maduro regime.

If Jamaican lawmakers vote to approve the proposed legislation that would give effect to the takeover, ownership of Venezuela’s 49 per cent stake in Petrojam would immediately be vested in Jamaica’s Accountant General “free of all encumbrances” and held in trust for the Government.

The Compulsory Acquisition (Shares in Petrojam) Act 2019, which was tabled in the House of Representatives yesterday, sets out Jamaica’s plan to retake the stake held in Petrojam by PDV Caribe, a subsidiary of the Venezuelan state-owned firm Petroleos de Venezuela (PDVSA). The Jamaican Government owns the remaining 51 per cent.


The parliamentary Opposition, however, mocked the move by the Jamaican Government to table the proposed legislation a day before the Parliament was set to be prorogued.

“It is a mystery. At a minimum, it would have made sense to wait until Thursday,” said Opposition Leader Dr Peter Phillips, making reference to tomorrow’s ceremonial opening of Parliament.

The bill indicated that in assessing compensation for the shares, account should be taken of the fair market value of Petrojam as determined by the valuation that was conducted by Muse, Stancil and Company. No figures were provided.

Prime Minister Andrew Holness has cast the failure of the Venezuelan government to upgrade Petrojam’s ageing and increasingly obsolete infrastructure as an existential threat to the country’s energy security, arguing that the refinery would be at risk of breaching international agreements as well as losing its main client, electricity provider, the Jamaica Public Service Company (JPS), which is in the mode of transitioning from heavy fuel oil to liquefied natural gas.

The proposed law allows persons who refuse the compensation offered by the Jamaican Government to seek legal redress for specific issues.

At a press conference held late Tuesday morning, Foreign Minister Kamina Johnson Smith sought to emphasise that a negotiated settlement was a better guarantee that Jamaica would be in a strong position to buy back the PDVSA stake.

“The work towards a negotiated settlement continues, but as I have said before, the reality is that if we do nothing, if we do not have access to the shares, if we do not reach an agreement, nothing changes for the Venezuelan people, while for the Jamaican people, our supply of electricity and energy would be at risk,” she told a press conference at Jamaica House.

“If Petrojam were unable to purchase oil to sell the relevant types of fuel to JPS, Jamalco and JUTC, the entire economy would topple. And we are not even speaking yet about the taxes they pay to the revenue and the direct and indirect employment.”

Johnson Smith skirted questions on whether the Government’s legislation would circumvent the Trump administration’s interpretation of a transactional arrangement as stepping over a red line laid down last month.

She said negotiations with the Venezuelans were “beyond fluid, beyond sensitive, beyond complex”, asserting that even if PDV Caribe were open to agreement, the ability to remit the funds was problematic and required “analysis”.