Fri | Nov 27, 2020

$65M REVIEW - Gov’t shells out millions to examine Petrojam operations

Published:Wednesday | July 3, 2019 | 12:32 AMPaul Clarke/Gleaner Writer
The Petrojam oil refinery in Kingston.
The Petrojam oil refinery in Kingston.

Approximately $65 million was paid to consultants to carry out the strategic review into the operations of the state-owned oil refinery Petrojam, Energy Minister Fayval Williams has revealed.

The disclosure came during yesterday’s sitting of the House of Representative as she responded to a question posed by Phillip Paulwell, the opposition spokesperson on energy, who asked whether the Government had followed established procurement rules when it acquired the services of the United Kingdom-based Gaffney, Cline and Associates (GCA).

GCA was used to take on the review instead of continuing with Muse Stancil, which had done previous work for the Government. The consultancy firm conducted the review over a three-month period from January 22 to April 22, 2019.

Paulwell said that he was not aware of the change of consultancy until the report came out last week.

While not addressing the procurement question, Williams told the Parliament that the respective consultants had different terms of reference.

“I think their focus is different from Muse Stancil, which was really a valuation focus … . Looking at the operations, if we’re going forward with it, what would be the value?”

She said that the new focus was to look at the operations at Petrojam, laying out all options that are available to the Government so that when Cabinet reads the report, it would know that if it goes down Road A, here are the implications for taking that road versus Road B, versus Road C, versus Road D,” said Williams.

The energy minister said that GCA was engaged to put things into perspective, given its track record as an industry expert.

The report from the consultations was used to inform the recommendations made by Petrojam’s Strategic Review Committee in relation to the future of the country’s only refinery.

The committee recommended that the Government divest Petrojam or shut down the refinery if it fails to identify a suitable lessee.

The terms of reference for the consultants include examining and analysing the current plans for upgrade of the refinery and assess them in relation to possible alternatives and against realistic options in respect of the future strategic path for the petroleum sector; assess the prudence and usefulness of the current governance structure and corporate position.

The terms also include the forecasting of the impact of oil prices, declining demand for petroleum products; deconstructing the existing pricing approach and methodology used by Petrojam to sell its products and evaluating its usefulness and impact on the market that it serves and to identify and discuss any and all factors encountered in the course of this exercise that are believed to be critical to the proper functioning and growth of Petrojam.

paul.clarke@gleanerjm.com