By Lavern Clarke, Staff ReporterJAMAICA'S OIL shipment remains frozen in Venezuela, as the oil strike there enters its third week, a situation that marks Petrojam's recent decision to diversify its supply base as a prudent move.
The island forward buys oil from Mexico and Venezuela, and is supplied with 350,000 barrels per month by each country according to Petrojam boss, Winston Watson.
Jamaica previously acquired all its crude under the August 1980 San Jose Accord with Venezuela and Mexico and the October 2000 Caracas Energy Accord signed with Venezuela but driven by the demands of the market, Petrojam this year began sourcing an additional shipment on the market every 6-8 weeks.
Under the oil facilities, the price per shipment is referenced to world prices, with payment made within 30 days of delivery. Petrojam also gets similar credit terms for its open market buys.
The refinery has just started doing business with Ecuador, said Watson, because its crude is good for extracting asphalt, a finished product now in demand locally for road programmes underway.
A 350,000-barrel shipment bought at spot - prices then were running at US$26-27 per barrel is expected here on December 23 or 24, to fill the gap that the undelivered Venezuelan supply has created. The island currently has sufficient crude to run the refinery to December 22.
The Petrojam boss said the decision to go open market was benchmarked on a need to diversify the refinery's supply base.
"You buy different crude depending on the type of product you want from the crude. Refineries tend to do that. If you want to sell a lot of diesel then you buy the crude that can give you the diesel," he told Wednesday Business.
Formerly, Venezuela accounted for 60 per cent of Jamaica's oil supply and Mexico 40 per cent. The new move could see the split at Venezuela 50 per cent, Mexico, 30-35 per cent and the other 15 per cent from Ecuador, the refinery boss said.
He noted that the refinery was still committed to sourcing oil from Venezuela and Mexico.
Under the San Jose Accord, the island pays for its oil up front under the credit terms outlined by Watson, but 20 per cent is returned here in the form of a loan at 6 per cent interest for development projects.
The Caracas Accord similarly redirects between 15-25 per cent of the oil payments to Jamaica, depending on the price paid for the oil within the US$15 to US$30 per barrel band within the agreement. The Caracas loan funds are repayable at 2 per cent interest.
According to Dr. Raymond Wright, head of the Petroleum Corporation of Jamaica which negotiates oil contracts, each agreement guarantee Jamaica 7.4 million barrels of oil per year.
The refinery processes approximately 29,000 barrels per day, but reduces the run to about 22-25,000 barrels in situations where supplies are interrupted.
Last fiscal year, Petrojam imported a total 7.677 million barrels of oil valued at $7.52 billion.
Meantime, Commerce Science and Technology Minister Phillip Paulwell yesterday issued a press release, again assuring them that supplies were sufficient to last over the holiday season.
The refinery said last week that if the situation in Venezuela is regularised and the shipment on order is delivered alongside the replacement supplies, the refinery had sufficient storage capacity to accommodate all the deliveries.
