Left: Chavez Right: Minister Phillip Paulwell (right) on a 2004 tour of the Petrojam refinery on Marcus Garvey Drive with Petrojam managing director Winston Watson (left) and senior manager F.R. Marshall. - File
A senior official for Venezuela's national oil company Petrleos de Venezuela S A (PDVSA), Amilkar Maca, is expected in Jamaica today to finalise agreement on the valuation of the government's 35,000 barrels a day Petrojam oil refinery, ahead of PDVSA taking a 49 per cent stake in the company and its modernisation and expansion to a 50,000 bpd facility.
Phillip Paulwell, the energy minister, yesterday confirmed Maca's visit and the fact that the initial agreement between Jamaica and Venezuela has been altered, to give PDVSA a 49 per cent stake in Petrojam, rather than the 50 per cent outlined in a ministry paper he tabled in Parliament in June.
"We have renegotiated to make sure that we retain a majority position," Paulwell told Wednesday Business. "We figured that the Government should maintain a majority position."
Provide cash upfront
The modernisation and expansion of Petrojam is one of the projects under Venezuela's President Hugo Chavez's PetroCaribe energy initiative, under which the Venezuelans provide up to 40 per cent of the value of the oil it sells to Jamaica on credit, which can be converted to long-term loans at one per cent.
The initial expansion of the Petrojam is projected to cost upwards of US$200 million, which is to be financed by the partners to the proportion of their stake in the company.
But, with the Venezuelans expected to pay up-front for the 49 per cent acquisition of Petrojam, the deal is apparently being structured in a way to provide economically-strapped Jamaica with a cushion in finding cash to meet its portion of the investment.
"We are going to get raw cash," Paulwell said.
It could not be immediately ascertained what value the govern-ment has placed on Petrojam, a subsidiary of the Petroleum Corporation of Jamaica (PCJ), but it is among the more profitable of the state enterprises.
It projects pre-tax profit this fiscal year at around $700 million, on sales of approximately $6.7 billion. While turn-over will be up nearly seven per cent, profit will fall nearly a fifth because of a big rise in capital spending.
After the upgrade, for which front-end engineering is now being done, the plant, which currently supplies 86 per cent of Jamaica's petroleum demand, including the bauxite and alumina sector, will see a 43 per cent increase in throughput.
The current demand for oil, not including consumption in the bauxite and alumina industry, is approximately 14.2 million barrels a year, which is 13 per cent higher than in 2001. This means that should the demand for oil and petroleum products continue to grow at the same pace up to 2009, Petrojam will have the capacity to handle all the non-bauxite demand, except for gasolene.
Gasolene production is to be expanded to 7,500 barrels a day, as part of the plan. Total gasolene used in 2005 was roughly 4.6 million barrels, about 10 per cent higher than in 2001.
If consumption grows at the same pace over the next four years then Petrojam will be able to locally manufacture and supply 54 per cent of total gasolene consumed locally by mid-2009.
On the project so far, the Jamaican government employed Canadian engineering firm, SNC Lavalin, in February of this year to conduct the front-end engineering design. Their study is expected to be completed in February of 2007, by which time the costs will be absorbed into the new joint venture operation, most of which Maca, PVDA's point man on the Jamaican project, is expected to conclude.
Sign-off on project
"He is expected to sign-off on everything ahead of the formal signing of the joint venture plan," said a Wednesday Business source.
That agreement is expected to be signed by Chavez and Prime Minister Portia Simpson Miller, during a visit by the Venezuelan president to Jamaica shortly. Chavez will, at the same time, also officially sign-off a US$260 million loan to Jamaica to finance highway development and the provision of fuel to Air Jamaica under the PetroCaribe arrangement.
Paulwell noted earlier this year that, the initial expansion of Petrojam apart, more work is projected for the refinery under the PetroCaribe initiative, at a cost ranging from US$250 million to US$350 million. However, it was not immediately clear precisely what is contemplated at the exact stage of negotiations for this.
