The Petrojam Refinery on Marcus Garvey Drive in St. Andrew. - Rudolph Brown/Chief Photographer
Venezuela's state-owned oil company, Petroleos de Venezuela SA (PDVSA) will pay just under US$64 million for its proposed 49 per cent stake in the Petrojam oil refinery and seems set to lend Jamaica a major portion of its share of a near US$300 million modernisation of the facility, officials here confirmed yesterday.
"Petrojam has been valued at US$130 million, so they are going to be paying us sixty-odd million cash for the stake," said the energy minister Phillip Paulwell.
Broad agreement
The broad agreement for PDVSA's acquisition of a portion of Petrojam, which is owned by the Jamaican Government, and its expansion from 35,000 bpd to 50,000 bpd, was signed on Monday in Montego Bay by Venezuela's President Hugo Chavez and the Jamaican Prime Minister Portia Simpson Miller as part of Chevez's PetroCaribe initiative under which Caracas sells oil to Caribbean countries on concessionary terms.
The leaders also signed a series of agreements for Caracas to lend Kingston US$273 million, of which 95 per cent (US$260 million) will go to the re-financing of high-cost Highway 2000, enhancing the viability of a proposed 80 kilometre leg of the motorway, from Bush Park, St. Catherine, on the south coast, to Ocho Rios, a resort town on Jamaica's north shore.
Highway 2000 is an ambitious plan for a more than 200 kilometre of tolled motorway, mainly on the island's south coast and south-central region, linking the capital Kingston, in the south, to the second largest city, Montego Bay, in the north-west. It is being developed by the French company Bouygues Travaux, which has a 30-year build, own, operate transfer (BOOT) concession on the project.
Already more than 30 kilometres of the highway - including a six-lane causeway over Kingston Harbour linking the capital and the community of Portmore to its west - have been completed between the capital and Sandy Bay, Clarendon.
The next phase
Under the initial plans, the next phase is for another 40 kilometres of road between Sandy Bay and Mandeville in Jamaica's south-central plateau region. But the authorities now want to push ahead with the spur to Ocho Rios, cutting out the existing route between the north and south coasts, a treacherous drive over narrow, winding mountain roads.
The money from Caracas, at the low single digit rates, will enable the Government to on-lend cash to the developers, allowing them to retire some of their high-cost commercial loans.
"They will be able to write-down the higher cost debts, which are in the double digit, the rates at which Jamaica can borrow," said a senior Government official. "There will also be some cheaper seed money for the Ocho Rios leg, which will make it more viable."
Highway 2000 loan
But Paulwell stressed that Highway 2000 loan was not specifically part of the PetroCaribe arrangement, under which Venezuela not only provides substantial credit on its oil sales, but promotes partnership deals between PDVSA and Caribbean state oil companies for the refining, transportation and distribution of petroleum. Jamaica, under PetroCaribe, is allowed to purchase up to 23,500 bpd of oil, 40 per cent of whose cost is turned into 20-year credit at one per cent.
The PetroCaribe arrangement is allowing Kingston to modernise the near 40-year-old Petrojam refinery, with the Venezuelans providing the financial cushion for the undertaking.
With a 51 per cent equity in what will become a Jamaica/ Venezuela owned facility, Kingston would be expected to find approximately US$148 million as its share of the projected refurbishing cost of US$290 million. This would be difficult given Jamaica's heavy debt burden and burdensome fiscal deficit.
Negotiating
But, according to Paulwell, Jamaica plans to plough back into the venture the cash it will receive from PDVSA's 49 per cent acquisition and was also negotiating loans from the Venezuelan state company for its additional investment.
"The cash from the sale of the 49 per cent, we'll use that," he said. "The balance we expect to negotiate PDVSA. Based on our negotiations we are confident that they will come through."
The structure of the loan, he insisted, would not impact Jamaica's debt profile. "We are not going to have to get a government guarantee. The project will stand on its own."
