Venezuela tightens oil supplies to Jamaica

Daraine Luton, Senior Staff Reporter

IT APPEARS that all may not be well at the state-owned oil refinery.

A notation in the revised public bodies budget recently presented to Parliament indicates that Petrojam has been hit with a major problem.

"During the first quarter of 2011-12, Petrojam experienced changes that impacted its operations. As of May, PDVSA (Venezuela) began a strict enforcement of the quota system whereby only two shipments of crude were allowed under the PetroCaribe agreement," the notation said.

The revelation is in stark contrast with an earlier position advanced by Petrojam's managing director, Winston Watson.

Asked last month by The Gleaner if Jamaica was receiving more than its quota from Venezuela, Watson said: "Jamaica currently receives its quota under the PetroCaribe agreement. In 2009, we received slightly more than the quota."

And asked if there had been any recent change to that and what caused the change, Watson said: "There hasn't been any recent change in the quota.

"Petrojam is able to access its quota of 23,500 barrels of oil per day. There has been no change in this provision. However, Venezuela is only one of our suppliers and we do buy from other parties," Watson responded when asked if there was any reduction in the volume of oil being lifted from Venezuela and how it had impacted Petrojam's financials.

Petrojam had projected to end the fiscal year with a balance of $1.98 billion, but this figure has been revised to $534 million.

During last week's sitting of the Public Administration and Appropriations Committee of Parliament, Watson said Jamaica was no longer getting three shipments per week from Venezuela under the PetroCaribe agreement.

He said the country has had to be purchasing the other shipment which is required for Jamaica's energy needs.

A well-placed government source said Petrojam has been forced to buy the excess oil on the spot market, putting pressure on the company's cash flow.

Under the PetroCaribe arrangement, Jamaica pays Venezuela only 60 per cent of the cost of the oil it receives. The remainder is set aside as a loan, which is payable over 20 years at an interest rate of one per cent.

Worrying development

Phillip Paulwell, the opposition spokesman on energy, told The Gleaner that the development at Petrojam is worrying.

"I believe that this new requirement for them to purchase the product outside of Venezuela will result in significantly lower profits from the refinery, as the crude purchased will cost significantly more and there is no saving," Paulwell said.

Prime Minister Bruce Golding said in 2009 that a shift in the PetroCaribe agreement could significantly impact the country's fiscal accounts.

"We had already indicated to the Venezuelan government that, while we understand the difficulties that may trigger a change in the PetroCaribe agreement, we have stressed to them the fact that not only our current Budget but our medium-term economic programme was predicated on the PetroCaribe agreement as it now exists, and, therefore, any sudden change in that arrangement would have a significant effect on our external as well as our fiscal accounts," Golding said.

daraine.luton@gleanerjm.com