Wed | Mar 20, 2019

Petrojam prepares for higher bunkering demand

Published:Wednesday | April 9, 2014 | 12:00 AM
Kingston Petrojam oil refinery, Marcus Garvey Drive, Kingston.

Correction & Clarification

In the story titled ‘Petrojam prepares for higher bunkering demand’, it was reported that: Petrojam’s total sales are projected to fall to US$1.83 billion, from an estimated US$1.88 million – the second figure should have read US$1.88 billion. Also, the sentence that reads: The refinery is expected to make a small profit of US$0.96 million (J$105 billion) – should have read J$105 million.

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Avia Collinder, Business Reporter

Revenue from bunkering has flattened over the last two years and the projection for the current year is zero growth, but Petrojam said this week that it is looking farther ahead to improved in sales with the opening of the Panama Canal and other developments in the shipping industry.

Winston Watson, general manager of Petrojam Limited, said the oil-refining company is making improvements to capacity to handle the new demand that will emerge with widening of the Central American shipping corridor.

Bunkering refers to the process of supplying fuels to ships for their own use. It includes sales for the fuelling of commercial or private boats, such as pleasure crafts and oceangoing vessels.

The products sold by Petrojam Limited as bunker fuels are Marine Gas Oil (MGO) and Intermediate Fuel Oil (IFO) of various grades: IFO 30 to IFO 380.

Referencing current processing volumes, the company said that Under the Petrocaribe Agreement, it lifted some 7.905 million barrels of crude from Venezuela in 2013.

Past industry data suggest that about half of the oil consumed by Jamaica goes into the production of Bunker C fuel used to power ships, while the second largest volume is used to manufacture gasolene.

Petrojam touts itself as beneficiary of the strategic location of Jamaica with respect to international shipping lanes, the Panama Canal, the US Gulf Coast, the US East Coast, as well as its position as a major tourist destination in the Caribbean.

Watson said the refinery is now "increasing tank storage capacity for automotive diesel and heavy fuel oil for that eventuality," referencing the expected movement of vessels and the need for fuel to power cargo ships, resulting from the widening of the Panama Canal.

IMPROVED PROFITS

The additional sales should result in improved profits for the oil company, he adds.

He did not state the specifics of the expansion.

Petrojam's total sales are projected to fall to US$1.83 billion by year end March 2015, from an estimated US$1.88 billion at year end March 2014, according to figures newly released by the Ministry of Finance regarding the performance of public bodies.

At current exchange rates, Petrojam's sales are tracking above J$200 billion, some J$196 billion of which flowed back out in taxes and production costs, the ministry data indicate.

The refinery is expected to make a small profit of US$0.96 million (J$105 million), and net 10 times that amount in 2014-15 notwithstanding the projected fall in sales.

Petrojam has a bunkering deal with Aegean Marine Petroleum, in which IFO 380-type fuel and MGO are supplied to Aegean's vessels, enabling the offshore bunkering of vessels passing the Port of Kingston.

The agreement signed back in 2005 precludes the sale of bunker fuel by Petrojam within the Kingston Harbour.

Other players have since entered the market and are being supplied by Petrojam, the company notes.

Petrojam has declined to state the value of bunkering sales.

"We will not be able to provide the exact dollar figure as this is of commercial value and can prejudice our interests," said Watson.

"Projection for 2014-15 is flat. This is based on projected volumes and price forecast," he added.

Petrojam says on its website that bunkering charges are based on competitive pricing. The company's shipping department is responsible for the logistics of bunkering.

The refinery, which itself no longer owns any vessels, has been prospecting for a new partner for ship-handling services.

avia.collinder@gleanerjm.com