Sun | Oct 2, 2022

$32b demand - Venezuelans seek hefty compensation for Petrojam takeover

Published:Tuesday | June 18, 2019 | 12:28 AMErica Virtue/Senior Gleaner Writer
The Petrojam oil refinery in Kingston.
The Petrojam oil refinery in Kingston.

Venezuelan oil subsidiary PDV Caribe is demanding that the Government of Jamaica (GOJ) pay a minimum of US$50 million (J$6.5 billion) in core share value as compensation for the forcible takeover of its 49 per cent stake in the local refinery, Petrojam.

But The Gleaner understands that the claim includes supplementary add-ons in relation to dividends and prospective value that could bring the total compensation package sought to US$250 million (J$32.5 billion).

The Jamaican Government’s initial offer of US$40 million was rejected by Venezuela and a later proposal of US$50 million also refused.

Yesterday, reliable Gleaner sources said that the GOJ has been sent communication this month on Venezuela’s behalf, through its legal team headed by Queen’s Counsel Michael Hylton.

Hylton could not be reached yesterday evening, but Gleaner sources confirmed the figure.

Jamaica’s Foreign Minister Kamina Johnson Smith also acknowledged that the Government has received communication from Venezuela. However, she said, no lawsuit has been filed.

Through the Compulsory Acquisition (Shares in Petrojam Limited) Act 2019, the Jamaican Government gave itself powers to acquire the 392,490,000 shares owned by Venezuela in Petrojam. After a valuation by Muse Stancil – the full-service, global energy consultancy firm specialising in the mid- and downstream sectors of the petroleum industry – Jamaica expropriated the shares.

Energy Minister Fayval Williams, who replaced Andrew Wheatley on February 14, said Petrojam’s market value was eroded by nearly US$100 million because of a decade of broken promises, delays and inaction by the Venezuelan government.

She told Parliament that Petrojam’s market value was listed at between US$126 million and US$128 million by Muse Stancil in 2006, when Jamaica signed a joint-venture agreement with Petróleos de Venezuela SA (PDVSA), Venezuela’s state-owned oil company and parent to PDV Caribe that was expected to finance a major upgrade of the 55-year-old refinery, among other things.

But Williams said that an evaluation carried out in 2018 by the same consultants listed Petrojam’s market value at US$34 million.

Muse Stancil, however, has remained silent, four months after The Gleaner first sought responses about the massive variance in the sale-as-is price and the investment value.

Sources have said that there is a non-disclosure agreement between the company and Jamaica.

At the time of the share swipe, Petrojam was jointly owned by the governments of Venezuela and Jamaica, with Jamaica’s shares – 51 per cent – held by the Petroleum Corporation of Jamaica.

Venezuela valued the refinery at just under US$90 million, which included the initial sum paid for shares at the time of the joint-venture agreement, plus unpaid dividends and retained earnings.

A&A Lime Hall Development Limited, a company incorporated in 2004 as a rental service in Montego Bay, St James, had also offered PDV Caribe SA US$100 million for its 49 per cent stake in Petrojam Limited.

PDV Caribe SA is the company tasked with organising and coordinating PetroCaribe’s hydrocarbon transportation network, including its vessels, storage facilities, and port terminals, as well as refining and distribution capacity.

PetroCaribe is an energy cooperation agreement signed by 14 Caribbean countries, including Jamaica, which was established to secure a direct oil supply among members on preferential terms. Created in 2005 by Venezuelan state-owned PDVSA, and acting as a subsidiary, PDV Caribe holds interests in several subsidiaries established in each of these countries.

PDV Caribe is headquartered in Caracas.