Jamaica says buy-back of Petrojam shares not a Caricom issue

Jamaica says buy-back of Petrojam shares not a Caricom issue

Tuesday, January 15, 2019

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Minister of Foreign Affairs and Foreign Trade Senator Kamina Johnson Smith has dismissed Opposition criticisms that the Government has not involved the Caribbean Community (Caricom) in its negotiation of a buy-back of the 49 per cent shares in Petrojam from Venezuela.

“The issue is a bilateral issue, not a Caricom issue, and while we may not have used Caricom — and I would question whether that would be an effective method of making progress in a matter such as this — we certainly reached out to heads who are friends of the Venezuelan Government and accordingly, we think we made all the relevant approaches to diplomatic support and to friendly support that we could have made in the circumstances as they were undertaken. To correlate the two is entirely missing the point of how to progress what has been a sticky series of negotiations,” Senator Johnsom Smith told a press conference at the Office of the Prime Minister, yesterday.

Last week the foreign affairs minister announced that the Government plans to enact special legislation to authorise the buy-back of Venezuela’s stake in the state-oil refinery. It is a move which the Government has been strategising for some time now, as cash-strapped Venezuela continues to grapple with worsening socio-economic conditions.

From as far back as 2014, the International Monetary Fund (IMF) warned Caribbean and Latin American countries, which have cooperation agreements with Venezuela, such as PetroCaribe, that it could mean trouble for their economies if the South American country’s external liquidity problems worsened.

Petrojam’s parent company — the Petroleum Corporation of Jamaica (PCJ) — in mid-2018 signalled that there would be difficulties ahead for the refinery.

Former Group General Manager for the PCJ, Winston Watson, who now heads Petrojam, said at the time that the state oil refinery could be in trouble by as early as the end of 2019, as the market for heavy fuel oil (HFO) continues to contract. He suggested that the refinery could stave off the anticipated challenges by, among other things, fast-tracking the Vacuum Distillation Unit project — which is supposed to enable Petrojam to convert HFO to asphalt and vacuum gas oil for export — and seeking out new bunkering business.

Watson said the Government would need to spend over of US$1 billion to complete the upgrading of the refinery, which was a part of the PetroCaribe deal with Venezuela. The upgrading was intended to diversify production and ensure viability.

The foreign minister has said that these objectives have not been met and that despite a commitment made in May 2016 by the Venezuelan Government for the upgrading of Petrojam, this has not materialised.

In August 2006 the Petroleum Corporation of Jamaica entered into a joint venture agreement with PDV Caribe, an affiliate of Venezuela’s state oil refinery PDVSA, resulting in the sale of the Petrojam shares.

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