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JAMAICA expedites efforts to buy Venezuela's 49% share in Petrojam

Featured Jamaica's Petrojam Oil Refinery in Kingston Jamaica's Petrojam Oil Refinery in Kingston
Consequent upon the threat by the United States to increase economic sanction against Venezuela, which is expected to negatively affect the Jamaican economy,  Energy Minister Dr. Andrew Wheatley says Jamaica has made an offer to buy Venezuela’s 49% stake in the Petrojam oil refinery.

The Energy Minister says Venezuela has acknowledged receipt of the offer, however, he failed to say whether the country has indicated a willingness to sell.

andrew wheatleyDuring a sitting of the House of Representatives last November, Dr Wheatley revealed that an executive order by US President Donald Trump — blocking entities from doing business with Venezuela — is affecting Petrojam’s operations.

The order prohibits US companies from doing business with Venezuelan companies.

This has led to banks in the US being reluctant to finance Petrojam’s oil purchases on the international market, due to the company’s part-Venezuelan ownership.

As the Venezuelan economy continues to deteriorate because of the widescale US economic sanctions, the country finds itself in greater need of foreign exchange.

 Dr. Wheatley said the Jamaican government would be willing to fast-track the purchase and has received an updated valuation on the 49-percent shares.

Its understood that the value has now fallen from the USD$80-million at which the shares were valued last summer.

Dr. Wheatley says the government has already allocated funds in the upcoming budget to make the purchase.

In the meantime, the Energy Minister says Venezuelais yet to fulfill its commitment to upgrade the Petrojam refinery.

This, despite several commitments, including one as recently as February last year, to begin the upgrade. The upgrade is expected to cost between USD$850-million and USD$1-billion.

The expansion would increase Petrojam’s capacity from 36,000 to 50,000 barrels of oil per day – enough to meet Jamaica’s energy needs.

However, Jamaica's embattled South American energy partner which is the world's third largest oil producer, is finding some difficulty in getting big banks in the US to finance its planned upgrading due to the economic embargo by the United States, and political destablization which has resulted in violence in the streets of that country.

Dr. Wheatley was silent on what would now happen to those plans to upgrade the refinery, with the anticipated repurchase of Venezuela’s shares.

tillerson holness jaUnited States Secretary of State Rex Tillerson, a former Exxon Oil CEO, last week  concluded a six-day whirlwind tour of the Latin American and Caribbean region during which he visited Argentina, Colombia, Mexico and Peru, in an effort to sell the US Plan to increase economic sanctions against Venezuela, the world's third largest oil producer.

Tillerson said the US would assist the Government in overcoming any fallout arising from giving its support to the United States which has threatened to inflict possible sanctions against the Venezuelan oil industry.

“We are going to undertake a very quick study to see if there are some things the United States could easily do with our rich energy endowment, with infrastructure we already have available to see what we can do to ease the impact of it,” Tillerson said as he spoke at a media briefing at Jamaica House.

Prime Minister Andrew Holness in his remarks said it was Jamaica's intention to severely reduce, or even end its long standing arrangements with Venezuela and establish new links with the United States to fill the void.

Holness stated that Jamaica could benefit from the US becoming a net exporter of energy, if its remaining energy ties with Venezuela are cut by its stance against Maduro's Government.

“This has always been Jamaica's position. It is a not a new position. Jamaica wants to see the people of Venezuela being able to enjoy their democracy and this is a principle that has nothing to do with any other country. We wish the best for the people of Venezuela,” the prime minister said.

Holness also noted that Jamaica does not currently import oil from Venezuela. However, Venezuela still owns 49 per cent of Jamaica's only oil refinery, Petrojam.

PetroCaribeJamaica as well as a number of  countries in the Caribbean had forged a special relationship with Venezuela under the PetroCaribe arrangement, where oil is purchased from Venezuela on preferential payment conditions. 

The agreement, which began in 2005, allows beneficiary nations to buy oil at market value but only pay a percentage of the cost up front. The balance can be paid over 25 years at 1% interest.

Countries under PetroCaribe are required to pay 40% of their oil bill within 90 days. The remainder can be paid over the next 25 years at a fixed interest rate of 1% as long as oil prices exceed US$100 per barrel.

Seventy per cent of payments may be deferred if oil reaches US$150 a barrel.

Beneficiary nations are allowed to purchase 185,000 barrels of oil per day on these terms. Additionally, these nations could settle their debt to Venezuela using goods and services.

The countries that are signatories to this agreement are: Antigua and Barbuda, the Bahamas, Belize, Cuba, Dominica, the Dominican Republic, Grenada, Guyana, Jamaica, Nicaragua, Suriname, St Lucia, St Kitts and Nevis, and Saint Vincent and the Grenadines. Cuba, the Dominican Republic, Haiti, Honduras.

Last modified onMonday, 12 February 2018 10:50
  • Countries: Jamaica

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