Venezuelans
to finalise Petrojam joint venture
Jamaica
Gleaner
KINGSTON
Petroleumworld.com
08 14 06
A senior official for Venezuela's
national oil company Petrleos de Venezuela S A (PDVSA),
Amilkar Maca, is expected in Jamaica today to finalise
agreement on the valuation of the government's 35,000
barrels a day Petrojam oil refinery, ahead of PDVSA
taking a 49 per cent stake in the company and its
modernisation and expansion to a 50,000 bpd facility.
Phillip Paulwell, the energy minister,
yesterday confirmed Maca's visit and the fact that
the initial agreement between Jamaica and Venezuela
has been altered, to give PDVSA a 49 per cent stake
in Petrojam, rather than the 50 per cent outlined
in a ministry paper he tabled in Parliament in June.
"We have renegotiated to make
sure that we retain a majority position," Paulwell
told Wednesday Business. "We figured that the
Government should maintain a majority position."
Provide cash upfront
The modernisation and expansion
of Petrojam is one of the projects under Venezuela's
President Hugo Chavez's PetroCaribe energy initiative,
under which the Venezuelans provide up to 40 per
cent of the value of the oil it sells to Jamaica
on credit, which can be converted to long-term loans
at one per cent.
The initial expansion of the Petrojam
is projected to cost upwards of US$200 million,
which is to be financed by the partners to the proportion
of their stake in the company.
But, with the Venezuelans expected
to pay up-front for the 49 per cent acquisition
of Petrojam, the deal is apparently being structured
in a way to provide economically-strapped Jamaica
with a cushion in finding cash to meet its portion
of the investment.
"We are going to get raw cash,"
Paulwell said.
It could not be immediately ascertained
what value the govern-ment has placed on Petrojam,
a subsidiary of the Petroleum Corporation of Jamaica
(PCJ), but it is among the more profitable of the
state enterprises.
It projects pre-tax profit this
fiscal year at around $700 million, on sales of
approximately $6.7 billion. While turn-over will
be up nearly seven per cent, profit will fall nearly
a fifth because of a big rise in capital spending.
After the upgrade, for which front-end
engineering is now being done, the plant, which
currently supplies 86 per cent of Jamaica's petroleum
demand, including the bauxite and alumina sector,
will see a 43 per cent increase in throughput.
The current demand for oil, not
including consumption in the bauxite and alumina
industry, is approximately 14.2 million barrels
a year, which is 13 per cent higher than in 2001.
This means that should the demand for oil and petroleum
products continue to grow at the same pace up to
2009, Petrojam will have the capacity to handle
all the non-bauxite demand, except for gasolene.
Gasolene production is to be expanded
to 7,500 barrels a day, as part of the plan. Total
gasolene used in 2005 was roughly 4.6 million barrels,
about 10 per cent higher than in 2001.
If consumption grows at the same
pace over the next four years then Petrojam will
be able to locally manufacture and supply 54 per
cent of total gasolene consumed locally by mid-2009.
On the project so far, the Jamaican
government employed Canadian engineering firm, SNC
Lavalin, in February of this year to conduct the
front-end engineering design. Their study is expected
to be completed in February of 2007, by which time
the costs will be absorbed into the new joint venture
operation, most of which Maca, PVDA's point man
on the Jamaican project, is expected to conclude.
Sign-off on project
"He is expected to sign-off
on everything ahead of the formal signing of the
joint venture plan," said a Wednesday Business
source.
That agreement is expected to be
signed by Chavez and Prime Minister Portia Simpson
Miller, during a visit by the Venezuelan president
to Jamaica shortly. Chavez will, at the same time,
also officially sign-off a US$260 million loan to
Jamaica to finance highway development and the provision
of fuel to Air Jamaica under the PetroCaribe arrangement.
Paulwell noted earlier this year
that, the initial expansion of Petrojam apart, more
work is projected for the refinery under the PetroCaribe
initiative, at a cost ranging from US$250 million
to US$350 million. However, it was not immediately
clear precisely what is contemplated at the exact
stage of negotiations for this.
Jamaica Gleaner
Wednesday | August 2, 2006
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