Jamaica: House approves bill to
amend Petroleum Act
Jamaica Information Service
KINGSTON
Petroleumworldtt.com
01 07 07
The
House of Representatives has approved a Bill to
amend the Petroleum Act.
Minister
of Finance and Planning, Dr. Omar Davies, who piloted
the Bill on November 28, explained that the amendment
would provide for the Government to establish a
"special Fund to receive proceeds which flow
to the Government of Jamaica on concessionary terms
as a result of the PetroCaribe agreement" between
Jamaica and Venezuela.
He
pointed out that the agreement codified the enhanced
benefits to Jamaica from the oil trade with Venezuela,
stating that these would be based on the principles
set out in the loan agreement.
Based
on what the Minister termed the "unique features
of the agreement", which would "have important
implications for how the resources are managed and
utilised in the public sector", it was important
that alternative energy sources be developed.
Accordingly,
Dr. Davies said Cabinet decided that the proceeds
from this special Fund, which would be exempt from
income tax, would be "utilised to upgrade,
primarily, the social and physical infrastructure
of Jamaica and to facilitate the development of
natural energy resources".
He
emphasized that projects with high profit or income
saving potential would be deemed "high priority
for financing".
The
Minister also noted that proceeds from the Fund
would go towards debt servicing under the agreement
as well as support alternative energy projects,
which were aimed at reducing the nation's reliance
on oil, social intervention projects and the retooling
of the industry sector.
Dr.
Davies proposed, along with the formal establishment
of the Fund, "a Board of Management, under
the chairmanship of the Financial Secretary, to
have oversight of its operations". Annual reports
would be tabled in Parliament on a yearly basis.
But
the Opposition, through its Finance Spokesman, Audley
Shaw, said it would evade transparency if Parliament
was updated on the use of the PetroCaribe funds
only on an annual basis. Instead, he believed disbursement
of the funds should only come after parliamentary
scrutiny.
The
Finance Minister, however, maintained that this
was not necessary, as the fund was unlikely to create
additional debt on the part of the Government. He
said that the Opposition's call for a Select Committee
to approve these disbursements could not be supported
solely on the need for transparency, especially
since there would be regular consultations and oversight
from the Auditor General.
Dr.
Davies explained that "the financing terms
[of the loan from Venezuela] depend on the prevailing
oil price per barrel of oil and at the existing
level, 40 per cent of each [loan] payment is converted
to a loan for 25 years, which includes a grace period
of two years at an interest at 1 per cent per annum."
This condition, he said, would hold only when per
barrel oil prices were more than US$50 and below
US$100.
The Minister said that when the per barrel price
for oil was below US$50, the loan terms would change.
Instead of the usual 40 per cent over a 25-year
period, there would be a deferred payment between
5 and 30 per cent over a 17-year reduced period
at an increased interest rate of 2 per cent per
year.
A
further condition would be that when oil prices
rise to more than US$100 per barrel, the deferred
amount would be 50 per cent of each payment over
a period of 25 years.
Dr.
Davies said that despite the generosity of these
concessionary terms, the Government would prefer
if nothing flowed into the loan Fund. This, he said,
only reflected the high prices of oil and this would
negatively affect the nation's balance of payments
profile.
"There
is no concession to Jamaica in terms of the price
of petroleum products. The price of petroleum products
to Petrojam reflects prevailing conditions in the
international market and full payments for the products
become due after a 90-day grace period," the
Finance Minister informed.
JIS
Friday, December 01, 2006
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