Venezuela delays Petrojam upgrade

(Jamaica Observer) The expansion and modernisation of Jamaica’s oil refinery, Petrojam, appears to have been delayed by at least a further four years. Already delayed by four years, the project has failed to take off due to the inability of the owners — the governments of Jamaica (51 per cent) and Venezuela (49 per cent) — to finance the project.

Moreover, Caracas has since shifted its attention to other areas for expanding its refining operations.

In a filing to the US Securities and Exchange Commission (SEC), the Venezuelan government stated that its state-owned refinery, PDVSA, is now targeting 2015 as the start year for the upgrade and expansion of Petrojam in order to increase production from 35,000 barrels per day (bpd) to 50,000 bpd at the Kingston refinery.

No reason was given for pushing back the commencement date of the three-year project for which completion, up to recently, was targeted for 2013.

Petrojam’s general manager, Winston Watson told the Business Observer that he was not party to any meeting at which a new date was set while the energy minister, Clive Mullings, was abroad and unavailable for comment.

At the end of 2009, Prime Minister Bruce Golding disclosed that plans to expand the plant would be halted as financing had gotten out of reach when it was realised that the capital costs associated with the upgrade would double from the original US$663 million estimate to US$1.3 billion over a three-year period.

“Given our fiscal situation, given our debt limit, it is just not possible for us to assume that kind of liability,” Golding said then.

Later, the International Monetary Fund (IMF) disclosed in its memorandum of economic and financial policies (MEFP) fresh after a stand-by arrangement was reached that, over time, the government is prepared to reduce its remaining interest through the direct sale of shares to PDVSA or other potential investment partners.

“As PDVSA makes new equity investments in the refinery project, the Jamaican government’s equity participation will continue to be reduced accordingly,” said the document.

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