Jamaica to take over Venezuela's 49% stake in Petrojam

Jamaica to take over Venezuela's 49% stake in Petrojam

Decision is economic not political — Johnson Smith

Wednesday, January 09, 2019

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The Government of Jamaica has announced that it will take legislative action for ownership of the 49 per cent share in the local oil refinery, PetroJam, held by Venezuelan state-owned oil and natural gas company, PDV Caribe.

Speaking at a press conference yesterday Minister of Foreign Affairs and Foreign Trade Senator Kamina Johnson Smith said the government will enact special legislation that will allow it to forcibly retake the stake held by Venezuela.

“It will not be a general piece of legislation which allows for acquisition of property rights, other than land, beyond the scope of the transfer of ownership of the 49 per cent shares in PetroJam currently held by PDV Caribe,” Foreign Affairs and Foreign Trade Minister, Johnson Smith, told journalists.

The decision comes after uncertainties in addition to failed attempts by the Government to get Venezuelan state-owned oil and natural gas company, PDV Caribe, to hold up its end of a joint-venture agreement which resulted in the sale of PetroJam shares in August 2006 and February 2007 respectively.

The agreement had called for the upgrading and expansion of the refinery to improve its competitiveness and meet local and international market demands, but Johnson Smith said these objectives were not met and that this poses a risk to the economy.

“During all this time, Venezuela had become increasingly impacted by domestic and hemispheric challenges, and still is…But it has become clear that the previously shared interest in and prioritisation of Jamaica's energy security, which drove the PCJ and PdVCaribe to agree to operate and upgrade Petrojam together, no longer exists,” she said.

She told reporters that Prime Minister Andrew Holness had led a delegation including then Energy Minister Dr Andrew Wheatley that held talks with Venezuelan President Nicolás Maduro in May 2016 where Caracas gave a commitment to upgrading Petrojam.

The Foreign Affairs and Foreign Trade Minister said that after signing a Letter of Intent in January 2017 and a refinery upgrade agreement in February 2018, Venezuela has not fulfilled its obligations and that Kingston had made a formal offer to buy back the Petrojam shares in March 2018.

But she said that these efforts had not borne fruit and that Jamaica's decision to retake the Petrojam shares was based on economic considerations and not political.

“The action proposed is in the public interest as it is in the interest of each and every Jamaican that we ensure our energy security. Petrojam impacts all of us – energy security is relevant to public and private transportation, our hospitals, our homes, factories and business places, and current and prospective foreign investors,”

She added that the Government has not changed its free-market policies, its promotion of foreign direct investment or its belief in and appreciation for international cooperation. However, Johnson Smith noted that for Jamaica to prosper and uplift, the Government must ensure the country's energy security.

“The Cabinet has, therefore, determined that decisive action is necessary for the public interest, and Parliament will act within its powers to make laws for the good governance of Jamaica,” she continued.

She added that the uncertainties arising from Venezuela's ownership stake cannot be overstated and while the Government has been trying to negotiate an agreement to buy back, the urgency of the matter has increased as geopolitical conditions related to Venezuela have not improved since the issuance of the US Executive Order in August 2017.

“Even as the government of Jamaica acknowledges, values and appreciates the tremendous support provided to this country by the Bolivarian Republic of Venezuela to the energy sector over the years, Jamaica regretfully cannot continue negotiations in perpetuity, especially where it appears that delays are of no concern to our counterparty.

“Therefore, in the national and economic interest of Jamaica, the decision has been taken to commence the legislative process towards acquiring the shares in Petrojam held by PDV Caribe,” said Johnson Smith.

In March last year, a government statement said that the attempt to take full control of Petrojam followed the decision by US President Donald Trump to issue Executive imposing sanctions targeting the Government of Venezuela and its state-owned entities.

Wheatley told Parliament then that since the Trump announcement “the relationship between Petrojam Limited and PDVSA has come under intense scrutiny, both locally and internationally.”

The Ministry of Finance has set aside $35 billion (One Jamaica dollar=US$0.008 cents) in the 2018/2019 budget to repurchase the shares.

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