Business

Chavez gives Petrojam priority

Venezuelans put expansion on fast track

BY CAMILO THAME Business co-ordinator thamec@jamaicaobserver.com

Wednesday, October 17, 2012    

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THE start date for the modernisation of Jamaica's oil refinery, Petrojam, appears to have been brought to the front of the queue of Venezuelan expansion projects.

Already delayed by five years, the project 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.

But Caracas, which turned its attention to other areas for expanding its refining operations, has since shifted its focus back to Kingston.

In a filing to the US Securities and Exchange Commission (SEC), the Venezuelan Government said that its state-owned refinery, Petroleos de Venezuela SA (PDVSA), has brought forward the start date of the Jamaica project to 2014, a year earlier than previously expected.

The aim is to increase production from 35,000 barrels per day (bpd) to 50,000 bpd at the Kingston refinery.

No reason was given for advancing the commencement date of the three-year project, but the new start date puts it ahead of several other projects, including two in Cuba, for which start dates have been put off by a year or more.

Some of those projects were earmarked for commencement before PDVSA got to Kingston.

The Jamaican Government's inability to finance the expansion project, based on its lack of fiscal savings, has been evident for some time.

After the Government realised that the capital cost associated with the upgrade would double from the original estimate of US$663 million to US$1.3 billion over a threeyear period, former Prime Minister Bruce Golding said that plans to expand the plant would be halted.

An alternative view until recently was that the Venezuelans were held back politically.

The refinery upgrade project evolved out of a memorandum of understanding signed in August 2005 between then Jamaican prime minister at the time, P J Patterson, and President Hugo Chavez, with an expected 2010 completion date.

Golding, who took office in September 2007, has, in the past, expressed concern about Jamaica's relationship with Venezuela. Referring to President Hugo Chavez's brazen anti-Americanism, he said: “We must not allow ourselves to become part of someone else's political agenda.”

It's likely that the return to office of the People's National Party — Patterson's party — and affirmation of Chavez's Administration, which was returned last week for a sixyear presidential term, has strengthened diplomatic ties between the two countries.

Even while the Petrojam project is expected to begin in two years, the start of expansion of the Camilo Cienfuegos refinery (49 per cent PDVSA share) in Cuba from a production of 65,000 bpd to 150,000 bpd have been pushed back a year to 2015.

Completion of construction of a new refinery (49 per cent PDVSA share) in the town of Matanzas, Cuba, with a capacity of 150,000 bpd, is now expected in 2017, back from 2015.

Plans for Complejo Industrial El Supremo Sueño de Bolívar in Nicaragua (51 per cent PDVSA share) with a capacity of 150,000 bpd has also been pushed back by one year to 2016.

In South America, PDVSA had planned to start working on the construction of the Abreu e Lima refinery in Brazil (40 per cent PDVSA share), with a capacity of 230,000 bpd, last year, but won't do so until 2014.

Work on other refineries in Syria and Asia won't begin until after Petrojam, according to the new schedule.

However, China's State Council formally approved the initial phase of the US$9.21 billion Nanhai refinery project between China National Petroleum Corporation and PDVSA, in April.

Nanhai, in Jieyang City, is to be built with a capacity of 384,000 bpd, and is expected to begin operations in 2015, back from 2014.

Two other 200,000 bpd refineries in which PDVSA has plans to invest in China are expected to commence in 2016 and 2019.

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