GOVERNMENT is forecasting big savings from the Petrocaribe agreement which it, along with other regional countries, signed with Venezuela last week in Caracas to supply cheaper oil to Caribbean nations.

PAULWELL... accord opens avenue for increasing trade in commodities

Yesterday, commerce, science and technology minister, Phillip Paulwell said there were many long-term benefits to be derived from the agreement, which include longer credit periods and the payment of long-term loans with goods and services.

At the same time, the minister made it clear that the Petrocaribe agreement builds on the Caracas Accord and was not in any way an alternate to Jamaica's other energy agreements.

"It is in fact complementary to other initiatives such as that for the supply of LNG from Trinidad," he said.

"This opens an avenue for increasing trade between Jamaica and Venezuela in commodities such as banana and sugar which are now under threat from current trade policies," Paulwell said yesterday at a press conference at his ministry in Kingston.

According to Paulwell, the new agreement will allow Jamaica up to 90 days to pay for each shipment of oil from Venezuela. Additionally, Jamaica will be able to access up to 50 per cent of the value of purchases as long-term loans if the barrel price of oil hit the US$100 mark.

"At the trigger price of $40 per barrel, the payment period for these loans is extended to 25 years from the present 17 years," the minister told reporters. He said the arrangement included a grace period of two years, while the interest rate has been chopped by 50 per cent, from two to one per cent.

Paulwell also said that as part of the agreement, a fund has been established for social and economic programmes. He said Venezuela will make an initial contribution of US$50 million to the fund, while additional contributions will flow through savings from direct trade "or contributions from the financed portion of oil purchases".

Paulwell also announced that the government, through the Petroleum Corporation of Jamaica, has also signed a memorandum of understanding with Venezuela's PDVSA to expand the capacity of the Petrojam refinery by 42 per cent, pushing production up from 36,000 to 50,000 barrels per day.

He said the upgrade will involve the introduction of new processing technology "to increase the proportion of higher quality fuel produced from crude supplies".

"The new technology will allow the refinery to process heavier crude, which attracts a comparatively lower price in the market," said the minister.

According to Paulwell, the agreement calls for a 50:50 partnership in the US$500- million expansion plan, and will involve the establishment of a joint-venture company between the two entities. Additionally, he said the PDVSA is to carry out a study on the state-owned PETCOM "with a view to engage in a 50:50 participation in the ownership of the company".

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