JAMAICAN officials yesterday insisted that a 1994 agreement to buy seven million barrels of heavy fuel oil a year from Ecuador was "clean and above board" in the face of an order by the country's president Alfredo Palacio for a suspension and review of the deals.

Petrojam oil refinery in Kingston.

The Ecuadorians had up to late yesterday not formally advised Jamaica of the suspension, but the information was beginning to trickle into Kingston from oil traders in Quito, officials confirmed.

Palacio also ordered investigations into two other contracts by PetroEcuador - one for a sale of heavy fuels to Mexico state company, PMI, and the other to a private firm for the construction of underwater infrastructure for a state-owned oil refinery.

"There was no corruption in the award of the contract to the Petroleum Corporation of Jamaica," said the state-owned oil group's just-retired CEO, Dr Raymond Wright, who is still a consultant with the PCJ.
"Zero, zilch, nada. There was no corruption," Wright told the Observer yesterday.

Last October, when Wright was still the PCJ's managing director and concerns were being raised in Quito about the deal, he wrote to Ecuador's Accountant General, also insisting that Jamaica had entered the deal in good faith. A copy of the letter was made available to the Observer.

Palacio. ordered probe of Jamaican oil deal

"PCJ has no knowledge of and was not aware of any internal rule or regulation affecting the power and/or authority of PetroEcuador to engage in contract for the sale of petroleum products," Wright wrote at the time to the Attorney General's audit management officials.

"Indeed, PCJ entered into the contract on the assumption that PetroEcuador was duly authorised to undertake the sale and cannot be held accountable for any internal restrictions or limitations on the power to PetroEcuador to enter into international contracts of this kind for the sale of petroleum products," Wright said at the time.

Jamaican officials say the petroleum deal has fallen victim to Ecuador's fractious and unstable politics, spurred on, as one put it, "by a spurned lover", who lost the export deal to PCJ. A British-based petroleum trader, Vitol, had competed with PCJ and its oil refinery, Petrojam, for the deal.
Palacio, the former vice-president, became president in April last year when Congress removed president Lucio Gutierrez after more than week of street unrest over the economic policies and other issues.

Under the 2004 agreement, Ecuador was to sell Jamaica a minimum of 7,000 barrels a day of heavy fuels, which helped to shore-up the country's fuel security, allowing Petrojam to meet its supply obligations for heavy fuels to the light and power company, JPS, and other users. Jamaica also has a separate agreement to purchase Ecuador's Oriente crude refining at the Petrojam plant.

Wright. deal above board

At the time of the deal to purchase the fuel oil #6, Jamaica had turned to Ecuador for supplies in the face of a deep and destructive strike in the Venezuelan industry, from which the island gets most of its supplies. But the Ecuadorian fuel, when required, was listed on the market on PCJ's behalf by the London-based, French-owned trader, Trifigura.

However, critics in Ecuador have complained that shipments under the contract with PCJ, and the one with PMI, have not gone to either Jamaica or Mexico, but to Central American destinations by intermediary firms.
This, the critics say, breached agreements between state oil groups that commit them to avoid supplying the market via re-sellers. However, PetroEcuador said that no such restrictions applied to the PCJ and PMI deals - unlike with most other contracts.

But officials said that most heavy fuel bought from Ecuador has come to Jamaica, which requires up to 12,000 barrels a day to meet demand.
"We have a supply problem," said Wright, noting Petrojam's contracts with others.

Despite the importance of the deal, Jamaican officials also pointed to the cushioning effect of the PetroCaribe agreement with Venezuela, under which Jamaica pays cash for 60 per cent of the oil it buys from Caracas, while the remainder is converted to long-term loans at interest as low as one per cent.
With regard to the Ecuador deal, Wright insisted: "PCJ has done nothing wrong. We have been clear, clean and above board. It has to do with politics and perception in Ecuador."

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