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 arrangment 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.

Up to mid-2010, Watson was still optimistic that the project would commence “at the end of 2010 into 2011 and complete over a three-year period”, but any hopes that activities related to the upgrade of the Petrojam refinery would happen this fiscal year (which ends March 31, 2012) were dashed In August 2011, when the Jamaican government slashed all of the $860 million allocated for the project from its budget.

While it is clear that the Jamaican government’s inability to finance the expansion project is based on its lack of fiscal savings, there is a view held that the Venezuelans’ are 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.”

Until 2008, in their own filing to the SEC, the Venezuelans maintained that PDVSA had US$2.2 billion committed to overseas investment activities primarily in Cuba, Jamaica, Brazil and Uruguay, “from 2005 through 2012 to improve its refining systems and adapt its systems to meet environmental regulations and domestic and international product quality requirements”.

Since 2009, the Venezuelans have not said anything further regarding their financial commitment to the project, but instead of scaling back expansion activities due to financial constraints, PDVSA, which increased its net interest in refining capacity from 2.4 billion barrels per day (bpd) in 1991 to 3.1 billion bpd at December 31, 2008, revised upward its targeted refining capacity for 2015.

Last year, the refinery projected that it would reach 3.2 billion bpd by 2015 and now has it at 3.5 billion bpd in four years.

Before PDVSA gets to Jamaica, it plans to start expansion of the Camilo Cienfuegos refinery (49 per cent PDVSA share) in Cuba in 2014 from a production of 65,000 bpd to 150,000 bpd, with an estimated completion and commissioning in the same year, and plans to build a new refinery (49 per cent PDVSA share) in the town of Matanzas, with a capacity of 150,000 bpd and to be completed by 2015, and another refinery (51 per cent PDVSA share) in the Republic of Nicaragua called Complejo Industrial El Supremo Sueño de Bolívar also with a capacity of 150,000 bpd.

In South America, PDVSA is working on the construction of the Abreu e Lima refinery in Brazil (40 per cent PDVSA share), with a capacity of 230,000 bpd, which is estimated to begin in 2012.

In Ecuador, the Pacific Refining Complex Eloy Alfaro Delgado (49 per cent PDVSA share) is estimated to begin production in 2015 and have a capacity of 300,000 bpd.

In Asia, PDVSA plans the construction of three new refineries in China with PDVSA owning 40 per cent of the shares in each. In Jieyang City, the Nanhai refinery, with a capacity of 400,000 bpd, is expected to begin operations in 2014.

In Syria, PDVSA has made plans to build a 140,000 bpd capacity refinery through the Association of Venezuela, Syria and Iran (33 per cent PDVSA share), which is estimated to start operations in 2014.

In a seemingly unrelated move, PDVSA this year began a strict enforcement of the quota system whereby only two shipments of crude were allowed under the PetroCaribe Agreement, which, according to Petrojam in its revised estimates of revenue and expenditure, negatively impacted its operations.