Over a decade ago, shortly after the Government of Jamaica transferred two per cent of its holdings to the Government of Venezuela, making it the majority owner of Petrojam Limited, both nations also made plans for an extensive upgrade of the petroleum refinery, priced in 2010 at US$663 million.

In 2017, a new agreement was struck, this time priced at US$1 billion and aimed at increasing the capacity of the refinery to process 50,000 barrels of crude a day up from 35,000 barrels.

The then Government said that the refinery upgrade was critical to increase Petrojam’s efficiency and to meet local demand for fuels.

However, since that time the partnership with the Government of Venezuela has fizzled, and plans have been significantly downgraded. Financing is also uncertain.

Petrojam supplies a full range of domestic, transportation and industrial petroleum products. The company started in 1964 when ESSO built and operated the refinery, before selling it to the Government of Jamaica in 1982 which then established it as Petrojam Limited.

Later in 2006, the Government of Jamaica sold 49 per cent of its shares to PDV Caribe SA of Venezuela and the remaining 51 per cent of the company owned by the Government of Jamaica through State agency Petroleum Corporation of Jamaica (PCJ).

In 2019, the Government of Jamaica reacquired the 49 per cent share held by Venezuela through ‘The Compulsory Acquisition (shares in Petrojam Limited) Act 2019’ which was enacted on February 22, 2019.

The legislation vested the 49 per cent shareholding previously held by PDV Caribe SA in the Accountant General of Jamaica which is in trust for the Government of Jamaica with effect from February 22, 2019.

Consequent on the fallout with Venezuela, Petrojam is not the only refinery project which has fallen awry.

Some Caribbean refineries, as the partnership with PDVSA dwindled, have become storage tanks. Curaçao, Aruba, Jamaica and the Dominican Republic reportedly in the same boat.

Petrojam has indicated that its plan now is for plant optimisation, instead of a full upgrade.

CEO Winston Watson told the Jamaica Observer that Muse Stancil, an international consulting firm which specialises in the energy industry, was contracted to conduct an assessment of possible configurations for upgrading the refinery.

“Instead of a full upgrade, based on their recommendations, we are now exploring a number of refinery optimisation programmes, proposed to be executed in a phased manner,” he said.

“The current plant configuration produces far too much heavy fuel oil (HFO) and high sulphur diesel and less of in-demand products such as gasolines, ultra-low sulphur diesel, etc. The proposed optimisation programme will improve the plant’s capability to meet the customers’ demand for these and other products,” Watson added.

He said that the plant’s ability to refine more of these products from crude oil will help to reduce Jamaica’s dependence on imports of petroleum products, thereby reducing the demand for foreign exchange.

“Of equal importance,” he added, “the country stands to realise increased foreign exchange earnings from increased export of asphalt, another potential benefit of the optimised plant. Petrojam creates between 300 and 500 direct and indirect jobs from its plant operation and maintenance activities.”

Watson said that the Government of Jamaica is exploring different sources of capital financing, but has not selected any option.

Meanwhile, he stated, Petrojam will continue to manage and maintain the plant so as to supply the country with the requisite fuels.

However, he notes, “The lack of an upgraded or optimised refinery can place our country’s energy security at risk, as it is always easier to purchase crude oil than it is to get finished products. There are instances in which market supply issues make it difficult for us to access products and we have to rely solely on the plant to meet market demand. Without a refinery, this is not an option.”

He said if upgrades required are not put in place, the island’s fuel security will decline.

“Petrojam contributes approximately 10 per cent to Jamaica’s manufacturing gross domestic product (GDP). This will also be affected,” Watson said. “As the demand for cleaner gasoline and diesel increases locally, more foreign exchange will be needed to import these products.”