16th February 2018
The Jamaican government is to repurchase the 49% of shares that the Venezuelan state oil company PDVSA holds in the island’s sole refinery, Petrojam.
Announcing this in Kingston following bilateral discussions between the Jamaican Prime Minister, Andrew Holness, and the US Secretary of State, Rex Tillerson, the island’s energy Minister, Dr Andrew Wheatley, said Government had made the necessary allocation to do so in its budget.
Dr Wheatley subsequently told Parliament that Jamaica had advised Venezuela of its wish to repurchase its stake. He said that the Jamaican government would be willing to fast-track the purchase and had received an updated valuation. This is believed to be below the US$80m at which the shares were valued in mid-2017. The original plan had been for Venezuela to upgrade the refinery at a cost of between US$850mn and US$1bn and increase its capacity from 36,000 to 50,000 bpd to meet Jamaica’s energy needs. However, this did not happen.
The announcement followed remarks by Mr Tillerson that the Trump Administration was considering imposing sanctions on the export of Venezuelan oil and halting the export to Venezuela of US refined products. He also said that Mexico is considering a PetroCaribe type regional oil programme, and that the US was seeking to export a part of its rapidly growing oil and gas production to the Latin American and Caribbean region while promoting support for what it described as new forms of partnership.
In Kingston, during a three hour stop over, Mr Tillerson was explicit about the possible impact on the Caribbean of its prospective Venezuela policy, observing that any such action would affect negatively those nations that continue to benefit from Venezuela’s PetroCaribe programme. However, Canada, Mexico and the US, he said, had agreed at a recent trilateral meeting they would put together a very small, focused working group to study what could be done to mitigate the impact on the Caribbean. He also said that Jamaica and others might benefit from the US having become a net exporter of energy.
In earlier remarks at the University of Texas before visiting Mexico, Argentina, Peru, Colombia, and Jamaica, Mr Tillerson had outlined a new hemispheric policy, observing that economic growth, security and democratic governance will in future be the principal pillars of US engagement. He also said that energy security and energy connectivity will become central components in Washington’s approach to the development of the hemisphere and its security.
The announcement regarding Petrojam coincides with other changes underway affecting regional refining capacity.
In the case of Curacao, reports suggest that PDVSA has resumed crude imports to its 335,000 bpd Isla refinery after a seven-month pause. Quoting internal PDVSA documents, Reuters said that because of its underinvestment and falling oil output, Venezuela is increasingly importing foreign crude to refine and blend.
The news agency said that the increased activity at the Isla Refinery follows suppliers’ willingness to swap oil for refined products with the required crude coming from the US, Russia and China at prices over US$66 per barrel. It reported that payment was largely made on the basis of the supply by barter of light fuel oil and Merey heavy crude.
Meanwhile, the Bahamas Government has announced plans for a US$4bn oil refinery project and US$1.5bn oil storage facility on Grand Bahama.
On February 19 the country’s Prime Minister, Dr Hubert Minnis, signed heads of agreement with Oban Energies to construct storage facilities for crude oil, a harbour, a deep-sea loading dock able to service large vessels, and the construction of a 50,000-bpd refinery.
Oban said on its website that it hopes to target growing market demand for storage of petroleum/liquid products for their distribution to refineries and major trading companies. It also noted that phase 1 of its plans requires a US$1.5bn investment for development, construction, and the start-up of operations.
The company said that its plans involve the provision of storage crude oils, residual fuel oils, middle and light distillates, specialty vegetable oils and heavy oils, and that the company will consider all other bulk liquid storage requests. According to its website, it intends to build an initial storage capacity of 4m barrels, with plans to expand capacity to 20m by year four of operations.
In addition, Oban Energies says it will construct a 50,000 barrel per day petroleum refinery with plans to expand to 250,000 barrels per day by year four of the facility operation.
It provided no indication of its sources of financing, or of any current corporate experience in delivering such a large-scale project. The company is listed as being based in Palm Beach Gardens, in South Florida. Commenting on the project, the Chairman of the Bahamas opposition PLP, Fred Mitchell said that it would be watching “very carefully to see whether it’s real” but noted that his party would “give critical support” to help “a real project come off the ground.”
The online and print publication Tribune 242 previously reported that the area selected for the new facility may raise environmental concerns. It noted that the refinery and storage facility is to be located near to a site previously approved for a Carnival cruise port project. However, the Minnis Government reportedly now wants to relocate this nearer to Freeport.
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