Jamaica starts refinery work, PdV stake in limbo

Jamaica's state-owned PCJ started a $1bn upgrade of the 35,000 b/d Petrojam refinery to allow it to continue operating amid delays in the sale of Venezuelan state-owned PdV´s 49pc stake.

PCJ and a Chinese company are negotiating the installation of a vacuum distillation unit at Petrojam, energy minister Andrew Wheatley said, without naming the company.

The unit will help Petrojam to adapt when it loses its market for heavy fuel oil (HFO). The island's power generators are switching from oil to gas from imported LNG, and demand for HFO for bunkering will dry up from stricter international sulfur specifications that take effect in 2020.

Privately managed utility JPSCo, the island's biggest generator, converted a 120MW plant from oil to gas in November 2016, and will commission a 190MW gas-fired plant by December 2019.

Some of the island's bauxite refiners are also converting oil-burning power plants to use gas.

JPSCo purchases 45pc of the HFO produced by Petrojam, with bauxite refiners consuming 15pc. HFO accounts for about 45pc of Petrojam's output, the company says.

A vacuum distillation unit will cushion Petrojam from the impact of the loss of its market for HFO, and from changing sulfur level specifications for bunkering, PCJ general manager Winston Watson told a parliamentary committee.

"By 2020, with the change in the marine specifications for fuel, we will have a difficulty selling HFO. JPSCo would have completed its conversion, so we are going to start getting badly affected in December 2019."

Neither Wheatley nor Watson indicated when the vacuum distillation unit would be commissioned. "The contract for the unit is not yet concluded, so we do not expect it to be installed and ready until mid-2020," the island's energy ministry told Argus.

Jamaica is "growing anxious and impatient" with PdV´s seeming reluctance to sell its interest in the facility to Jamaica, government and industry officials say.

Jamaica has made a $280mn offer to PdV for its stake in Petrojam, according to government budget figures.

Jamaica is anxious to buy out PdV because the Venezuelan company´s participation thwarts the refinery company´s access to credit to purchase feedstock and other materials as a result of US financial sanctions, Wheatley said.

Jamaica, once a large recipient of subsidized oil from PdV under a regional supply program known as PetroCaribe, has distanced itself from Caracas in recent years. Kingston supported a 5 June resolution of the Organization of American States (OAS) to hold an extraordinary assembly to vote on whether Venezuela should be suspended. The resolution passed, but the OAS still lacks the 24 votes needed to eject Venezuela.

PdV could not be reached for comment on Jamaica´s offer to purchase its refinery stake.