Jamaica weighs refinery closure

Jamaica is weighing the possible closure of its 35,000 b/d Petrojam refinery as local clients slip away and its Venezuelan partner sinks into insolvency.

The 50-year-old refinery is among several Caribbean crude processors that are operating at a chronic loss or have been shut down altogether.

The refinery "was designed for an era that is passing," prime minister and energy minister Andrew Holness said on 17 August.

The refinery, which is owned by state-owned oil companies PCJ of Jamaica and PdV of Venezuela, has been struggling to conclude terms with potential investors for an upgrade and expansion.

Petrojam will lose its major clients in 2019 when power company JPSCo and bauxite refiners complete the conversion of plants using heavy fuel oil and diesel to burn natural gas from imported LNG, Holness said.

The refinery will also lose its bunkering clients when new marine fuel restrictions take effect in 2020.

"We need to make a strategic decision about Petrojam," Holness said. "We must decide what we do with it."

Petrojam produces diesel, heavy fuel oil, kerosene, jet fuel, LPG, asphalt, and gasoline. It also imports low sulfur diesel for the domestic market.

The refinery's operations have also been affected by difficulty in obtaining credit to purchase feedstock because of the impact of US sanctions imposed on PdV in August 2017.

Jamaica has been trying to purchase PdV's 49pc interest in Petrojam to avoid the impact of the sanctions, but the Venezuelan firm has been unresponsive to the island's December 2017 offer of $280mn for the stake.

The uncertainty is clouding a preliminary agreement between PCJ and Chinese state-owned engineering firm Sinohydro to expand Petrojam's capacity to 50,000 b/d, and to upgrade several units, starting with a vacuum distillation unit.

"Something has to give with Petrojam," one energy ministry official told Argus yesterday. "It is caught in a technical bind, and it is not financially viable." It would be "inappropriate at this time" to give figures on the refinery's finances, the official said.

Energy minister Andrew Wheatley was fired last month amid a government investigation into alleged financial malpractice at the refinery. This happened days after the police anti-corruption agency and the government's integrity commission raided Petrojam's offices.

The government still seeking to sell a stake in Petrojam to a major international firm that can deliver an upgrade. But this can happen only after PdV formally withdraws by selling its 49pc stake, energy ministry officials say.

The US sanctions have also affected past loans delivered under Venezuela's PetroCaribe regional subsidized oil supply program, although the island had been receiving "little or no PetroCaribe crude and products for over a year," energy ministry said in November 2017.

Jamaica has a 23,000 b/d PetroCaribe quota, but has been receiving most of its oil supplies from Mexico, Trinidad and Tobago and the US.

Jamaica produces no oil or gas, and imports an estimated 69,000 b/d of crude and products.

US firm New Fortress Energy is supplying 60,000 t/yr of LNG for a 120MW JPSCo power plant on the island's northern coast. The company will also supply 200,000 t/yr of LNG to JPSCo for a new 190MW plant under construction on the southern coast.

New Fortress will supply more LNG for several other medium and small-scale ventures on the island, including bauxite refineries, the public bus service for the capital Kingston, police vehicles and the island's leading brewery.

LNG imports could reach 720,000 t/yr by 2021, according to energy ministry officials.

Jamaica's downstream quandary is shared by the Dominican Republic, where PdV also has a dormant minority stake in a money-losing refinery, Refidomsa.