Jamaica Plans to Buy Venezuela's Stake in Kingston Refinery
(Bloomberg) -- The Jamaican government intends to buy Venezuela’s stake in the Kingston oil refinery, allowing it to start a delayed plan to boost production.
Jamaica sent state oil company Petroleos de Venezuela, or PDVSA, notice of its intent to buy the troubled company’s 49 percent stake in the Petrojam refinery last month, and is “aggressively” pursing the purchase, Energy Minister Andrew Wheatley said in a telephone interview from Kingston. The government estimates that the stake is worth about $80 million, although a formal valuation is currently underway, he said.
Jamaica’s decision comes nearly a year after the partners signed a long-term agreement to spend more than $1 billion to modernize the plant and boost its refining capacity by 40 percent to 50,000 barrels per day. PDVSA, which has seen its oil output drop more than a third in the last five years to below 2 million barrels a day, has lost its once dominant foothold in the Caribbean in recent years as it struggles to sell oil due to U.S. economic sanctions and keep up with payments on the $14 billion it owes creditors by 2020.
“We are cognizant of the current situation in Venezuela and we know that they’re not in the position to participate in the upgrade plan anymore,” Wheatley said. “It’s in our interest for Jamaica’s energy security that we go forward with the upgrades as planned.”
PDVSA, which bought the stake 12 years ago, has yet to formally respond, he said.
As Venezuela has slipped deeper into an economic crisis, marked by hyperinflation, shortages of basic goods and an exodus of residents, its state oil company has also slashed a program that sent oil to Caribbean and Central American countries and allowed them to repay over time and, in some cases, in goods, such as black beans and blue jeans.
Jamaica had been receiving 23,000 barrels per day of crude and refined products through the so-called Petrocaribe program, most of which was processed at the Petrojam refinery. The country has not received a shipment since May. Instead, it’s purchasing on the spot market from Mexico, Ecuador, Trinidad and elsewhere, Wheatley said.
Since Venezuela’s financial crisis set in, banks representing sellers of crude and other feedstocks have been asking for more details of where PetroJam’s funds have come from to finance these purchases, said a person familiar with matter.
“We’re at the juncture where we just want full ownership of the refinery" Wheatley said. "Once we have that, we’ll look at whether we should engage with other partners going forward.”
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