The Government has recalled a US$100-million ($12.8-billion) loan to the Petroleum Corporation of Jamaica (PCJ) as its relationship with Venezuela in the ownership of the Petrojam oil refinery seems to be quickly unwinding.
Prime Minister Andrew Holness yesterday announced at a press conference at Jamaica House that the Government had considered carefully the expenditure on the installation of a vacuum distillation unit (VDU) at the refinery, which should have enabled the petroleum refinery to produce low-sulphur bunker fuel in time for the 2020 global sulphur cap.
“As at this point, for us to make that expenditure we have to look carefully at the overall position of Petrojam, so we have decided to return the US$100-million to the Ministry of Finance,” Holness told journalists, noting that he considered it a proper cost-management exercise.
“It doesn’t make sense to have the money sitting down not using when Government has hundreds of other things that it could use it on to increase the revenue base of the Government. So we have decided to do that,” he added.
The US$100-million would have been Jamaica’s contribution to the project, which was consistently plugged by former Minister of Science, Energy and Technology Dr Andrew Wheatley up to last April.
Minister of Finance and the Public Service Dr Nigel Clarke told the press conference that while Petrojam had made the decision to invest the US$100-million in the project, it did not have the funds and, based on US sanctions against Venezuelan companies, PCJ could not seek the loan privately. As such, the loan was included in the 2018/19 budget and paid over to PCJ, which had started paying interest.
“So, if PCJ went ahead and invested in the unit and needed to borrow the funds they would have to borrow it from within the Government. The proposals came to the Government to lend the US$100 million to PCJ. That loan was executed earlier this year and the funds transmitted to PCJ, (but) things have occurred since, and that project has not started, and therefore the funds are not being used,” Dr Clarke explained.
Prime Minister Holness said that the policy of the Government is to have full utilisation of State assets, and since Petrojam is not fully utilising the money it has to be put back in a position in which that could be done.
In response to a question about the divestment of the PCJ, Holness said that the Government’s policy is wealth creation and so far its wish is to have ownership shared with the public.
But he told the Jamaica Observer yesterday that while shares of Petrojam could go on the market in the future, the decision would have to await the outcome of the current consultations being made by the recently appointed Petrojam strategic review commission
He said that the Government was not only looking at private sector entities in terms of divesting its assets, “but we should seek to have our stock market expanded to have democratic ownership”.
“I am increasingly of the view that shareholders are much better at holding enterprises to account than our voters,” he stated.
“We need to look at the entire register of public agencies and say which could better be operated by the private sector and place them there,” he said.