As the scandal surrounding Petrojam deepens, there’s more damning information this morning about the management and procedures at the state-owned oil refinery.
A late 2017 internal audit found that the company lost tens of millions of dollars due to inefficiencies, breaches of proper procedure, among other things.
The audit covers the period from April 2015 to October 2017.
The audit was conducted on behalf of Petrojam’s minority owner, Petroleos de Venezuela, PDVSA, last December.
It was prepared by PDVSA’s Corporate Audit Manager for Trade, Supply and International Businesses, Juan Jose Rodriguez, and submitted to Petrojam’s then Chairman, Dr. Percival Bahado Singh, on February 15 of this year.
It’s the same audit that Prime Minister Andrew Holness told Parliament last week, wasn’t submitted to him as part of a report from Permanent Secretary in the Energy Ministry, Hilary Alexander.
Nationwide News has obtained a copy of that 18-page report.
Among the damning findings are that Petrojam lost millions of dollars that could’ve been avoided.
Among the losses was some USD$343,000, or JMD$44-million.
According to the report, on June 28, 2017, an emergency purchase of 35,000 barrels of High Sulfur Diesel was approved.
This was done under the justification that Petrojam needed to guarantee the supply for the local market and maintain a 3-week inventory, as a result of the impact of Tropical Storm Cindy on Trinidadian supplier, Petrotrin, the week before.
Additionally, there was an unplanned shutdown of Petrojam on June 23 for 18 days.
This was described as a force majeure – an unforseeable circumstance that prevents someone from fulfilling a contract – and one of the reasons for which an emergency purchase can be approved under Petrojam’s procedures.
However, the “emergency” product wasn’t discharged until July 26 – nearly a month later. And, it was loaded at Puerto Esquivel, which the report says “does not look reasonable”.
In a subsequent letter to Petrojam’s Chairman, the auditor adds that the use of this port “is not compatible with the emergency pattern”.
According to the report, Petrojam made a second emergency purchase of 35-thousand barrels of high sulfur diesel on August 4, from the same supplier, Castleton Commodity International, CCI, and using the same justification.
The auditor concludes, “this does not look reasonable either”.
The report notes that Petrojam paid a premium to CCI for the “emergency” diesel, much more than it would’ve paid under its current contract with Shell.
According to the report, an economic analysis carried out by Petrojam’s own Unit of Economy and Planning suggested that not purchasing this volume would have resulted in savings of 334-thousand US dollars.
A response from Petrojam’s management, which forms part of the report, notes that the emergency purchases were approved by the refinery’s general manager, as a strategic decision to secure petroleum product that was below minimum inventory levels and were readily available in Jamaica at the time of the Hurricane interruption in Trinidad together with the unplanned shutdown of the refinery.
Management says this was done to ensure high sulfur diesel was available in the case of any unforeseen external supply threats.
It says under those circumstances, the movement of the diesel to storage at the refinery’s facilities was not critical.
The question then, is – if the movement was not critical, why spend millions more to procure it under an emergency contract?