Refinery operations at Petrojam have been operating at a substantial loss over the last four years.
According to the strategic report prepared by the Petrojam Review Committee, PRC, the refinery as a separate entity from Petrojam’s terminal operations generated losses of US 55-million dollars between 2014 and 2018.
This forms part of the PRC’s recommendation that the Refinery be operated as a terminal only if the government fails to have Petrojam leased to the private sector.
Chevon Campbell tells us more.
$US55 Million, according to the PRC, that’s more than $JA7 billion in losses to the refinery if it were operated on its own.
The PRC’s report says Petrojam has had a longstanding problem of separating the financial contributions from the two very distinct operating business units.
The PRC says it is important to understand that both the terminal and the refinery can operate in an open and competitive environment and could be managed as two separate and individual companies.
Under that guise, the PRC was able to ascertain that terminal operations at Petrojam have entirely kept the State-owned entity afloat.
Over the four year period under review, Petrojam, as a complete entity, made a profit in 3 of them.
From 2014 to 2018 the terminal generated profits of $US197 million or a staggering $JA25 billion.
According to the report, part of the problem stems from what the PRC sees as Petrojam’s low efficiency of 63%, well below the 80% industry standard.
The PRC says achieving the targeted efficiency is critical to the viability of all future refinery operations and the success of all potential investment in the refinery.
It says without the achievement of these higher utilization levels, the refinery would best be closed.
However, the PRC decidedly warned the government against undertaking the long-expected Refinery Upgrade Project and the Installation of a Vacuum Distillation Unit, VDU.
The VDU would allow Petrojam to refine Vacuum Gas Oil, VGO, and increase asphalt production.
However, the PRC says this would be a bad return on investment.
It says there is no market in Jamaica for VGO and production would need to be exported to international markets.
The PRC also says the volume of asphalt that would be produced would also far exceed local Jamaican demand, and thus a strategy to export asphalt would also be required.
This, it says, is not an easy undertaking logistically and commercially.
The PRC asseses that for this to be feasible a refinery availability rate of 90% is required, far exceeding past and current capabilities.