Jamaica to pay into escrow for PDVSA's Petrojam refinery stake
Petroleumworld 02 26 2019
Jamaica´s government will deposit its payments for Venezuelan national oil company PDVSA's (PdV) 49pc stake in the island´s 35,000 b/d Petrojam refinery into an escrow account, effectively keeping the funds out of the hands of the increasingly isolated government in Caracas.
Jamaica, unlike most of its larger neighbors in Latin America, does not recognize Venezuelan opposition leader Juan Guaidó as interim president, and continues to recognize Nicolas Maduro as president.
The island´s acquisition of the refinery stake could nonetheless become the first sale of an overseas Venezuelan asset whose proceeds go to the political opposition.
Payment for the refinery stake will go into an escrow account that "will allow Venezuela to have the funds whenever it wants it," Jamaica´s finance ministry told Argus today, declining to name the financial institution holding the account, its location or the name of the account.
The escrow account will "insulate" Jamaica from US sanctions on Venezuela, a ministry official said.
The US has a broad array of sanctions on Venezuela, most recently levying oil sanctions on PdV and today expanding a list of Venezuelan officials subject to targeted sanctions. Jamaica´s escrow payment shows the impact of Washington´s actions even outside of its legal jurisdiction.
Jamaica had allocated $280mn to pay for the PdV stake, according to the government's budget plans published in February 2018. But Petrojam's value has been "severely eroded" by the delay in upgrading the refinery, energy minister Fayval Williams said.
The February 2018 payment amount "is now way beyond the reality of what is being offered to the Venezuelans," the energy ministry official told Argus , declining to give a new figure.
The PdV refinery stake is a legacy of Venezuela´s flush years when the late President Hugo Chavez promised to upgrade refineries abroad. None of the pledges came to fruition, leaving majority partners or government owners in Jamaica, the Dominican Republic, Curacao and Aruba with abandoned projects.
Jamaica plans to shut down its refinery and convert it to a fuel import terminal at the end of 2019 if it fails to carry out an upgrade. The island's legislators on 22 February approved the government's plan to take over PdV's 49pc stake. The remaining 51pc interest is held by Jamaica's state-owned PCJ.
Jamaica needs "total control of the refinery in order to make urgent decisions" about its future, the government said on 19 February.
Jamaica cannot seek a partner to help with the upgrade "until the untidy relationship with PdV is properly concluded," the energy ministry official said.
The plant will be "redundant" in a few months as it will lose markets for most of its products, the official said, referring to local power plant conversions from oil to gas from LNG, and looming sulfur limits on marine fuel.
PdV and PCJ agreed in 2008 to expand Petrojam's capacity to 50,000 b/d, and to install new units to produce cleaner products.
PdV has quietly acknowledged that it failed to meet its commitments and expected Jamaica to acquire its stake.
At an ongoing meeting of the Lima Group in Bogotá today, US vice president Mike Pence urged members to freeze PdV assets and transfer ownership to the opposition. Jamaica is not a member of the group.
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