Remembering Zacca’s Petrojam report

UNTIL LAST week, questions about the fortunes and policy direction of Petrojam had receded into the background. The Zacca report on the future of the Government’s oil refinery continued to wander in policy purgatory.

But now that the faux pasby the board of the Tourism Product Development Company (TPDCo) in the Lionel Myrie matter has reawakened memories of Petrojam, it is time for the Government to seriously talk about its plans for the oil refinery. The energy and technology minister, Daryl Vaz, fudged the question when he spoke on his portfolio in Parliament in May.

Petrojam is an ostensibly 38,000-barrels-per-day refinery (it actually produces far less than that), in which Jamaica sold Venezuela a 49 per cent interest but forcibly reacquired it two years ago, purportedly because Caracas could not finance its share of a planned modernisation of the plant. The Jamaica-Venezuela dispute, in part, framed the work of the committee that was led by businessman Christopher Zacca.

Mr Zacca’s analysis was done at a time when Petrojam was mired in scandal. A performance review by the auditor general discovered that Petrojam could not properly account for billions of Jamaican dollars worth of crude purchases; that nepotism and cronyism were rampant in its business practices; and that it regularly flouted its own rules on procurement and on how it made donations.

During the period of the audit, Lionel Myrie was a member of the board of the Petroleum Corporation (PCJ), the now wound-up government entity that was the parent of Petrojam. He was also an aide, self-declared, to the then energy minister, Andrew Wheatley.

Mr Myrie’s name figured in the scandal. He was, it came to light, the person who sent emails to Petrojam’s management soliciting donations for citizens’ groups in Dr Wheatley’s parliamentary constituency, the approval and payment of which were, on the face of it, irregular. Mr Myrie, however, said he merely acted as a ‘courier’ for a local government councillor, who, by the time the matter came to public notice, was already dead.

REIGNITED QUESTIONS

Understandably, when Mr Myrie, now employed to TPDCo, was last week announced to be the agency’s interim executive director, his appointment met a blowback and caused a revisiting of the Petrojam scandal.

It also reignited questions about the status of the Zacca report, which proposed the end to Petrojam’s refining operation, and for the facility to be run as a terminal for imported, refined petroleum products.

The plant was too small and the cost of upgrading too expensive for Petrojam to operate efficiently and profitably as an oil refinery, the Zacca report concluded.

Petrojam turned profits, Mr Zacca’s group said, primarily because of the Government’s tax policy on oil, which included a hefty levy on refined products, called a Customs Administration Fee (CAF). The CAF, it said, provided “a significant tax incentive to refining over the importation of finished products, and this CAF differential represents a major contributor to the economic viability to the refinery”.

The Zacca report argued that the refinery was not “essential to ensuring Jamaica’s energy security”. But the terminal operation, “because of its storage capacity and ability to receive petroleum product cargoes, and to supply distributors via its terminal racks, is deemed to be critical to ensuring energy security for the nation”.

It is surprising that more than two years after the Zacca report and its tabling in Parliament, the Government has provided neither strategy nor direction for Petrojam – unless in secret.

Indeed, when Mr Vaz, now the energy minister for more than a year, spoke about Petrojam in his May parliamentary remarks, he relied on a public “consultation” conducted by the private Caribbean Policy Research Institute (CAPRI), and spoke in generalities of the public’s view of “the strategic importance for Petrojam’s assets to the country”. What that translates to remains murky.

REAL DISCUSSION

Insofar that Mr Vaz dealt with anything substantive, it was about people’s concern that Petrojam’s productpricing tool was opaque, and of the company’s intention to hire a communications expert to help explain “the pricing mechanism used by Petrojam to determine fuel prices and providing ongoing explanation to the public on the process that is involved”.

It may be that the Government has concluded that oil refining should be part of Jamaica’s short-, medium- and long-term energy strategy. In which case, it should say so. It should also explain the basis on which such a decision was arrived at, and where oil refining falls in the energy supply mix against, say, renewables.

If the Government has not yet made a decision, the least it should do is have a real discussion with stakeholders.

Christopher Zacca and company should at least know that their effort was worth something.

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