Susan Smith, Staff Reporter
Prime Minister P. J. Patterson and Venezuelan President Hugo Chavez, show copies of the energy cooperation agreement under the PetroCaribe Initiative for the supply of 21,000 barrels of crude oil per day to the Petrojam Refinery. The documents were signed last month at the Ritz Carlton Hotel in Montego Bay, St. James.
THE CASH-STRAPPED Government should get about J$5 billion for the rest of this fiscal year or over J$10 billion each year from the PetroCaribe initiative, based on current petroleum prices.
On June 29, the Jamaican Government signed an agreement with the Venezuelan Government under the PetroCaribe initiative, for the supply of crude oil and refined products. The agreement will allow Jamaica to import 21,000 barrels of crude oil per day from Venezuela with 40 per cent of the cost being offered at favourable credit terms.
PRICE DIFFERENCE
Chief Executive Officer for the Petroleum Corporation of Jamaica, (PCJ) Dr. Raymore Wright, said Jamaica purchased crude oil form Venezuela, Mexico and Ecuador at a price which is benchmarked against the New York Sweet Crude petroleum. This is presently in the region of US$65 per barrel.
The price difference in the lower grade of crude oil that Jamaica purchases may vary from US$5 to US$10 per barrel less than the New York Sweet Crude, he explained.
With an estimated purchase price of US$55 per barrel, Dr. Wright believes that the Jamaica will be less burdened to pay the approximately J$26 billion worth of crude Jamaica will import from Venezuela.
"This means the energy bill for Jamaica will be reduced," said Dr. Wright speaking of the next two years. The energy bill stood at US$837 billion for year 2004 and he said he is expecting this year's energy bill to substantially supersede this figure, based on the increase in fuel prices this year.
The 40 per cent of the cost of the crude oil being offered to the Government on credit is a loan which is to be paid back beginning in the next two years at a one per cent interest rate and repayable over 25 years.
Under the pre-existing San Jose Accord, Jamaica got 15 per cent of the price of its crude imports on credit. But this agreement was limited to 7,400 barrels per day, giving the government $1.4 billion.
BENEFITS FOR CONSUMERS?
Effectively, he Government should have an additional $9 billion under the new PetroCaribe agreement, assuming oil prices remain at present levels. If prices rise, the amount it collects will increase. This cash can be used for energy projects as well as for education, housing or health programmes.
Investment research and sovereign risk analyst at Jamaica Money Market Broker, Jason Morris, says that for the immediate future the ordinary man will not feel the benefits.
"This savings will not go back to the consumers," said Mr. Morris.
He said that unless the Government of Jamaica subsidises petrol at the pumps, the price Jamaicans pay for petrol will still be subject to the international fluctuations.
A critical benefit of the PetroCaribe initiative is that it should ease the pressure from the Bank of Jamaica to source the additional large quantities of foreign exchange, Mr. Morris said. Jamaica now has additional time to pay for its energy needs.
