The Petrojam Refinery. - FileThe state-owned oil refinery, Petrojam, which controls about 80-85 per cent of the petroleum market, expects to gross just under $80 billion from its refined products this year, but will spend $75 million, or 94 cents per dollar earned, to secure the sales.
At the same time, the company projects capital spending of just over $3.04 billion.
Approximately $1.13 billion (US$16.6 million) of the total will finance the upgrading of the refinery, under way since 2005 to bring the Kingston-based refinery up from its 35,000-barrel capacity to 50,000 barrels per day, and install a new cataclyctic cracker, which will improve the efficiency of the plant and enhance its ability to refine heavier crudes.
Another $300 million is earmarked for the roll-out of the ethanol (E10) programme, a project of subsidiary Petrojam Ethanol Limited, to replace MBTE in gasolene with the corn-based additive on a phased basis.
Petrojam has already spent just over $11.8 million on a pilot to test the fuel and will press ahead this year with plans to phase in the fuel at the pumps "starting with the regular 87 octane, and moving to premium 90 six to nine months later.
"This plan will require 1.25 million gallons of ethanol monthly for full implementation," said the agency, which translates to an annual 15 million gallons.
The PEL operation, run by General Manager Ricardo Neins, has a 40-million gallon capacity, with sales last year of 30 million and revenues estimated at $4.45 billion, according to the current Jamaica Public Bodies report.
PEL, which is operated under joint venture with Coimex Trading Company of Brazil, expects that falling ethanol prices which it projects at US$2.20 per gallon, compared to the US$2.36 it averaged in 2006/07, will help boost demand to 40 million gallons, its full capacity.
Net profit fall
As a result, the fuel company anticipates a more than $1.3 billion growth in revenue to $5.83 billion this financial year, but is projecting a $61 million fall in net profit to $318.45 million.
Petrojam is now exploring whether to double the capacity at the existing plant or construct a new 60-million gallon ethanol plant this year.
The agency is now favouring the latter option, in partnership with other investors, the Financial Gleaner has learned, and remains hopeful of getting the plan implemented within this fiscal year.
Otherwise, with other players entering the ethanol market - notably Jamaica Broilers and the existing Jamaica Ethanol Processors Limited - Government may have to tap private producers for supplies.
Industry, Energy, Technology and Commerce Minister Phillip Paulwell, speaking in Parliament on the plans of the refinery, said the investments would be used to improve the long-term competitiveness and survival of the company, business efficiency, security and safety measures.
The refinery upgrade is scheduled for completion in 2008 on the first phase, but the programme might extend to 2011, Paulwell had told the Financial Gleaner in May.
Last year, $594 million (US$8.6 million) was invested in the plant upgrade.
At the start of the programme in 2005, the refinery's turnover just crested $66 billion, but last year revenues climbed by 18 per cent to $77.9 billion in a year of volatile oil price movements.
Petrojam, managed by engineer Winston Watson, actually ended last year with depleted margins and consequently lower net profit of $269 million (2005/06: $717.7m).
This year, sales are estimated to grow at a staid 2.1 per cent to $79.6 billion, and profits to climb 47 per cent to $395 million.
The refinery is debt-free and could easily finance its capital projects from its cash resources - estimated at $6.9 billion on its balance sheet, plus $5 billion in receivables - but indications are it is hunting loans of $1.77 billion this year.
Additionally, the Venezuelans are taking a 49 per cent stake in the refinery, with expectations that the equity it puts in will help finance the plant project.
lavern.clarke@gleanerjm.com
| Petrojam 2006/07 Preliminary Results |
| Revenues | $77.9 billion |
| Gross Margin | $3.99 billion |
| Net Profit | $269 million |
| Net Profit Margin | 0.3 per cent |
| Net Assets | $5.28 billion
|
