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Minister of Commerce, Science and Technology, Phillip Paulwell has urged businesses to seize the opportunity that would be presented to them as a result of the recently signed PetroCaribe Agreement, as these entities would have to work with the government in the production of goods and services.
Such goods and services, he said, would be critical in buffering the need for actual cash payment when the time came for the country to pay back its 40 per cent of the cost per barrel of oil to Venezuela under the Agreement over the next 25 years.
Mr. Paulwell was speaking at the Seventh Regional Manufacturers’ Association meeting, which was hosted by the Jamaica Manufacturers’ Association (JMA) at its Duke Street offices today (September 28).
The Minister, who was speaking on the importance of the PetroCaribe Agreement to the region, highlighted some of the important aspects of the agreement. He explained that Venezuela, being a part of the Organization of the Petroleum Exporting Countries (OPEC), could not offer countries discount prices as that country had to abide by the terms of its OPEC arrangements.
“What they have done with PetroCaribe is to offer a financing arrangement that is truly very attractive, because when we purchase a barrel of oil today from Venezuela, and under the agreement we are able to procure up to 21,000 barrels per day, we become liable for 60 per cent of the cost of that barrel. Before now, you would have to pay within 30 days. Under PetroCaribe, we pay for that over 90 days,” he pointed out.
The balance of 40 per cent would be paid for over 25 years, with the first two years being a grace period, the Minister said.
“Therein lies the tremendous benefit of PetroCaribe, because on that 40 per cent, we are able to pay for that over 25 years in cash or in kind. Here is where you have some opportunities as business people to work with the government to see how we can produce goods and services, so that when the time comes for us to pay back this money, we might be able to offset some of the cash payment with sugar, bananas, beer perhaps, and services, etcetera,” the Minister explained.
Noting that PetroCaribe was just one of the initiatives being pursued to prepare and protect Jamaica as oil prices soared, Mr. Paulwell said that much of the recent increases have been fueled by certain factors, over which the country had no influence.
“The instability in the Middle East, the tremendous demand that is growing continuously out of Asia, particularly China and India. We admit that this is going to continue. people are saying that we are not at the end of the cycle as yet and that is quite a sobering thought. We therefore have to recognize that changes will have to take place,” he said.
Pointing out that the rate of interest which the 40 per cent attracted was one per cent over the 25-year period, Mr. Paulwell said this allowed the government to hold onto 40 per cent of the price, because the Petroleum Corporation of Jamaica would have to pay the money up front. “So we will have cash available that we can designate for a number of projects. Very shortly, we will announce some of these projects. The focus is going to be on social and infrastructural development projects,” he added.
The Minister noted that the country would benefit from an upgrade and an expansion in the state refinery, another positive spin-off of the Agreement. “We now have a bilateral agreement that will enable us to jointly develop Petrojam. We could not develop Petrojam alone. The first phase of the development will require over US$200 million and the second phase (which we are about to agree on) will require a further $250 million,” he said.
A local steering committee is working in tandem with the state oil company in Venezuela and contracts will soon be signed for the basic engineering design to be done. Mr. Paulwell said the intention was for ground to be broken by the end of next year, adding that when Petrojam was upgraded, the refinery would be able to process a lower price crude that would enable it to pass on price benefits to the public.
Another very important aspect of the agreement, he said, was the focus on renewable sources of energy. “We cannot continue to have a situation where 90 per cent of our energy comes from fossil fuels. It is bad for the environment, it is also bad in terms of our own national security. We have to now move to greater diversification and Jamaica has put forward itself as the focal point for a major research to be done on renewables,” he said.
“One of the things that we want to ensure is that in every private sector firm, we can assist in doing energy audits to see what steps need to be taken to become more efficient,” the Minister added.
Heads of all countries who signed the PetroCaribe Agreement at Puerto la Cruz, Venezuela on June 29, signed final documents with Venezuelan President, Hugo Chavez, giving effect to the PetroCaribe Agreement between these countries and Venezuela, earlier this month in Montego Bay.