Petrojam to Spend $1.7 Billion on Capital Works

Petrojam projects a capital expenditure of US$19 million (approximately $1.7 billion) during the 2012/13 financial year, an increase of US$7 million over the previous financial year.

This is outlined in the ‘Jamaica Public Bodies: Estimates of Revenue and Expenditure for the Year Ending March 2013’,  tabled in the House on May 10.

According to the Estimates, the budgeted capital works involve major restoration/enhancement work in respect of the dock, major tank repairs, piping and other sustaining capital activities geared towards improved plant reliability, efficiency and improved refinery margin.

Improving operational efficiencies of core refinery processes remain the key objective of the company for the long term survival and viability. Based on planned capital projects and best practices, the refinery is expected to attain its major performance targets. These include improvements in refinery service factor from 85 per cent  to 90 per cent  and shutdowns from 5 times to 3 times for the year.

With respect to the on-going fluctuation in the price of crude oil, Petrojam has indicated that as the demand for oil recovers, prices are expected to remain strong, in spite of continuing economic uncertainty. Within this context there is an assumption of a stable but strong price market, with slight decline in selling prices of 3 per cent  projected, moving from an estimated US$122.12 per barrel for 2011/12 to US$118.22 per barrel  for 2012/13.

Margins are expected to contract slightly however, with a narrowing of the differential between product and crude prices. Profit before tax for the year is forecast at US$36.33 million, reflecting a US$8 million or 28 per cent  increase on the estimate for 2011/12. This will be derived from a 6 per cent  increase in sales volume, consequently improving revenue and profitability.

Petrojam is a limited liability company which was incorporated in October 1982 as a wholly owned subsidiary of the Petroleum Corporation of Jamaica. In 2006,  49per cent of the company’s shares were sold to Petroleos de Venezuela S.A.

The company operates the only petroleum refinery in Jamaica, processing crude oil into various finished products, including liquefied petroleum gas, auto diesel oil, turbo fuel, heavy fuel oil, asphalt, and unleaded gasoline.

Petrojam sources crude supplies primarily from Venezuela, Mexico, and Ecuador, while finished products are imported mainly from Trinidad and Tobago.

By Allan Brooks, JIS Senior Reporter