PdV seeks compensation for Jamaica refinery stake

Venezuela's state-owned PdV has filed a claim for compensation from Jamaica for the February 2019 expropriation of the company's 49pc stake in the 35,000 b/d Petrojam oil refinery, Jamaica's energy minister Fayval Williams said.

Jamaica's attorney general is assessing the claim, which was filed in the island's supreme court, Williams said.

"The court will determine when this matter will be heard," Jamaica's energy ministry told Argus today. "Jamaica will argue that there is no merit in this claim. We expect this matter will eventually be determined by international arbitration."

The other 51pc of Petrojam was held by Jamaica's state-owned oil company PCJ. The Jamaican company now owns 100pc of Petrojam, the government said in February.

Jamaica had allocated $280mn for the PdV stake under budget plans published in February 2018. But the delay in upgrading the refinery has diminished Petrojam's value, Williams said in March.

An unspecified amount of money has been placed in escrow to pay for the PdV shares in the refinery, foreign minister Kamina Johnson Smith said in February 2019.

The account is necessary because of US sanctions that prohibit doing business with the Venezuelan government, Johnson Smith said. Venezuela will be paid when the sanctions are lifted, she said.

The US has a broad array of sanctions on Venezuela. The Jamaican case illustrates how Washington´s actions bear weight beyond its legal jurisdiction.

Venezuela's oil ministry told Argus that PdV's Caribbean subsidiary PdV Caribe is seeking $250mn in compensation for the refinery stake. The value represents $50mn for the PdV shares that were "stolen" by Jamaica, and up to $200mn in past-due dividends and estimated real market value. The claim will be pursued to the "highest courts and ultimate consequences," a ministry official said.

Kingston has been at odds to address the problem of its money-losing refinery while steering clear of Venezuela's internal politics. The government rejected a June 2019 request by Venezuela's political opposition to drop the takeover of the PdV stake, but the escrow account keeps the funds out of the hands of the disputed Venezuelan government of President Nicolas Maduro.

The US-backed opposition has been trying to assert authority over PdV's overseas assets since National Assembly speaker Juan Guaido declared his interim presidency in January 2019. PdV's US refining arm Citgo is effectively controlled by the opposition.

Jamaica's government, in common with several other Caribbean island nations that previously benefited from Venezuelan oil aid, is not among more than 50 countries that recognize Guaido as interim president. Nonetheless, Kingston voted in a January 2019 session of the Washington-based Organization of American States not to recognize Maduro's presidency.

Jamaica has repeatedly asserted that PdV reneged on a pledge to upgrade Petrojam to 50,000 b/d, and that this delay had threatened the plant's economic viability and the island's fuel security.

Petrojam is currently processing just over 20,000 b/d of imported crude, but its operating days look to be numbered. A government-appointed committee said on 1 July that the refinery should be mothballed if the government cannot find investors willing to lease it.

The PdV refinery stake is a legacy of Venezuela´s flush years when late president Hugo Chavez promised to upgrade multiple overseas refineries.

None of the pledges materialized, leaving a string of abandoned projects in Jamaica, the Dominican Republic, Curacao and Aruba, among other countries.