Petrojam rejects Opposition assertion it suffered a $5B loss

State-owned oil refinery Petrojam is rejecting assertions by the parliamentary Opposition that it suffered a $5 billion loss because of its decision to purchase up to one million barrels of oil.

The opposition has asked the auditor general's department to launch a probe into the purchase arguing that the oil, purchased at a cost of US120 per barrel, substantially exceeded ordinary inventory purchases.

In a media release Thursday afternoon, Petrojam said the current total inventory is approximately 2.3 million barrels, which represents nine weeks' supply.

"Holding inventory for this purpose, exposes the company to additional costs and the risks that are inherent in the petroleum industry, specifically, world market price fluctuations. This means that when prices fall, there will be a corresponding impairment of the inventory values. This situation is usually temporary," it said.

However, Petrojam said it does not engage in speculative purchasing of crude oil or finished products.

It said crude oil, which was purchased at approximately US$120 per barrel during the peak of the Russia/Ukraine war, has already been processed to produce finished petroleum products for the Jamaican market.

It further stated that the average purchase price of the current crude inventory is approximately US$80 per barrel.

"The company has not suffered at J$5 billion dollar loss," it stressed.

Explaining the need for a $5 billion loan from the Government, Petrojam said its financial partners did not have the appetite for the increased exposure from the inventory.

"As an entity committed to continuous improvement, an internal review of oil procurements is in progress in order to determine any necessary steps to improve the oil procurement process to achieve the best outcomes for supply chain stability," Petrojam said.

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