Advertisement

More Petrojam concerns raised in Auditor General's report

Robert Morgan, Director of Communications in the OPM and Phillip Paulwell, Opposition Spokesman on Energy
 
There are now question marks over the mechanism used by Petrojam the determine the weekly changes to the ex-refinery prices for petroleum products based on the findings of a probe by the Auditor-General.
 
The audit revealed that there was no indication that the weekly decisions were always transparent.
 
According to the Auditor General's report, Petrojam's pricing mechanism committee reviews the change in the US Gulf Coast reference price and the other pricing elements in order to determine the ex-refinery price.
 
In deriving the final published weekly ex-refinery price, the committee applies a market adjustment in its pricing formula. 
 
The Auditor General noted that the market adjustment is a discretionary value that Petrojam's pricing committee determines. 
 
However, due to the absence of minutes for meetings, the Auditor General could not determine whether the market adjustment was always determined in a transparent manner.
 
According to the Auditor General's report, while Petrojam struggles to implement its refinery upgrade project to create greater efficiency, high levels of oil losses became a major risk to its operations. 
 
Over the last five years, the oil refinery reported that it used 1.5 million barrels of oil, valued at $12.8 billion, during normal refinery production, but could not account for more than 600,000 barrels valued at $5.2 billion. 
 
Petrojam's average annual unaccountable oil loss of 0.75 per cent was almost two times its Key Performance Indicator of 0.4 per cent.
 
Although Petrojam put in place security measures to reduce the levels of unaccountable oil losses, the Auditor General said more decisive actions needed to be taken to address the problem.
 
Petrojam indicated that inventory inaccuracies, under estimated flaring and fuel consumption, vapour losses, unreported as well as uncaptured shutdown, leaks and losses between product transfers were some of the factors contributing to oil losses. 
 
However, the Auditor General said Petrojam did not provide evidence that it analysed these factors and sources of the unaccountable oil loss with a view to better assess and address the problem. 
 
In August 2017, Petrojam appointed an internal oil loss task force mandated to spearhead the implementation of the oil loss reduction measures. 
 
It was mandated to complete eight deliverables between October and February this year.
 
However, it achieved only one.
 
Despite spending almost US$1 million on four of the loss reduction measures, Petrojam was not able to curtail the problem of oil loss.
 
Purchase of oil 
 
Meanwhile, the audit has revealed more alarming information regarding Petrojam's purchase of oil.
 
The refinery could not validate the volume of products received versus volumes ordered.
 
The Auditor General discovered that the State-run oil refinery does not have an efficient system to reconcile the volume of products received against the volume ordered, following the transfer of  products from ships to its storage tanks. 
 
As a result, Petrojam made payments for the volumes billed on the suppliers' invoices without validating the actual amount received. 
 
In keeping with industry practice, Petrojam used independent cargo surveyors to gauge the actual volume of products off-loaded by observing the pre-product and post-product volume readings of the ship. 
 
However, the Auditor General said this method of reading does not accurately compensate for temperature adjustment, which normally results in a disparity between the observed volume off-loaded and the volume actually received. 
 
She said these factors would have accounted for its inventory inaccuracies.
 
In an attempt to minimise the reported losses during transfers for one of its products, Liquefied Petroleum Gas, Petrojam acquired a meter and prover system in 2010, at a cost of almost half a million US dollars to validate the volume of gas received.
 
However, since purchasing the system eight years ago, Petrojam has not commissioned it into use. 
 
Petrojam did not provide a reason for its non-use, but reported that an assessment conducted in February this year at a cost of a little more than US$11,000 revealed that a major component is now obsolete, rendering the system unusable.
 
Top priority 
                  
The Office of the Prime Minister (OPM) has said the Auditor General's report on Petrojam and the Petroleum Corporation of Jamaica is now at the top of Prime Minister Andrew Holness' priority list.
 
Mr. Holness, who currently has responsibility for energy, returned to Jamaica Wednesday morning from a meeting in Trinidad and Tobago.
 
Robert Morgan, Director of Communications in the OPM, said Mr. Holness is now going through the report with a view to making a full statement on the decisions of the government with regards to the issues. 
 
However, he told RJR News Wednesday afternoon that he was unable to say exactly when Mr. Holness will make a public comment. 
 
Mr. Morgan said the administration views the report as one of the most important to be done in the last few years.
 
"We are treating this matter as a priority because we recognise the importance of it. We recognise that there are fundamental issues that need to be dealt with at Petrojam, and we also recognise that the confidence of the public in terms of government institutions are important," he said, adding that the government is committed to "transparency, accountability and probity, and how state entities that use taxpayers' money are managed." 
 
Full forensic audit needed 
 
Meanwhile, Opposition Spokesman on Energy Phillip Paulwell has called for a full forensic audit of the operations of Petrojam.
 
He said the Auditor General's report shows that there are clear systemic issues at the oil refinery.
 
Pointing to the issue of oil losses at Petrojam, Mr. Paulwell said this has been a longstanding problem, which he tried to correct during his time as minister with oversight. 
 
He expressed confidence there was no wrongdoing on the part of the previous Petrojam board appointed under the People's National Party administration. 
 
"In our case, I ensured that my Board behaved above board, that they were at all times accountable to me and I insisted that there was no wrongdoing," he maintained. 
 
In the meantime, he said tax dollars wasted on parties should be fully repaid by those responsible.
 


comments powered by Disqus
More Stories
Most Popular
West Indians lose latest practice game in...
JFF planning benefit fund initiative for...
CWI boss wants more committment from Windies...