The Petrojam refinery in Jamaica cannot be renovated as planned due to the acute shortage of funds in Venezuelan coffers, according to reports from local media.
Jamaican Prime Minister Andrew Holness said the project, which had financial support from Venezuela, now faces an uncertain future.
The Petroleum Refinery Expansion Project had been signed off on by both Venezuela and Jamaica in Caracas back in February at a cost of $1 billion.
Currently, Petrojam refines 36,000 barrels of oil per day, but the upgrade would have brought maximum capacity up to 50,000 barrels per day.
The Jamaican government owns a 51 percent stake in Petrojam, while Caracas holds the remaining stake.
Last month, UK-based Tullow announced plans to return to offshore locations off the southern coast of Jamaica to explore a field of "live oil" that was brought to their attention by local fisherman earlier this year. The firm will ramp up their 3D seismic surveys this year in hopes that the floating oil will lead them to vast oil fields the likes of their neighbors to the south and the nearby Gulf of Mexico.
Venezuela, Jamaica's financial overseer, was hit by U.S. sanctions last month, which prevent American financial institutions from offering new funds to Caracas or to its state oil company, PDVSA. The oil firm's U.S. subsidiary, Citgo, was also barred from repatriating profits - further isolating Caracas from international financial markets.
With cash drying up, PDVSA is also struggling to import lighter fuels that are necessary to blend with the country's heavy oil. Some ships are sitting off the Venezuelan coast because of unpaid bills. Meanwhile, because of obligations to creditors, PDVSA is sending crude abroad, leaving little for domestic refining.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More