Deconstructing The Petrojam Scandal: The Big Questions & Issues

Since May 23, 2018, when Opposition Spokesperson on Science & Technology Julian Robinson sounded an alarm in Parliament about concerns he had over alleged irregularities at Petrojam, the state-owned oil refinery has been the centre of a national scandal. In this article, diGJamaica attempts to break down the key issues and questions raised.

Five Fast Facts About Petrojam

  1. It was built in March 1964 and operated by Esso, and was sold to the Government of Jamaica in 1982.
  2. It is a statutory body, a limited liability company partly owned (51 per cent) by the Petroleum Corporation of Jamaica and PDVCaribe, a subsidiary of Petroleos de Venezuela (the remaining 49 per cent).
  3. Six members sit on its board of directors – three Jamaicans and three Venezuelans.
  4. It is Jamaica’s only oil refinery, and supplies 80 per cent of the local non-bauxite market and 70 per cent of the national market. It supplies a full range of petroleum products to the island.
  5. Its oversight falls under the purview of Jamaica’s Energy Ministry.

The Non-Meeting Board of Directors

The Question: Why hadn’t the board met in nine months? Why were the three Jamaican members of the board asked to resign after the Petrojam scandal broke?

What’s Been Reported:

  • The three Jamaican board members were Dr Perceval Bahado-Singh, Harold Malcolm and Richard Creary.
  • Two of them – Chairman Bahado-Singh and Malcolm – lived overseas.
  • All three resigned after being summoned by Energy Minister Andrew Wheatley to a meeting on Friday, June 15, to answer questions about “several grave and troubling matters at the refinery”.
  • Three new board members were approved by Cabinet on Tuesday, June 19, 2018 comprising Paul Hoo, former Chairman of Supreme Ventures Limited, Ms. Rosie Pilner,  and Mr. Wayne Powell, both former vice presidents of Scotia Bank.
  • Columnist Garnett Roper attributed the boards’s nine-month non-meeting to an inability to answer questions about allegedly mismanaged funds being raised by the Venezuelans for more than nine months now.

The Former Board Chairman’s London Trip Ticket

The Question: Why weren’t established procurement procedures followed when an airline ticket in the amount of over US$7,000 (J$900,000) was purchased for the then board chairman Dr Perceval Bahado-Singh, to attend a function in London on the company’s behalf in February?

What’s Been Reported: 

  • Bahado-Singh, having not attended the meeting in February, did not return the money for the ticket until a full two weeks after Opposition Spokesman on Energy, Phillip Paulwell, raised the matter in Parliament in June.
  • The Public Administration and Appropriations Committee (PAAC) expressed concerned about the breach of procurement procedures, as Petrojam breached government policy regarding foreign travel, which requires airline tickets to be booked through a travel agency.

The Wall Cost Overrun

The Question: Did Cabinet sign off on a contract with triple the costs originally estimated for the erection of a wall at Petrojam, and was procedure followed?

What’s Been Reported:

  • Opposition Senator Lambert Brown raised the issue of the $96-million contract to erect a wall at Petrojam, noting that the original bill of quantity estimated that the project should cost nearly $30 million.
  • Brown asked specifically id Cabinet signed off on this contract, and if the Prime Minister was aware of it, as if he wasn’t, it would be a breach of the procurement rules.

The Costly Insurance

The Question (& What’s Been Reported): Chairman of Marathon Insurance Brokers (MIB), Richard Burgher, is demanding answers from the Government as to why Petrojam turned down a tender offer to provide insurance services for its workers, but awarded the contract to a competitor, even though MIB’s proposal was $420 million cheaper.

Venezuela’s Damning Report

What’s Been Reported:

  • A report by PDVSA, the state-owned Venezuelan oil company which owns 49 per cent of Petrojam, states that Petrojam spent over $14 billion or 74 per cent of its domestic expenditure over a two-year period to last October via direct and emergency sourcing, rather than competitive bidding contracts, even though “there were items that could have been awarded under a competitive method”. The report also suggested ‘less-than-robust record-keeping and data analysis that made audit verification, in many instances, difficult’.
  • Columnist Garnett Roper refers to “protest by the Venezuelans, who are 49 per cent owners of Petrojam along with the Government of Jamaica which owns 51 per cent. … For more than nine months now, the Venezuelans have demanded answers for more than US$10m of value not accounted for. The 15-page memo by Venezuela to their Jamaican counterpart raised questions about US$2m of pilferage and US$5m of crude oil converted to products for which no revenue flows can be traced. The Venezuelan memo is the reason that the Petrojam board has failed to meet for more than nine months.”

Donations made by Petrojam in 2017

The Question: Will Andrew Wheatley provide details about the millions paid out of Petrojam’s accounts for ‘charitable donations’, and how much went to his South Central St Catherine constituency?

What’s Been Reported:

  • In his initial mention of the Petrojam debacle, Julian Robinson said:  “Donations were made, last year of $30 million to a number of entities … where there is no proof that the donations have been made, for example, to a school to undertake a particular project.”
  • Wheatley has responded that donations were made as part of Petrojam’s corporate social responsibility, and that they were made to both PNP and JLP constituencies.

The HR Manager

The Question: Will the Minister state the compensation packages for the current Human Resource Manager and the previous HR manager and, if there is a difference, justify the difference in terms of their competence and experience in industrial relations and personnel matters? The PAAC also wants to know whether the proper procurement procedures were used when the human resources manager was employed at a salary in excess of $12 million.

What’s Been Reported:

  • Yolande Ramharrack, Petrojam human resource manager, started with a salary of $6.9m in 2017, but her total package flew to more than $12m in a year as she benefitted from an increase in the salary band. Then it moved to more than $13.04m when all allowances were added.
  • Ramharrack has admitted to the PAAC that the advertisement to which she responded for the position required a Master in Business Administration (MBA) degree, which she did not have in February 2017 at the time of applying, and is still pursuing.
  • Wheatley has defended her appointment, noting that employee engagement between staff and management has risen under her stewardship from 40 to 65 per cent, and that her increased salary reflected expanded functions.
  • The former HR manager has taken her case to the Industrial Disputes Tribunal, claiming wrongful dismissal.

The Overseas Consultant

The Question: What justification was there for the engagement of an overseas consultant for a project which, the Opposition argues, could have been done by the oil refinery’s parent company, the Petroleum Corporation of Jamaica?

What’s Been Reported:

  • Members of the PAAC have blasted Petrojam for engaging and paying Rodney Davis, a Canada-based consultant, US$17,000 (J$2.2 million) per month for a project which could be handled locally.

A High Employee Turnover Rate

The Question: Why have up to 10 per cent of the technical staff left the company last year? Will the Minister list the management and technical personnel that have left Petrojam since March 2016?

What’s Been Reported:

  • In his initial mention of irregularities at Petrojam, Julian Robinson noted “widespread nepotism, where persons who lack the appropriate experience and expertise are being put into critical positions within that entity. There is victimisation of staff, of persons who are standing up for principle and are either being fired or sidelined”.
  • Wheatley has responded that 42 employees – mainly technical and managerial – have left the company since 2016, mainly for greener pastures.

The Vaccuum Distillation Unit

The Question: Will the Minister describe the process being used to select the contractor to upgrade the Vacuum Distillation Unit at Petrojam?

What’s Been Reported:

  • The PNP said, based on figures presented at Parliament’s PAAC, there could be a cost overrun on another project at Petrojam, specifically concerning the vacuum distillation unit.
  • Peter Bunting charged that Petrojam had engaged a Chinese firm that offered to carry out the work on the VDU project at a cost of US$119 million, or US$40 million more than was proposed by a United States-based entity, resulting in a potential overrun of approximately J$5 billion.
  • Chevril Shaw, the Project Manager for Petrojam’s Vacuum Distillation Unit (VDU) project, and Roderick Codner, the Senior Supervisor in charge of Reliability and Maintenance, both resigned, effective June 30.
  • Wheatley insisted that no agreement had been signed and no money spent on the planned multimillion-dollar upgrade of the vacuum distillation unit (VDU), but that a Chinese firm had been recommended.

Other questions:

  • Why was public relations and marketing firm, Main Events Limited retained at a cost of $13.9 million, and in addition to the retainer, was Petrojam is billed by the company each time Main Events did work on its behalf?
  • How and why a company that goes by the name Asha Corporation, which is incorporated in the United States, was contracted for consultancy and other services, and why cheques for work done were made payable to the consultant who is affiliated with the company, and not to the company itself.
  • Whether an airline ticket was purchased for the chairman to travel to Brazil on company business. The committee also wants to see the total spent on the chairman’s travels, including hotel accommodation. Pointing out that Bahado-Singh was not an executive chairman, (committee member Dr Wykham) McNeill said: “we would like to know the specific expertise that he brings (to the position) that we cannot find in Jamaica.”
    Source: All the news reports listed in diGJamaica’s Timeline: The Petrojam Scandal