The Jamaican Cabinet has formally approved the US$63.7 million sale of 49 per cent of the Petrojam oil refinery to Venezuela's national oil company, Petrolos de Venezuela SA (PDVSA) and Caracas is expected to pay over the cash to Kingston within days, Energy Minister, Phillip Paulwell confirmed yesterday.

The PDVSA acquisition, to which ministers gave the greenlight at their weekly meeting on Monday, is a precursor to modernisation and expansion of the 35,000 barrels-a-day refinery and the earnings are expected to go towards Kingston's cost of the project.

"We will be collecting a cheque for $63.7 million for the sale," Paulwell told the Financial Gleaner. "They will be paying up this week."

Jamaica and Venezuela have been negotiating the deal for about a year.

The oil refinery deal is being done under President Hugo Chavez's PetroCaribe energy initiative, under which Jamaica and other Caribbean countries already receive up to 40 per cent of the oil delivered by Venezuela on credit. The remainder of the payment is converted to long-term debt at one per cent. Jamaica last year is projected to have 'saved' an estimated US$180 million from the PetroCaribe programme.

But the Chavez initiative also contemplates other areas of cooperation in energy, such as the Petrojam deal, whose first phase, at a cost of US$250 million, will include expanding the more-than-forty-year-old refinery to 50,000bpd and the installation of a new cataclyctic cracker, which will improve the efficiency of the plant and enhance its ability to refine heavier crudes.

This phase of the project, for which design work has begun, is expected to be completed in 2010.

The next phase, costing another US$250 million, if it goes through, will widen Petrojam product mix, including the manufacture of petro-coke as an energy source for power plants here and for export.

"Everything should be completed by 2011," Paulwell said.

The Petrojam refinery was owned by Exxon Corporation but was acquired by the Jamaican government, through the Petroleum Corporation of Jamaica (PCJ), in the 1980s when the Edward Seaga administration resisted an attempt to raise fuel prices.

There was an attempt at a management buy-out in mid 1990s but that fell through because the buyers had difficulty raising the cash for the purchase and upgrading.