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$300m gas giveaway - Petrojam, Gov’t gave up chunk of revenue from price cut near elections

Published:Wednesday | May 22, 2019 | 12:00 AMLivern Barrett/Senior Parliamentary Reporter
Petrojam

Petrojam and the Government gave up revenue totalling close to $300 million because of the decision taken by former general manager of the state-owned oil refinery, Floyd Grindley, to shave $2 off the ex-refinery price of gasolene products around the time of the 2016 local government elections and again over a one-month period ending in January the following year. 

But more troubling for some members of the Public Accounts Committee (PAC) of Parliament was that senior executives at Petrojam could not indicate on whose instructions Grindley acted when the price rollback was implemented.

Facing questions from PAC Chairman Mark Golding and Mikael Phillips, the opposition member who first raised the issue, Michael Hewett, manager of logistics and marketing at Petrojam and a member of the company’s pricing committee, recounted that he and the chief financial officer (CFO) at the time raised objections to Grindley’s action, but were overruled.

“Members, the answer is that we are not aware of any instructions [that Grindley was acting on]. The [former] GM took positions and those were the ones that were implemented,” Hewett said during a meeting of the PAC at Gordon House yesterday.

“What was your understanding as to why this was being done?” Golding questioned.

“Both myself and the CFO at the time were clearly of the view that the direction was not in keeping with the normal direction. But there was a decision-making process that was followed, and that was the result,” Hewett responded.

Golding was not satisfied.

“No explanation was proffered to you at the committee as why this was being pursued?” he pressed.

“There was a sense that’s the direction that was desired,” Hewett replied.
email trail

Earlier this month, an email presented to the PAC revealed that on November 23, 2016 – five days before the local government elections – former Petrojam Chairman Dr Perceval Bahado-Singh instructed a top executive at the refinery to slash $2 off the ex-refinery price of several gasolene products.

Another email showed that 14 minutes later, incumbent general manager of Petrojam, Winston Watson, ordered a subordinate to ensure that the chairman’s directive was carried out.

In documents submitted to the PAC yesterday, Watson revealed that Petrojam lost an estimated $42.5 million in revenues and the Government lost an estimated $4.25 million in taxes as a result of the $2 reduction in the price of gasolene, which was in effect for the week of November 24 to 30.

The $2 reduction was again implemented over the period December 8, 2016 to January 11, 2017, this time costing the state-owned refinery $227 million in revenues.

The second round of price cut cost the Government $21.25 million in taxes.

“This matter is getting really absurd that a general manager could take decisions like this,” Phillips lamented.

The documents also show that almost immediately after Grindley took over as general manager in 2016, there were changes to the membership of the pricing committee and how it arrived at the ex-refinery price for gasolene products.

Under the new decision-making process, the general manager had final decision on the price movement, irrespective of whether there was consensus among the four members, which was three fewer than what obtained before Grindley’s tenure.