NEW RULES FOR PETROLEUM SECTOR

UNCLAS KINGSTON 001328

SIPDIS

E.O. 12958: NA
TAGS: ECON ETRD ENRG JM
SUBJECT: NEW RULES FOR PETROLEUM SECTOR

REF: KINGSTON 294


1. Representatives from ChevronTexaco contacted Emboffs
on May 3 requesting an urgent meeting to discuss
developments in the Jamaican petroleum market. Econoff,
FSN Econ Specialist and FCS Specialist met with Maria Pis-
Dudot, Regional Latin American Manager for Policy,
Government and Public Affairs; Kevin Wolahan, General
Manager for Retail Caribbean; and David Sterling,
ChevronTexaco Marketing Manager and Legal Representative.


2. Pis-Dudot updated Emboffs on the Jamaican Fair Trade
Commission's (FTC) Code of Conduct for the petroleum
industry (reftel). Despite earlier threats of fines and
enforcement, the FTC has let the code remain a voluntary
measure. Pis-Dudot stated that the operations of the
marketing companies had, therefore, not been affected.
However, she said, they feel that it sets a bad precedent
of allowing the GOJ to interfere in private contracts.


3. The current problem, according to Pis-Dudot, lies with
the new regulations enacted by the Bureau of Standards
Jamaica (BSJ) on May 1, apparently in response to
allegations by retailers that they were receiving less
fuel than they had paid for from the marketing companies.
The marketing companies were first informed of these
regulations when they were summoned to a meeting on April

29. At that meeting, the ChevronTexaco representatives
said Dr. Omer Thomas, executive director of the BSJ,
informed the marketing companies that they had until May
29, 2005 to fully comply with the new regulations. Pis-
Dudot complained that Thomas dismissed the protests and
technical questions of the marketing companies as
immaterial. (Note: Emboffs have known Omer Thomas to act
in a high-handed manner on agricultural issues in the
past. End Note.)


4. The new regulations require the marketing companies to
purchase and install flow meters at all of their service
stations, and to apply a temperature correction factor to
all petroleum being sold. Wolahan told emboffs that the
required equipment would require significant capital
investment, and that the cost would be passed to the
consumers. He also stated that the temperature correction
factor wasn't an issue in Jamaica, where the gas is put
into the trucks, offloaded to the stations, and pumped
into cars at the same ambient temperature.


5. Pis-Dudot outlined ChevronTexaco's concerns about the
new regulations as follows: A) The enactment of the
regulations didn't follow standard GOJ procedures, being
gazetted in November, but never going through a draft
status wherein stakeholders could provide feedback; B) The
BSJ is acting as an enforcement agency in the jurisdiction
of the FTC; C) There was no advance consultation with the
marketing companies; D) The new laws will be expensive to
implement, with no benefit to consumers - only to the
retailers; E) Media coverage of the new regulations
expressly implies that the marketing companies have been
stealing from the retailers, which Pis-Dudot strongly
denies; F) Applying a temperature correction factor to
petroleum shipment accounting will result in fewer tax
dollars being paid to the Ministry of Finance by marketing
companies; and G) GOJ interference in private contractual
agreements may cause ChevronTexaco to shift their
investments to other markets.


6. Pis-Dudot and Wolahan said they will bring their
concerns to Thomas' supervisor, Minister Phillip Paulwell
at the Ministry of Commerce, Science, Technology and
Energy (MCSTE),in the hopes that pressure from above will
cause the BSJ to amend or repeal the new regulations.
Should that effort fail, they plan to ask for USG
assistance.

ROBINSON