US embassy cable - 05KINGSTON1328

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