Running Head: Saving Jamaicas Energy Needs

Northern Caribbean University

College of Business and Hospitality Management
Department of Business Administration and Hospitality Management
Subject: Quantitative Business Analysis
Research Project: Petrojam Limited
Prepared for
Kirkland Anderson

Prepared by
Natoya Smith ID # 11022177
Vincent Leslie ID # 11075189
Kati-Ann Green ID # 31050872
Sharon Williams ID # 31062428
Keisha Francis ID #11061173
December 07, 2009

Running Head: Saving Jamaicas Energy Needs

History of Petrojam
Petrojam Limited, Jamaica's only petroleum refinery, is a subsidiary of the
Petroleum Corporation of Jamaica (PCJ), a statutory body created and wholly owned by
the Government of Jamaica. Petrojam was established in 1982 when the Government of
Jamaica purchased the Esso Kingston Refinery, which had been built, and operated by
Esso since March 1964. Petrojam supplies Jamaica with a full range of domestic,
transportation and industrial petroleum products. In addition, approximately 10% of total
sales volume is exported. Export sales in 2007 exceeded US$416 Million.

In 2007, with a capital base of US$87Million, Petrojam generated revenues in

excess of US$1.4 Billion, whilst fulfilling its mission "to supply petroleum products at
internationally competitive prices and quality, while acting at all times in the best interest
of its stakeholders". The company's market focuses primarily on meeting the needs of the
national market, and, involves refining imported crude oil into finished products for the
domestic market, bunkering of marine vessels and aircraft refueling. The refinery's rated
capacity is 35,000 barrels per day with average production ranging between 28,000 and
30,000 barrels per day. In addition, finished products are imported, mainly from Trinidad,
to supplement refinery production. Crude oil is sourced from Venezuela, Ecuador and
Mexico, and refined to produce two grades of gasoline (87 and 90 (R+M)/2 octane),
Jet/Turbo Fuel, Heavy Fuel Oil, Asphalt, Liquid Petroleum Gas, and Automotive Diesel
Oil.

Running Head: Saving Jamaicas Energy Needs

Petrojam also operates a laboratory which provides quality control and

certification services for products manufactured and imported by the refinery; laboratory
service is also provided to Jamaican businesses and the scientific community.

Staffing
The Managing Director reports to the Board of Directors, and is assisted by his
management team of eight (7) functional managers. The company is staffed by
approximately 205 full-time employees who are deployed to the departments of Finance
& Accounts, Logistics & Marketing, Human Resource & Development, Safety &
Environment, Technical Services, Production and Strategic Planning. Petrojam maintains
high standards for quality, health and safety, and environmental protection, and is
committed to delivering high quality products on schedule to the complete satisfaction of
its customers.

Petrojam's business strategy from 2006-2009 focuses on:

Ensuring Long Term Competitiveness

Improving Plant Reliability

Meeting & Exceeding Customer Needs

Maintaining & expanding market share

Increasing Business Process Efficiency and Cost Savings

Strengthening Organizational Support

Shipping Activities

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Petrojam Shipping manages the vessels used in its marine operations. Petrojam
owns a tug/barge and charters vessels as required to effect movement of crude and
finished products into the country. The vessels are also used to make round island
movements with products for Power producers and to Petrojam's Montego Bay Terminal.
Bunkering Operations

A supply agreement with AGEAN Marine Petroleum SA Ltd. of Liberia through

its local subsidiary AGEAN Bunkering Jamaica Ltd. for sale of bunker fuels for vessels
outside of Kingston has resulted in significant increase in sales volume over the last 3
years.

Subsidiaries
Both subsidiaries, JARS and Petrojam Ethanol were transferred to PCJ under a
joint venture agreement between PDVSA and PCJ. Under this agreement, signed in
August 2006, 49% of Petrojam's share was sold to PDVSA.

Petrojam has sought to strengthen its competitive position in the market through the
following measures:

Introduction of E-10 (10% ethanol in gasoline)

The Ministry of Industry, Technology, Energy and Commerce has mandated the
use of ethanol in gasoline in the Jamaican market by 2008. The results of a pilot study
conducted in revealed that cars in the market are suitable for E-10. E-10 will be
implemented on a phased basis with full implementation expected by April 2009.

Running Head: Saving Jamaicas Energy Needs

The long term goal is to blend ethanol produced from local sugar cane, as this will
provide reliable source of raw material in the medium to long term, and will also benefit
Jamaica's sugar industry.
Upgrading of the Refinery
Petrojam has embarked upon a US$720 Million project to upgrade the refinery.
This will increase refining capacity by approximately 40%; reduce importation of
finished products; increase operating efficiency;, improve product yields from crude oil,
and contribute to meeting worldwide mandates for low sulphur fuels which are needed to
protect the environment. Completion date for the first phase of the upgrade is expected in
2013. The update refinery will produce products for local use as well as export. These
include:

LPG Marine Diesel Oil (export)

Gasoline Vacuum Gas Oil (export)

Turbo Fuel Low Sulphur Diesel (export)

Diesel Petcoke (electricity generation)

Significant Milestones of Petrojam

1964

Refinery commissioned by Esso Standard Oil Limited.

1982

Refinery purchased by the Government of Jamaica and renamed Petrojam.

1986 Establishment of Petrojam Ethanol Limited

1996 Constructed and commissioned a second terminal in western Jamaica
1998 Processing Agreement between EDF MAN Alcohols of London

Running Head: Saving Jamaicas Energy Needs

1990- Petroleum Industry deregulated

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1999 Joint Venture arrangement with AirBP, resulted in the formation of JARS
on phasing out of the Top Loading System and implementation of
1999 Embarked
Bottom Loading System which was fully implemented in 2002
2000 Phase out of lead in all gasoline products
of a comprehensive Process Safety Management System
2002 Implementation
(according to OSHA standards)
Million Joint Venture agreement with COIMEX of Brazil, to refurbish the
2004 US$10
ethanol plant and resume production of ethanol
Million upgrade of the refinery's instrumentation system to a computerized
2004 US$3
DCS process control system
with AGEAN Marine Petroleum SA Ltd. of Greece to supply bunker
2005 Agreement
fuels for vessels outside of the Kingston harbor

2006

Agreement signed between the Governments of Jamaica and Venezuela for the
Venezuelan oil Company, PDVSA to purchase to 49% share in the refinery

Running Head: Saving Jamaicas Energy Needs

Who We Are?
Mission
To refine and supply petroleum products at internationally competitive prices and quality,
acting in the best interest of Jamaica and all other stakeholders.
Vision
To be the Petroleum product supplier of choice, best at what we do.
Values
Commitment to Health, Safety and Environment

Comply with design and operating standards

Immediately address Health, Safety and Environment Violations
Report Incidents and hazards promptly
Comply with personal protective equipment and good housekeeping practices
Willingly serve in Health, Safety and the Environment programmes.

Customer Focus
Be accessible to the customer
Be sensitive to the customers needs
Effectively communicate and respond in a timely manner
Routinely seek feedback to improve service
Excellence
Be thorough, accurate and timely in our work
Develop and continuously improve our capabilities
Integrity
Show respect for time, people and property
Be honest, frank and transparent with others
Be fair and even handed with others
Operate to the highest ethical standard
Teamwork
Communicate openly and effectively with each other
Follow through with commitments
Support organizational goals and objectives
Be committed to the success of the company
Share knowledge

Running Head: Saving Jamaicas Energy Needs

Encourage participation of others

Recognize and encourage performance and achievement
Products & Services

Liquefied Petroleum Gases

Liquefied petroleum gas (LPG) is the generic name for commercial propane and
commercial butane. Petrojam supplies both grades to the domestic market. These are
hydrocarbon products derived from the processing of crude oil. The process of light end
fractionization splits the naphtha cut (from the crude oil) into propane and butane (LPG)
for gasoline blending.
Commercial Propane predominantly consists of hydrocarbons containing three
carbon atoms; however propane (C3H8) is the main component. Commercial Butane
predominantly consists of hydrocarbons containing four carbon atoms mainly n- and iso
butanes (C4H10). Both have the special property of becoming liquid at atmospheric
temperature if moderately compressed, and reverting to gases when the pressure is
sufficiently reduced. This liquid state is an advantage in transporting and storing these
products. In the liquid state they are roughly 250 times as dense as they are when they are
gases. Butane is usually supplied to customers in cylinders. Propane can be supplied in
cylinders or in bulk for storage in tanks at the customers premises.
Individual LPG products have distinct uses. For example, propane is widely used
as a fuel in the commercial and industrial sectors, while Butane is mainly used as cooking
gas for residential users.
Motor Gasoline
To produce motor gasoline the naphtha cut is de-ethanized, de-butanized and split
with light and heavy virgin naphthas to produce motor gasoline. Petrojam has eliminated

Running Head: Saving Jamaicas Energy Needs

lead from its gasoline since 2000, and currently supplies two grades of unleaded gasoline:
regular (87R) and premium (90R). Motor gasoline is chiefly used to fuel automobiles and
light trucks for road use. Smaller quantities are used for off- highway driving, boats,
recreational vehicles, and various farm and other equipment.
Kerosene
Kerosene falls within the light distillate range of refinery output that includes
some diesel fuel, jet fuel, and other light fuel oils. The kerosene side stream is hydrofined and run down to tankage as dual purpose kero/turbo fuel.
Kerosene is used for in Jamaica mainly as a cooking fuel and in lamps.
Jet Fuel
The Jet Fuel sold at our airports is a kerosene-based fuel produced in the same
way as Kerosene under stricter quality requirements for use in aircrafts.
Automotive Diesel Oil. Auto Diesel Oil is produced by blending a part or the entire
kerosene side stream with the gas oil side stream. Diesel fuel is used to power diesel
engines in buses, trucks, automobiles, and other machinery. It is also used to fire
industrial and electric utility boilers.
Heavy Fuel Oil
Heavy fuel oil otherwise called residual fuel oil is comprised mainly of
atmospheric pipe still bottoms blended with heavy virgin naphtha and vacuum gas oil to
produce the final heavy fuel oil product. The primary market for this product is the
electric utility companies who use residual fuel oil to generate electricity. Much of the
capacity for electricity generation is oil-fired, so petroleum use by utilities is expected to

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increase along with electricity demand. Presently, this sector depends on petroleum for
about 98% percent of its total energy requirements.
Residual fuel oil is also used as bunker fuel (fuel for ships) and industrial boiler fuel.
Asphalt
The vacuum pipe still produces two grades of penetration asphalt from the
atmospheric pipe still bottoms. Petrojam manufactures two grades of Penetration asphalt
60/70 and 85/100. We also manufacture RS-1 and CRS-1 Emulsion asphalts which are
byproducts of the penetration asphalt. Asphalt is used in the construction of roads; on
roofs as a sealant and to water proof surfaces.
Services
Laboratory Operations
To ensure that products are consistent with specifications, the laboratory tests and
analyses samples from all process unit streams and blended products. The results of these
must meet the refinery target specification and our customer requirements. Each product
batch is certified by the laboratory before being made available to Petrojam's customers.
Incoming shipments of imported finished products including Gasoline, Kerosene,
Automobile Diesel, Heavy Fuel Oil, LPG and Crude Oil are each sampled and analyzed
to ensure that each batch meets the specifications stated by the suppliers.
Test Methods/International Procedures
The methods used are those set by the international regulatory organizations for
the petroleum industry, these include The American Society of Testing and Materials
(ASTM), the Institute of Petroleum Standard (IP) U.K., and others.

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Petrojam has the capability to analyze waste water, ethanol and the following petroleum
products butane, propane, kerosene, turbo Jet fuel, asphalt, diesel oils, residual fuel oil,
motor gasoline, and lubricating oils. The precision and accuracy of Petrojam testing is
verified by comparing our laboratory test results with those of certified petroleum labs in
the United States and Canada.
Test Equipment
Listed below are some of the highly specialized tests which Petrojam is equipped
to perform:
Octane Testing
These tests are carried out with two ASTM-CFR (American Society for Testing
Material and Cooperative Fuels Research) engines which rate motor gasoline to
determine Research Octane Number (RON) and Motor Octane Number (MON)
respectively. Road Octane at the gas pump is the average of RON and MON.
Precision and repeatability of data are maintained at high levels by good maintenance and
regular standardization of engines. Measurement of octane level is critical for ensuring
that there is optimum performance of petrol engine driven motor vehicles.
Chromatography
The Lab has a complement of seven gas chromatographs which are used in the
analysis of Liquefied Petroleum Gases (LPG), Hydrogen, Methyl Tertiary Butyl Ether
(MTBE) and Benzene in Gasoline, and Ethanol. These units are fitted with either thermal
conductivity of flame ionization detector.
Chemical Analysis
Instrumentation used for analyses includes an Atomic Absorption
Spectrophotometer and a Rotating Disc Electrode Emission Spectrophotometer, X-ray

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Fluorescence Analyzer, for metal analyses. Petrojam also has Ultra Violet Scanning
Spectrophotometer for the analysis of organic compounds, boiler feed and waste water.
Random Gasoline Tests
The laboratory performs tests for gasoline quality and octane levels for the Bureau
of Standards and, upon request, from the industry. These results are used by the Bureau of
Standards, Ministry of Industry Commerce and Technology, and the Petroleum Marketing
Companies to verify that the quality of petroleum purchased by the consumer is not
contaminated in transit to them.
Industrial Hygiene
The laboratory is equipped to monitor health hazards in the work
environment. Petrojam has skilled personnel and equipment to conduct the following
analysis:

noise level meters

radiation monitor
microwave radiation detector
Poisonous gas detection, inclusive of Hydrogen Sulphide
Hydrocarbon
Benzene
Sulphur Dioxide
Carbon monoxide and other poisonous gases typical
to the petroleum industry.

We also have portable electronic monitors for Oxygen measurement and heat stress.
Monitoring light levels through illumination surveys is also done at Petrojam.
The Laboratory Team
The laboratory staff is continuously being trained in new Quality Assurance
procedures to ensure future accreditation with the ISO 17025 Quality Management
System. This programme of continuous improvement in the Quality Assurance

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management for the Petrojam Laboratory has provided more reliable service to both
internal and external customers of the Laboratory, and results in significant cost savings
to the Refinery.
The Key Benefits of Standards Accreditation are:

Positive International and Local recognition

Improved Staff Skills
Improved Quality practices
Greater productivity and minimization business interruption through quality
failure.

Laboratory Services
As the sole petroleum laboratory in Jamaica, Petrojam offers laboratory facilities
for product testing and analyses to Jamaican businesses and the scientific community.
Laboratory services are offered for a fee. Results are conditional and are based on the
quality of samples submitted to the laboratory and the limits of the tests.

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Linear Programming
Total Gas Station Limited located on Spur Tree Hill, Manchester is part of a franchise of
operators owned and operated by Phillane Ink. The company currently sells two grades of
petroleum: E (10) and E (90). Each grade consists of three components referred to as C1,
C2, and C3. The maximum quantities available for each component and cost per barrel
are as follows:

Component

Maximum
Barrels/per day

C1
C2
C3

3600
6000
3600

There is a maximum barrel 3600 of C1 available, 6000 of C2 and 3600 of C3. Each
barrel of E10 requires 2 litres of C1, 3litres of C1 for E90. Each barrel of E (10) requires
5 litres of C2 and E (90) requires 4 litres of C2. Finally, each barrel of E (10) requires 4
litres C3 and (E90) requires 2 litres of C3.
Selling price for each barrel of E(10) is $23 and $20 for E(90). The company wants to
produce at least 2500 barrels of each grade of petroleum. Determine the best product mix
that maximizes revenue.

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Network Model
A salesman for Petrojam Limited travels each week from Kingston to Manchester. The
Travel time in hours between parish along the highway is shown along each branch in the
following network.

A. Determine the shortest route from Kingston to each of these Gas Stations in the
network.
B. Develop a minimal spanning tree for this problem.
Node
1

1, 2

Branch
1-2
1-3
1-4
1-3
1-4

Shortest Time
2 hours *
2 hours
4 hours
2 hours *
4 hours

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1, 2, 3
1, 2, 3, 4
1, 2, 3, 4, 6

2-5
1-4
2-5
3-4
4-5
4-6
4-5
6-5

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4.5 hours
4 hours
4.5 hours
2 hours *
5 hours
4.5 hours *
5 hour *
7.5 hours

1,2,3,4,5,6
The minimal spanning tree is as follows:

5
6
2

A. The closest unconnected node to 1 is node 2.

B. The closest unconnected node to 1 and 2 is node 3.
C. The closest unconnected node to 1, 2 and 3 is node 4
D. The closest unconnected node to 1, 2, 3, and 4 is node 6
E. The closest unconnected node to 1, 2, 3, 4, and 5 is node 5

Running Head: Saving Jamaicas Energy Needs

The minimal spanning tree follows: the shortest total distance is 6 hours.
Appendices
Corporate structure

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Management Structure

Winston L. Watson
Managing Director
Safety, Environment & Quality

Leon L. Jarrett
(Manager)
The safety team concentrates on hazard recognition and mitigation for natural events,
such as hurricanes and storm surges as well as, oil and chemical spills, fires fumes and
contamination of water and air. The team is also responsible for the operations of the
laboratory and our security systems.
Human Resource, Development and Administration

Andrea Bent
(Manager)

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The strength of the Petrojam team is the accumulated years of experience of its highly
trained engineers, technicians, production and petroleum processing personnel. The HRD
and Administration team members are involved in recruiting, training, public relations,
compliance and records management and library services to staff.
Strategic Planning

Andrea M. Reid
(Manager)
The department is responsible for the companys corporate business plan, monitoring
company performance and defining development of the company consistent with the
corporate plan.
Logistics and Marketing

Michael A. Hewett
(Manager)
The department is responsible for the purchase of crude and finished products from our
overseas suppliers and the sale of our finished products to the local and overseas market.
A part of the marketing arm focuses on bunker sales to vessels at sea.
Production

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Telroy A. Morgan
(Manager)
The department is staffed by a team of technicians and engineers who are responsible for
the managing the operations of the hydro skimming refinery.
Technical Services

Paul Lue Lim

(Manager)
The department is responsible for the operations of maintenance operations on the plant
and general upkeep of the grounds.
Finance and Accounting

Carlene A. Evans
(Chief Financial Officer (Acting))
The accounting team manages the companys finances and monitors the inventory for the
various products.

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Price Index
Current Price Index ($/L)
11/26/2009

E10
(87)

E10
(90)

Asphalt

Diesel

Kerosene

Butane

Propane

Ex-Ref
Price

53.5308

54.5976

50.8862

54.1952

54.4923

41.9128

32.5129

Tax

16.1061

16.4792

0.3703

15.4145

6.0186

0.0392

0.0392

Total

69.6369

71.0768

51.2565

69.6097

60.5109

41.952

32.5521

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Reference
Taylor, W.B. (2007). Introduction to Management Science. Upper Saddle River, New
Jersey: Prentice Hall.
Http://www.google.com

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