January 2011


Governments and good business people will always hire professional consultants to help them make the best decisions possible. Therefore we are not sure how much of an issue the below story is but if LNG is as bad for JA as it seems then why are we still paying consultants? We need to see what data he has uncovered to keep JA on this LNG path which will cost the country close to a US$1billion to implement with no guarantee LNG prices won’t skyrocket like oil. In other words it’s Monday and I am recovering from jazz fest so let’s all rest off and keep waiting for something substantial from the LNG steering committee to bring some light on this situation hopefully before none of us can afford to pay for our own light.

Describing it as “quite a hefty sum”, Opposition Spokesman on Mining and Energy Phillip Paulwell has questioned the terms of reference which led the Government to be paying US$105,000 (or approximately J$8,9250,000) to an overseas consultant for its liquefied natural gas (LNG) project. On Saturday, the Office of the Contractor General, which is the secretariat for the National Contracts Commission, released the list of approved contracts for December 2010, among them being the engagement of Ernest Megginson by the Office of the Cabinet. Megginson has been hired to work on the country’s LNG project and is being paid the US$105,000 for three months’ service. “I would love to get further details on that, especially in light of other shortcomings with the project. That is quite an hefty sum being paid over, so I would love to see what are the terms of reference,” Paulwell told The Gleaner yesterday. However, Christopher Zacca, head of the steering committee that has been set up to lead the project, says there is nothing unusual about the sum being paid to Megginson. “This is comparable to what you would normally pay an overseas consultant,” Zacca said.

Jamaica Gleaner


The LNG problems continue for the Jamaican government as predicted by everyone currently not in government. After all the guarantees of cheap LNG it seems government cannot even give a price for which they think the LNG will cost. So you are probably asking yourself how could they be pushing something that they are not sure of current or future price? Couldn’t that possibly mean that maybe in the future LNG might be just as costly as currently energy sources since its unpredictable? Trinidad has already warned us that the days of cheap natural gas are gone and don’t look to them for any cheap supply. If you don’t remember click here. Anyway just check out the Gleaner article below and then shake your head wonder what Mr. Zacca’s response will be in tomorrows paper. For something that would be so costly and yet is so unpredictable for Jamaica it begs the question why can’t government let go. Hmmm.

Prospective bidders on Friday complained that two months before the close of tender for the supply of 480 megawatts of new generating capacity to the national grid, they are yet to be provided with the indicative price at which liquefied natural gas (LNG) is to be sourced.

Because of this, the potential bidders warned they may not be able to produce competitive bids.

“Because you don’t have a firm price where fuel is concerned, without knowing what the price of gas is going to be, it is impossible to do a bid which embraces gas as the fuel strategy,” said Wayne McKenzie, general manager of Jamaica Energy Partners.

“In the power-purchasing agreement, gas has to be the fuel of choice.”

McKenzie was addressing the Government’s plan to add LNG to the mix of fuels – replacing up to 15 per cent of oil, according to previous reports – in generating electricity.

Christopher Zacca, head of the LNG steering committee created under the government’s push towards introduction of the gas by December 2012, was present at the consultation, but had no clear answers on the matter.

“The commercial structure of LNG is currently under review and we are working towards an indicative price as soon as possible,” said Zacca.

Neither was the Office of Utilities Regulation (OUR) – which convened the session – able to assist.

“The preference is that we would have the prices before then. If we don’t have those prices, we will use the prices that are in our study to hold a reference across the board,” said Peter Johnson, project manager at OUR.

The government has made LNG a critical component of its new energy policy and there will be a bias for contracts which are in compliance with its use in the assessment of bids for the new 480 MW of capacity.

McKenzie contends that, coupled with other requirements in the request for proposal and power purchase documents, it will result in “very very conservative bids and instead of getting the cost of electricity down, might just get it higher,”.

According to OUR analysts, the use of LNG as the preferred fuel for the 480 MW supply could lead to reduction in the cost of electricity by an estimated 10-20 per cent.

Exclusive right

Jamaica Public Service has the exclusive right to transmit and distribute electricity throughout Jamaica.

According to information obtained from the request for proposal document, the utility, at the end of 2009, had a customer base of 584,623.

The gross peak demand to date, it said, is 644 MW, and the average system load factor is approximately 74 per cent.

JPS supplies this demand from a functional firm-system capacity of approximately 785 MW, of which 190 MW is provided by independent power producers.

Of the 595 MW of capacity owned by JPS, 292 MW of the base-load is more than 33 years old, representing inefficient plants within the system that are now being replaced.

The new capacity is to be supplied in two tranches – 360 MW by January 2014, and the other 120 MW by January 2016.

Bids for the new capacity are to be submitted by the end of March 2011.

Jamaica Gleaner

futuristic gas pump with mp3 download capability
Image by constantskepticupdates via Flickr

EX-IM Bank Jamaica on Tuesday urged Jamaican producers to begin retrofitting their operations for energy efficiency to contain costs, as oil prices climb on the world market.

Crude sold for more than US$91 per barrel Tuesday and is forecast to hit US$100 sometime this year.

EX-IM said producers should act now to access its energy loan to develop renewable energy systems, such as solar, wind, biogas, for electricity conservation to protect against the adverse effects of rising energy costs.

The loans are priced at 9.5 per cent on JMD credit.

Jamaica’s electricity costs are among the highest in the region, due largely to high dependence on imported oil, the bank said in a statement.

“Analysts expect the cost of fossil fuels to increase, and the demand for these products to also increase. That creates the perfect scenario for high prices which can be detrimental to local businesses,” said Ann-Marie Walter Allen, chief marketing officer.

“Business owners can therefore mitigate against those risks by spending the money now to cut dependence on oil and thus see better profit in the future.”

Jamaica Gleaner

Container of Gasoline
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Since Jamaica’s energy mix is over 90% reliant on diesel fuel to provide electricity for the country this should be very troubling. If you think your electric bills are high now Jamaica just wait until oil hits US$100 a barrel this year. Solar for you business now! Since businesses run in the days they can utilize the suns energy. Dont listen to the false reports that solar is not beneficial for Jamaica. Those reports are coming from sources who benefit from high electricity costs. Especially since we at Solar Buzz have secured 4-6% interest rates and up to 15yr terms on overseas commercial green loans. SAVE YOUR BUSINESS NOW BEFORE ITS TOO LATE!!!! Contact us for a free evaluation on our energy management system and solar solution.

Solar for residential will be cheaper when JPS stops blocking the nation from having net billing or net metering. JPS and the govt are not working fast enough to allow Jamaica to save through alternative energy because JPS is greedy and the govt owns 20% of JPS so high prices benefit them both. The government who can help the country solve the energy issue instead of pushing false hopes of LNG, which at best is 5yrs away, will reign supreme. That’s not hard to figure out but instead they push a solution (LNG) that will cost JPS or tax payers US$700 million in upgrades. Why? Take a guess Jamaica. The cost of LNG is not promised and will rise as world demand rises locking us into the a similar oil situation in the future. See the fuel prices in today’s Observers article below and brace yourself for a painful year in electricity costs.

MOTORISTS will pay more at the pump when they fill up tomorrow following the latest ex-refinery prices announced by Petrojam today, among increases for all of its petroleum products.

Kerosene will recorded the largest increase, up $2.69 to $94.02 per litre.

Diesel will increase $1.96 to $91.92 per litre. Meanwhile gasoline 87 and 90 will both rise by 51 cents to $89.82 and $91.48 per litre respectively.

Increasing by the same amount as gasolene, propane (liquid petroleum gas) will cost $37.43. Butane (LPG) will increase by 2 cents to $45.73 per litre.

Marketers will add their respective margins.

Bruce Golding
Image via Wikipedia

The Government’s plan to introduce liquefied natural gas (LNG) has been engulfed in even more controversy in the wake of a damning November 2010 report by a World Bank-recommended team of consultants.

While the consultants acknowledged that LNG was the right choice for the nation over coal, they have suggested to the Bruce Golding administration that it should put its plan on hold until the middle of this year while the Office of Utilities Regulation (OUR) presents a new regulatory framework.

However, the local LNG team is adamant that it is on the correct course and the energy ministry yesterday argued that while some of the changes recommended by the consultants should be implemented, others are to be discarded as they were not sufficiently informed and did not capture all the information gained by the local officials.

With the LNG project now being driven from the Office of the Prime Minister, the team from the energy ministry has sought to convince Golding that it has so far been heading in the right direction.

“That (consultants) assessment report raised several valid questions of the project, for which comprehensive answers were provided,” Energy Minister James Robertson said in a release yesterday.

“Further yet; audits, operational reports and reviews from respected local and international consultants on a sustained basis, inclusive of taking on board the opinions of our independent development partners, continue to be undertaken,” Robertson added.

The energy minister did not release the report of the consultants but The Gleaner has obtained an extensive response provided by the local LNG team, which operated out of the Petroleum Corporation of Jamaica and the energy ministry.

While dealing extensively with many of the concerns raised by the consultants, the local team did not comment on fears about the financial viability of Exmar Consortium, which has already been selected for a lead role in the project.

Parallel moves a must

However, the local team was strident as it dismissed the consul-tants’ call for the project to be placed on hold.

The local team argued that the development of a regulatory framework and the implementation of final rules must be done in parallel with the ongoing efforts to identify the offtakers, develop the commercial framework and land LNG.

The team also scoffed at the claims by the consultants that there was ambiguity and uncertainties surrounding several aspects of the project which could make it a financial disaster for the Government.

According to the consultants, a focused economic and financial feasibility study must be completed quickly before a final design specification for the Floating Storage and Regasification Unit and pipeline system.

But the local team argued that the pipeline would be fully regulated by the OUR while the other areas are being addressed.

The local team was most dismissive of the consultants’ claim that the Government could be exposed to great financial risk for future gas purchase.

This the consultants linked to the failure of the Government to obtain a letter of intent to purchase from the bauxite company Jamalco and its inability to obtain a purchase commitment from the Jamaica Public Service Company.

“This statement is incorrect. The Government of Jamaica will have no financial responsibility for gas purchases,” stated the local LNG team in a retort.

According to the local team, while it remains optimistic that Jamalco will participate in phase one of the LNG project, even without Jamalco, the threshold volume would be sufficient to support the venture.

Christopher Zacca, the head of the government team leading the LNG project, has so far refused to comment on the individual concerns raised by the consultants.

Jamaica Gleaner

Installation of the solar panels on the OSO bu...
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The Bellevue Hospital in Kingston is looking forward to cuts in its electricity bill after receiving a gift of seven solar outdoor lighting system donated by the Petroleum Corporation of Jamaica (PCJ).

The solar panels, which were recently installed, will save the health facility some $700,000 per year, representing approximately five per cent savings.

PCJ Chairman Paris Lyew-Ayee said yesterday that with oil prices on the increase, it is important that the Government be a leader in saving the commodity. (more…)

LNG storage tank at EG LNG
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AN INDEPENDENT consultant has suggested that Government rethink aspects of its liquefied natural gas (LNG) project.

Christopher Zacca, head of the steering committee that has been set up to lead the project, told The Gleaner last week that he was not prepared to speak about the issues that have been raised in the report. He, however, said the advice of the consultants is being followed to ensure the project’s success. (more…)

Big Bend Power Station in Apollo Beach. Figure(1)
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The prime minister got that bit right. The concentration of his administration going forward must be on “stimulating growth and creating jobs”.

For the PM’s goal to be sustainably achieved, though, it will demand a competitive economy. In this regard, we feel that energy is the potential game-changer.

That is why this newspaper insists that while it moves quickly on an energy policy, the administration must do so with due care to ensure that whatever is introduced provides power to consumers at the cheapest price. We are not convinced that this has been the case, so far. (more…)

Aviation Biofuel
Image by Coastal Climber via Flickr

WITH THE cost of crude oil shooting above US$90 per barrel and the likelihood of it holding firm well into the middle of June, the implications for Jamaica, with a high dependency on fossil fuel, are dire. (more…)