Category: Crude Oil

The search for oil offshore southern Jamaica continues as a second series of exploration activities, specifically 2D seismic surveys, are expected to begin before the end of this week.

The exploration activities, which are being underatken by Tullow Oil — an independent oil and gas exploration and production company based in the United Kingdom — as part of a Production Sharing Agreement that it signed with the Petroleum Corporation of Jamaica (PCJ) in 2014, are forms of marine surveys conducted to identify sub-surface structures that may contain hydrocarbon (oil and gas) deposits.

The search is expected to cover a marine area of approximately 32,065 square kilometres of the Walter Morant area, comprising of 11 individual blocks.

In 2015, Tullow Oil conducted a series of exploration activities, including a bathymetric (sea floor) survey, soil sampling and an environmental survey, to assess priority habitats and species, fishing activity and seabed habitats in the area. Tullow Oil acquired 3,000 kilometres of 2D seismic data in the first quarter of last year and is now planning to acquire an additional 670 kilometres of 2D seismic data to further develop an understanding of the area.

The upcoming surveys will be conducted by seismic company Seabird Exploration, through the use of its specially outfitted vessel, the Harrier Explorer, and will focus on gathering data on an area between Blower Rock at Pedro Banks and the offshore seas south of Clarendon.

“We’ve seen some of the sheens from the oil seeps that helps us understand that there might be a source kitchen and that is one of the components necessary. You need to have a kitchen… and we are hoping to go ahead and confirm that, through the seismic programme,” Non-Op Business Unit Manager at Tullow Oil Eric Bauer told the

Jamaica Observer yesterday during a tour of the Harrier Explorer, which was docked at the port of Kingston.

Minister of Science, Energy and Technology Andrew Wheatley, who got a tour of the vessel, stated that he was impressed that they have reached the stage where they are going into 2D seismic studies, which he said will help further the search towards finding prospective oil or gas deposits in the selected area.

“We are cognisant of the fact that it’s a process, but we just want to use the opportunity to keep the Jamaican public informed. It’s a partnership between Government and Tullow, but also a partnership between the Government and people, because we want our citizens to be aware.

“We are now at the stage where we are doing the 2D seismic study and this is going to take around six days for the collection of data, and that data will be analysed over a one-year period and if it is positive enough, we move to the 3D seismic survey,” he told the press.

He explained that the 3D seismic survey gives a more detailed idea as to the layer of land, and if that comes up positive, then they will move towards the actual drilling of the first exploration well.

Wheatley also expressed his appreciation to both Tullow and Seabird Exploration for their efforts to balance environmental consideration along with the country’s own development, through their environmental protection efforts and by forming relationships with fishermen and other relevant stakeholders.

Party chief for the Harrier Explorer, David Healy, also underscored the importance of local involvement, highlighting that one of the two support vessels that will be accompanying the Harrier Explorer is a local one.

“We will need both as it’s very important to have not just somebody who knows the job that we do… but local knowledge is very important as well. So it’s always important for us to bring in as many local people as we can, because they know (the) area, what’s happening and when it happens,” Healy explained.

“When you speak to people, we don’t want them to think that we are just going to come in there and destroy their fishing areas or anything of the sort, we also have to protect our own stuff, and so it’s beneficial to both of us if we can work together, so it’s good support,” he said.

From left: Renford Smith, Marcus Grant and Alan Searchwell connecting the electrical components of a solar panel at the Wigton Renewable Energy Training Lab in Rose Hill, Manchester, recently.

As the debate intensifies over the possible rate increases which could face Jamaicans as more and more customers leave the Jamaica Public Service Company’s (JPS) grid, there are calls for a collaborative approach to the issue.

Manager of the Grid Performance Department at the JPS, Lincoy Small, says the various stakeholders must engage in dialogue to find an approach to provide the cheapest source of electricity to Jamaicans.

According to Small, it cannot be a matter of either renewable energy (RE) or staying on the JPS grid but a combination of the two.

“JPS is not telling people that renewable is not the way to go, because JPS even operates renewable facilities, but the key thing is to get them (grid and RE) working together in tandem to come up with the best synergy of what is best for the customer and what is best for the country,” said Small.

His comments came as Robert Wright, president of the Jamaica Solar Energy Association, told The Sunday Gleaner he has no desire for Jamaicans to leave the JPS grid.

Grid Stability

Wright said he strongly believes RE should be maximised and not just limited to large systems scattered across the island, but smaller systems distributed right across the country.

“When you have these smaller systems spread across the country it provides for better grid stability, and also it allows for more people to participate in clean energy as opposed to simply relying on large solar farms,” said Wright.

But Small said, based on experience due to the unpredictability of RE, the JPS sometimes has to resort to load shedding when customers jump on and off the grid.

He reiterated that JPS’s customers could face additional cost if the impact of RE on the grid is not handled carefully.

“So we are accepting solar power from the customers and as soon as something happens it drops off, and does so much quicker than the grid can even respond on some of those occasions, and as a result you have to be running expensive machines that are quicker to deal with those sun drop-offs or have to shed people’s light,” argued Small.

“And if you run these expensive machines or shed people’s light it means the overall cost to run the grid is going to be absorbed by the customer; you are going to have to pay for a more expensive energy source.”

The JPS executive said the company is actively seeking to incorporate new technology to deal with the loss of the intermittent renewable resources.

But Wright argued that the good news for Jamaicans is that the cost of RE is declining rapidly, enabling it to compete with traditional sources of energy.

“A system that a typical household would need in Jamaica two years ago would cost $1 million; that same system today cost $500,000, so we have seen a significant drop in prices,” said Wright.

“Also what is revolutionary is that the cost of batteries has gone down a lot, so now, even more than before, we will be able to offer that to residential customers at an affordable price.

“What is becoming more available now are systems called micro-inverters, and these allow you to install a very simple rooftop system which is cheaper, faster to install and is more appropriate for affordable housing developments, and so on.”

Batteries Expensive

But Small countered that with solar and wind on average only available for 20 and 35 per cent of the day, respectively, and the cost of buying and replacing batteries being expensive, it might be cheaper for customers to get their power from the JPS grid when RE is not available.

“It (solar) is a good thing to have, but it cannot be operated in isolation, and that is something a lot of people in the solar business not telling their customers,” said Small.

“Because even if you get a panel or a wind turbine and you get the battery, you are going to need a grid to at least charge up that battery for the 80 per cent of the time you are without solar or the 65 per cent of the time you are without wind.

“Plus, you will have to be replacing the battery every two to three years for full value, and batteries cost much more than solar panels.”

Small said the JPS is focused on supplying power as cheaply as possible so persons can take the cheap power from the grid rather than go buy a battery and use the solar power and the wind when it is available.

With Jamaica being a signatory to the Paris Climate Change Agreement, the utilisation of more RE forms part of the National Energy Policy which sees the country aiming to have 30 per cent RE penetration by 2030.

The country is currently at approximately 10 per cent of the quota, with roughly 300 net billing customers (those who have solar systems which allows them to consume energy and sell surplus) and around 10 larger customers.

Gleaner

Solar power is now cheaper than coal in some parts of the world. In less than a decade, it’s likely to be the lowest-cost option almost everywhere.

In 2016, countries from Chile to the United Arab Emirates broke records with deals to generate electricity from sunshine for less than 3 cents a kilowatt-hour, half the average global cost of coal power. Now, Saudi Arabia, Jordan and Mexico are planning auctions and tenders for this year, aiming to drop prices even further. Taking advantage: Companies such as Italy’s Enel SpA and Dublin’s Mainstream Renewable Power, who gained experienced in Europe and now seek new markets abroad as subsidies dry up at home.

Since 2009, solar prices are down 62 percent, with every part of the supply chain trimming costs. That’s help cut risk premiums on bank loans, and pushed manufacturing capacity to record levels. By 2025, solar may be cheaper than using coal on average globally, according to Bloomberg New Energy Finance.

“These are game-changing numbers, and it’s becoming normal in more and more markets,” said Adnan Amin, International Renewable Energy Agency ’s director general, an Abu Dhabi-based intergovernmental group. “Every time you double capacity, you reduce the price by 20 percent.”

Better technology has been key in boosting the industry, from the use of diamond-wire saws that more efficiently cut wafers to better cells that provide more spark from the same amount of sun. It’s also driven by economies of scale and manufacturing experience since the solar boom started more than a decade ago, giving the industry an increasing edge in the competition with fossil fuels.

The average 1 megawatt-plus ground mounted solar system will cost 73 cents a watt by 2025 compared with $1.14 now, a 36 percent drop, said Jenny Chase, head of solar analysis for New Energy Finance.

That’s in step with other forecasts.

  • GTM Research expects some parts of the U.S. Southwest approaching $1 a watt today, and may drop as low as 75 cents in 2021, according to its analyst MJ Shiao.
  • The U.S. Energy Department’s National Renewable Energy Lab expects costs of about $1.20 a watt now declining to $1 by 2020. By 2030, current technology will squeeze out most potential savings, said Donald Chung, a senior project leader.
  • The International Energy Agency expects utility-scale generation costs to fall by another 25 percent on average in the next five years.
  • The International Renewable Energy Agency anticipates a further drop of 43 percent to 65 percent for solar costs by 2025. That would bring to 84 percent the cumulative decline since 2009.

The solar supply chain is experiencing “a Wal-Mart effect” from higher volumes and lower margins, according to Sami Khoreibi, founder and chief executive officer of Enviromena Power Systems, an Abu Dhabi-based developer.

The speed at which the price of solar will drop below coal varies in each country. Places that import coal or tax polluters with a carbon price, such as Europe and Brazil, will see a crossover in the 2020s, if not before. Countries with large domestic coal reserves such as India and China will probably take longer.

Coal’s Rebuttal

Coal industry officials point out that cost comparisons involving renewables don’t take into account the need to maintain backup supplies that can work when the sun doesn’t shine or wind doesn’t blow. When those other expenses are included, coal looks more economical, even around 2035, said Benjamin Sporton, chief executive officer of the World Coal Association.

“All advanced economies demand full-time electricity,” Sporton said. “Wind and solar can only generate part-time, intermittent electricity. While some renewable technologies have achieved significant cost reductions in recent years, it’s important to look at total system costs.”

Even so, solar’s plunge in price is starting to make the technology a plausible competitor.

In China, the biggest solar market, will see costs falling below coal by 2030, according to New Energy Finance. The country has surpassed Germany as the nation with the most installed solar capacity as the government seeks to increase use to cut carbon emissions and boost home consumption of clean energy. Yet curtailment remains a problem, particularly in sunnier parts of the country as congestion on the grid forces some solar plants to switch off.

Sunbelt countries are leading the way in cutting costs, though there’s more to it than just the weather. The use of auctions to award power-purchase contracts is forcing energy companies to compete with each other to lower costs.

An August auction in Chile yielded a contract for 2.91 cents a kilowatt-hour. In September, a United Arab Emirates auction grabbed headlines with a bid of 2.42 cents a kilowatt-hour. Developers have been emboldened to submit lower bids by expectations that the cost of the technology will continue to fall.

“We’re seeing a new reality where solar is the lowest-cost source of energy, and I don’t see an end in sight in terms of the decline in costs,” said Enviromena’s Khoreibi.

Bloomberg

Crude oil and water pour from a well head at an oil field near Baku, Azerbaijan, on Wednesday, Feb. 4, 2009.  Since gaining its independence with the 1991 collapse of the Soviet Union, Azerbaijan has become an important energy exporter and transport hub for Caspian Sea oil and gas. Photographer: Jeyhun Abdulla/Bloomberg News

Last week, I wrote that OPEC needs friends and a miracle to re-balance the oil market. Could President Trump be that unwitting buddy, providing the miracle by tearing up the nuclear agreement with Iran and removing almost a million barrels a day of supply at a stroke?

Trump’s number one priority is to dismantle the “disastrous” deal — although his to-do list might have changed since saying that back in March. As luck would have it, that daily million barrels is about the same size as the cut OPEC needs to make, as I calculated last week.

OPEC’s Deepening Cuts
The cuts OPEC needs to make to reach its output target are just getting bigger and bigger
screen-shot-2016-11-14-at-11-12-23
NOTE: Assumes no further increases from Libya, Nigeria, Iran or Iraq. Cuts based on OPEC secondary source production estimates

Can he do it? Yes, despite assertions to the contrary from Iran’s President Rouhani and a slew of analysts. Here’s how:

The Joint Comprehensive Plan of Action, as the deal is snappily titled, wasn’t ratified by Congress, but brought into force by President Obama via executive order. Trump could rescind that. The fall-out would be messy, but it could be done (in theory).

There’s another way too, enshrined within the agreement itself. The dispute resolution mechanism allows any signatory to refer a perceived breach of the deal’s terms to the joint commission created to oversee the accord. If the complaining party isn’t satisfied with the outcome and believes the breach constitutes “significant non-compliance”, it can refer it to the U.N. Security Council. The Security Council would then vote — and here’s the killer blow — – not on whether to re-impose sanctions, but on whether to “continue the sanctions lifting.”

That might not sound like a big difference, but it’s critical. By framing the vote this way, the U.S. could, in theory, veto the resolution. All the U.N. sanctions on Iran would then be re-imposed. Simples.

That just leaves EU sanctions, which prohibited — among other things — the importing of Iranian oil into EU countries. We might expect some sort of European backlash against unwinding the deal, but it might not be very effective.

The tortuous process of re-establishing Iran’s oil trade with Europe shows that only too clearly. Although there were willing buyers and a very willing seller, the difficulty came in finding insurers who would underwrite the transactions, or shippers to carry the crude. All the big re-insurers had at least some U.S. involvement and they were extremely hesitant to pick up the business — even with the apparent backing of the Obama administration. They would drop the business like a scalding hot potato if the new president killed the deal. End of Iranian oil flows to Europe.

Iran’s Oil Export Surge
Iran’s crude oil exports have risen by more than 1 million barrels a day since sanctions were eased
screen-shot-2016-11-14-at-11-13-37
Source: Bloomberg tanker tracking
NOTE: Other includes Japan, South Korea, Turkey, Taiwan and Syria

Elsewhere, important Asian buyers were threatened in the past with the loss of access to the U.S. banking system to persuade them to cut their purchases of Iranian. This tactic would probably work again.

Of course, Iran would treat the move as grounds to abandon its own commitments. Coming shortly before Iran’s presidential election in May, it would be a huge boost to Tehran’s hardliners. You’d expect life to become more difficult for the Americans in Iraq, where it’s engaged alongside Iranian-backed militias in ousting Islamic State from its last stronghold in the country — another Trump priority.

But at least the crude price would recover, which would be great for U.S. oil, if not so good for motorists. I guess the new president will have to choose who to please.

Bloomberg

At least one local environmentalist has hit back at Sally Porteous, custos of Manchester, over her arguments urging the Government’s authorisation of a coal plant for a US multibillion-dollar investment into the Alpart alumina plant in St Elizabeth.

The Chinese-owned Jiuquan Iron and Steel Company (JISCO) is planning to spend US$3 billion or J$387 billion for the upgrade of Alpart’s alumina plant in Nain and expansion into a special economic zone. More than 3,000 people are expected to be employed over the six-year period of initial investment.

However, a proposal to use a coal-fired plant has angered environmentalists, forcing the Government to come out declaring that any decision on whether to use coal is almost two years away.

Speaking last week at a Gleaner Jobs & Growth Forum in Manchester, Porteous did not hold back.

“While I listen to, and respect, the environmentalists, I sincerely hope that it is not going to be a case of crying wolf and preventing an enormous opportunity for Jamaicans to get work.

“From what I understand, they will not be using coal from China, they will be using coal from Colombia. The Alpart plant itself would be run on oil, and the coal they are going to be using for the coal plant will not emit any worst emissions than oil,” she added, noting that she recently met with Chen Chunming, the JISCO chairman.

But Diana McCaulay, chief executive officer of the Jamaica Environment Trust (JET), said Porteous’ analysis is not deep enough, and so, too, is her view that coal is cleaner than oil.

“People are entitled to their views. But coal is a 19th-Century technology. It is time for us to move forward, and it is time for us to take the position that we want development and we want industry and we want business and we want jobs for our people, but not at the expense of public health and the climate.”

She added: “Jamaica is incredibly vulnerable to climate change. To say that you’re willing to take this risk for some short-term jobs, I find mystifying.”

Jamaica has been going through decades of low growth, double-digit unemployment and crippling debt levels that have created the circumstances for a loan agreement with the International Monetary Fund.”

NOT FIRST TIME

It is not the first time a local official has waded into controversy over securing needed investment for the country. Last year January, in the face of a hotel investment being derail over breaches, Robert Pickersgill, then environment minister, in lifting a cessation order remarked that he took note of the “the substantial value of the project to the Jamaican economy, which outweighs all other consideration”.

In September, Mining Minister Mike Henry said a decision on the coal proposal was at least 18 months away.

Global environmental advocacy group Greenpeace has said constructing the plant would violate the Paris climate agreement aimed at limiting global warming.

Porteous maintained that the Chinese investment represents an opportunity to bring well-needed economic growth to central Jamaica.

“This is the centre of the island’s only chance for revival. We have nothing else. We’re not near a beach, the north coast is taking care of itself very, very well, and I can see very great business going into Kingston.

“We have the opportunity of a lifetime with JISCO coming to take over that plant,” she said.

The Manchester Chamber of Commerce said it is already taking steps to get the parish ready to claim some of the spinoff benefits.

“We’re currently in discussions with investors to try and lure them and encourage them to come into the development of the parish to aid in the development of the parish, especially as it related to three main areas,” said Michael Gottshalk, the chamber’s manager of communications and public affairs.

He said housing to accommodate the expected influx of workers, entertainment and parking are at the top of the list.

Gleaner

Governor of the Bank of Jamaica (BOJ) Brian Wynter and Financial Secretary Everton McFarlane have come out defending the costly ‘insurance’ Jamaica has taken out against oil prices as the expiration date nears and a new one is being prepared for Parliament’s approval.

Hedging is an investment position used to reduce substantial losses that could be incurred based on actual or perceived fluctuating developments.

Last year June, Jamaica entered an arrangement with Citibank, which covers the period from June 2015 to December 2016, and for which the bank has been paid approximately J$3.3 billion (US$27.9 million) in premiums. The arrangement involved three contracts.

Under the arrangement, Jamaica would get a payout if oil prices exceed US$66 per barrel. Up to yesterday, the West Texas Intermediate crude rate used under the hedge put the latest oil prices at US$51.60 per barrel.

McFarlane told Parliament’s Public Administration and Appropriations Committee (PAAC) yesterday that the Parliament would be approached to approve funds to extend the hedge as no provision was made in the 2016-2017 National Budget, approved in May.

“In the coming Supplementary Estimates, we are looking to find the resources so that we’re covered a longer period of time,” he said. He added in a Gleaner interview later that “the details as to the period to be covered and the level of coverage are to be finalised in short order.”

He said the resources would come from budgetary reallocations.

NUMBER OF BARRELS DECLINING

The BOJ Governor also noted that with just two months to go under the last contract, the number of barrels has been declining.

“We’re not covering the full monthly amount now. This is the tail end of what was being hedged over a year ago. It’s a little under 200,000 barrels per month, whereas when you’re covering (fully), you’d be up there at about 700,000 or 800,000 barrels per month,” he said.

Concerns had been raised that because prices have remained low, Jamaica was losing millions under what some critics held was an unnecessary hedge.

PAAC member Franklyn Witter, using similar concerns, questioned whether the risks that gave rise to the hedge still existed.

“You have a projection over the medium term for oil to remain within $52 per barrel, so given that projection, why do you think it would be important to continue with the hedge?”

McFarlane responded that the risks still existed and that “Jamaica’s interest in continuing the hedge is based on the loss of foreign exchange that can entail or the budgetary loss that may arise in the event of significantly higher prices”.

Wynter, meanwhile, noted that investors have questioned how Jamaica would cope when oil prices increase even if other risks are low.

“There are several different answers to give. One answer is to build the Net International Reserves up by an extra billion so that we have it sitting down. The other extreme is to pay the $20 million or $30 million, still a lot of money, which, if nothing happens, you lose the premium, but if that event occurs, you get the payout that someone else has to have to pay you.

“We do look at what makes more sense,” he added. “Accumulating reserves is good for all sorts [of] reasons, but it’s also costly. So what we’ve done is try to strike the balance.”

The hedge has been funded by a special consumption tax on fuel.

The Private Sector Organisation of Jamaica has supported it.

No date has been given for the tabling of a supplementary budget, which the Finance Minister Audley Shaw has indicated will be coming.

In January, while on opposition benches, Shaw said the administration may have been ill-advised in pursuing the hedge.

Gleaner

Representatives from nearly 200 member countries of the Montreal Protocol agreed on a deal to reduce emissions of powerful greenhouse gases at a summit Saturday in Kigali, Rwanda.

The landmark deal will reduce the use of hydrofluorocarbons, or HFCs, the world’s fastest-growing greenhouse gases, the UN Environment Program said in a statement.
HFCs are potent greenhouse gases commonly used in refrigeration and air conditioning instead of other ozone-depleting substances.
“The amendment to the Montreal Protocol on Substances that Deplete the Ozone Layer endorsed in Kigali today is the single largest contribution the world has made towards keeping the global temperature rise ‘well below’ 2 degrees Celsius, a target agreed at the Paris climate conference last year,” the UN agency said in a statement Saturday.
According to the agency, the agreed reduction in HFCs could prevent up to 0.5 degrees Celsius (0.9 degrees Fahrenheit) of global warming by the end of this century. The deal was reached at a Meeting of the Parties to the Montreal Protocol, which started Thursday. Several high-profile leaders attended the meeting, including US Secretary of State John Kerry.

“It is not often you get a chance to have a 0.5-degree centigrade reduction by taking one single step together as countries — each doing different things perhaps at different times, but getting the job done,” Kerry said in a speech Friday.
“If we continue to remember the high stakes for every country on Earth, the global transition to a clean-energy economy is going to accelerate.”
The European Union also welcomed the deal. Miguel Arias Cañete, EU commissioner for climate action and energy, described it as “huge win for the climate” and the first step toward delivering on promises made on climate change in Paris in December.
The agreement in Kigali comes only days after enough countries ratified the Paris Agreement on climate change — which calls for the world to become carbon neutral this century — to become international law.
“Last year in Paris, we promised to keep the world safe from the worst effects of climate change. Today, we are following through on that promise,” said Erik Solheim, executive director of the UN Environment Program.
The White House
Today, nearly 200 countries took an historic step to for future generations by phasing down HFCs: http://go.wh.gov/qnkYar pic.twitter.com/f2wUyaLTt3
President Barack Obama also hailed the Kigali deal.
“Today’s agreement caps off a critical 10 days in our global efforts to combat climate change,” the US leader said. “In addition to today’s amendment, countries last week crossed the threshold for the Paris Agreement to enter into force and reached a deal to constrain international aviation emissions.
“Together, these steps show that, while diplomacy is never easy, we can work together to leave our children a planet that is safer, more prosperous, more secure and more free than the one that was left for us.”

Growing demand for cooling

The rapid increase in HFC emissions — put by the UN agency at 10% a year — is due in part to a growing demand for cooling, particularly in developing countries with hot climates and an expanding middle class, the agency said.
The agreement includes provisions for hot countries to reduce their use of HFCs at a slower rate. Developed countries will start to reduce the use of HFCs by 2019, while developing nations have been given a longer time frame in which to freeze their use of the damaging gases.
Funding for measures to reduce HFC use and research into alternatives is to be finalized next year, the UN agency said.
Kerry recalled how the world’s nations had worked together on climate change since first meeting in the 1980s in Montreal in a bid to protect the world’s fragile ozone layer from ozone-depleting chemicals such as chlorofluorocarbons.
“Thanks to the cooperation and the courage that we summoned at that critical time almost 30 years ago, the hole in the ozone layer — which had been growing at an alarming rate, and which was the reason that we came together — that hole is now shrinking, and it’s on its way to full repair,” he said.
“So we proved that we can make a difference. We proved that science has a value. We proved that if we come together in a forum like this, we can actually do things that affect the entire planet.”
Kerry also acknowledged that HFCs had turned out not to be the best solution for the problem of ozone depletion.
“We replaced the ozone depleting substances, but we came to understand the hard way that HFCs may be safe for the ozone layer, but they are disastrous for our climate, in many cases thousands of times more damaging than carbon dioxide,” he said.
Used in everyday household items such as refrigerators and air conditioners, he said, “in a single year, these substances emit as much CO2 equivalent as nearly 300 coal-fired power plants.”
The head of Rwanda’s climate change unit, Faustin Munyazikwiye, also welcomed the world’s commitment on HFCs after long hours of negotiations in Kigali.
There's a cheap, proven fix to the world's biggest problem

Nearly everyone who studies climate change policy agrees on one thing: To fix this monster of a problem, governments need to put a price on dangerous carbon pollution.

Carbon pricing can take a few forms, and it’s not a cure-all, to be sure. But it is generally considered by climate wonks to be the cheap-but-effectiveholy grail.” That’s why the world should applaud Canadian Prime Minister Justin Trudeau’s decision this week to implement carbon pricing across that country. It’s a move the United States should copy, too. It’s not as cute or heartwarming as when Trudeau welcomed those refugees, perhaps. But it should be seen as just as noteworthy.
The country’s bold policy shift “will help the country’s environment and economy as we compete for the rapidly growing global demand for clean energy,” Matt Horne, associate director of the Pembina Institute, an environmental think tank in Vancouver, said in an emailed statement. In other words: It’s a win for everyone. Not all politicians see it that way, of course, even in green ole’ Canada. “Why is (Trudeau) using a sledgehammer to force the provinces and territories to accept a carbon tax grab and what happened to his promised new era of cooperative federalism?” Conservative MP Ed Fast asked, according to CBC News.
Such complaints are shortsighted, though. They fail to recognize what’s becoming increasingly clear: Unless we do far more to clean up the global economy, we are passing an era of storms, floods and environmental wreckage on to future generations.
Because we’ve been so slow to act on this crisis, bold action is now required. To meet the international goal of limiting warming to 2 degrees Celsius, we need to ditch fossil fuels this century, hopefully by 2050. That goal is written into the Paris Agreement, which, this week, appears poised to become international law. The United States has ratified that agreement, and Canada has signed it, according to WRI. So far, however, pledges to cut pollution fall short of what’s needed.
We need to price carbon to meet those lofty (and critical) goals. Here’s how it works: Pricing carbon is an inherently conservative and market-friendly way to cut heat-trapping emissions that are causing seas to rise, ice caps to melt, wildfires to worsen and so on. These policies work by making a bad thing — burning high pollution fuels like coal, for example — more expensive. By comparison, smarter, cleaner energy choices — wind, solar, etc. — become cheaper. British Columbia already has a successful carbon tax in place. I visited earlier this year and talked to people at a gas station near the US border. I was surprised to find many people who said they wanted to pay the carbon tax — even wanted it to be higher — because it’s good for the environment.
Research shows carbon emission in the province dropped 5% to 15% and fuel use dropped 16% after the tax’s implementation. Yet, the economy continued to grow, slightly outpacing the rest of Canada. The only injustice of the tax is that neighbouring provinces didn’t have to pay it. The revenues from the carbon tax actually go directly back to citizens. These concepts continue to spread, which is cause for hope. Another version of carbon pricing, called cap-and-trade, is in place in California. (Cap-and-trade systems set a maximum amount of allowable pollution and then let businesses buy and sell pollution credits on a market.)
Canada will give provinces the choice of implementing either type of policy. The government says the prices must go into effect by 2018, with the price of carbon starting at a minimum of $10 per metric ton of pollution and rising to $50 per ton by 2022. Some environmentalists have called the plan too lax. It’s not perfect, but it’s far better than the piecemeal approach of waiting for jurisdictions to act on their town.
In the United States, Washington state residents will vote on a carbon tax this November.
I’m hopeful that vote — and this big push from Trudeau’s Canada — will reignite a debate about carbon pricing in the US federal government. Donald Trump and other American politicians can deny the harsh realities of climate science all they want, but that won’t change the urgency with which we need to act.
Outside view of International Conference Center in Algiers, Algeria, where energy ministers from OPEC and other oil-producing countries are gathered to attend the opening session of the 15th International Energy Forum Ministerial meeting in Algiers, Algeria.

OPEC nations reached a preliminary agreement on Wednesday to curb oil production for the first time since the global financial crisis eight years ago, pushing up prices that had sunken over the past two years and weakened the economies of oil-producing nations.

Mohammed Bin Saleh Al-Sada, Qatar’s energy minister and current president of OPEC, announced the deal after several hours of talks in the Algerian capital. The levels must still be finalised at an OPEC meeting in Vienna in November.

The preliminary deal will limit output from the Organisation of the Petroleum Exporting Countries to between 32.5 million and 33 million barrels per day, he said. Current output is estimated at 33.2 million barrels per day.

Benchmark United States crude jumped US$2.38, or 5.3 per cent, to US$47.05 a barrel in New York. Brent crude, the international standard, was up US$2.72, or 5.9 per cent, to US$48.69 a barrel in London.

Long-running disagreements between regional rivals Saudi Arabia and Iran had dimmed hopes for a deal at Wednesday’s talks.

Iran had been resistant to cutting production, as it is trying to restore its oil industry since emerging from international sanctions over its nuclear program earlier this year. According to Wednesday’s deal, Iran exceptionally will be allowed to increase production to 3.7 million barrels a day, according to Algerian participants at the meeting. It is currently estimated to be pumping around 3.6 million.

The OPEC officials met informally on the sidelines of an energy conference in Algiers to try to find common ground on how to support oil markets.

POSITIVE DEAL

“We reached a very positive deal,” said Nigerian Oil Minister Emmanuel Ibe Kachikwu. He said all countries will reduce output but the specific quotas will be set in Vienna in November.

Earlier, Iranian Petroleum Minister Bijan Namdar Zanganeh had played down the OPEC gathering, calling it “just a consultation meeting”.

The price of crude oil has fallen sharply since mid-2014, when it was over US$100 a barrel, dropping below US$30 at the start of this year.

Saudi Arabia, the world’s biggest oil producer and Iran’s rival for power in the Middle East, appeared to be more amenable to some sort of production limit, certainly more so than in April when OPEC failed to agree on measures to curb supplies.

Saudi Energy Minister Khalid Al-Falih this week promised to “support any decision aimed at stabilising the market”.

Over the past couple of years, OPEC countries, led by Saudi Arabia, had been willing to let the oil price drop as a means of driving some US shale oil and gas producers out of business. Shale oil and gas requires a higher price to break even.

Those lower prices have hurt many oil-producing nations hard, particularly OPEC members Venezuela and Nigeria, but also Russia and Brazil.

Gleaner

In this August 2016 photo, New Fortress Energy (NFE) hosts a tour of its Montego Bay terminal. Walking the port are (from left) Brendan McElmurray of NFE, Minister without Portfolio in the Ministry of Economic Growth and Job Creation Dr Horace Chang, Attorney General and Member of Parliament for West Central St James, Marlene Malahoo Forte, Ed Marsh of the Port Authority of Jamaica, Johnathan Klion of NFE, and chairman of the Montego Bay Free Zone, Mark Hart.

The plan to build and operate a liquefied natural gas marine terminal and pipeline by American company New Fortress Energy (NFE) will place the facility five kilometres offshore within the Portland Bight area or close to the Goat Islands, according to the environmental impact assessment (EIA) released this month.

New Fortress will execute the marine terminal and pipeline project through affiliate NFE South Holdings Limited. A public consultation on the project is set for September 28 in Old Harbour.

The environmental report done by CL Environmental Consultants Limited on behalf of New Fortress also estimates that the project will provide nearly US$1 billion worth of value over its lifetime and create about 300 direct jobs in the process. Indirect jobs are estimated at 200 to 600.

“Based on this analysis, the final net present value of the project, after application of social cost benefit analysis, turns out to be US$953.4 million. Hence, the project should be undertaken as it has multiple social benefits which are reflected in the final positive NPV of the project,” the report stated.

In arriving at that final figure, the EIA considered the financial profitability measured at market prices; the net benefit of the project measured in terms of economic prices; then adjusted for the impact of the project on savings and investment, income distribution, the impact of the project on merit goods and demerit goods, and the environmental impact.

LNG plan

The project forms part of the wider plan to bring LNG to the national grid. The marine terminal will feed gas to the new 190MW plant that Jamaica Public Service Company is developing at Old Harbour. New Fortress is also supplying gas to JPS’ Bogue plant from a terminal developed in Montego Bay.

The marine terminal EIA report reasoned that consumers, but in particular the manufacturing sector, would benefit from the lower cost of electricity and the establishment of a more reliable power supply.

“This will lead to more possibility of manufacturing that will lead to creation of employment opportunities for unskilled and skilled workers. This is hard to quantify and hence the number are not adjusted for it. Which means that the social benefit stayed below is a lower bound,” the report stated.

The NFE project involves constructing a marine terminal comprising of a vessel berth and offshore offloading and regasification platform.

“The location will be up for approval by the Port Authority of Jamaica in the Portland Bight area of Jamaica,” said the environmental report.

It adds that the facility will accommodate a floating storage unit or FSU vessel for LNG storage and a LNG carrier delivering gas to the FSU. The platform would contain equipment to regasify LNG as well as related process and safety equipment.

“The liquid gas from the FSU would be carefully regasified and the gas would then be released into an undersea pipeline which will be mostly directionally drilled in basically a straight line from the platform to the vicinity of the JPS plant,” stated the EIA, which adds that the pipeline, at some five kilometres in length, would connect to the JPS gas power plant on shore.

“In addition, the project will construct a new, or refurbish an existing, automotive diesel oil line from storage tanks to the renovated power plant in order to enhance the reliability of the facility in case of LNG delivery interruptions.”

The marine terminal will be constructed offshore in the western side of Portland Bight, at a distance about 200 metres from the shipping channel to Port Esquivel in approximately 14 metre of water depth. “This location offers sufficient depth to berth the FSU and the LNG carrier vessels without the need for dredging, yet has sufficient protection from storm wave impacts as a result of the shape of the Bight,” stated the report.

Energy Policy

NFE is expected to supply JPS as well as potential future industrial users with natural gas. The main objective is to provide the Jamaica Public Service Company’s Old Harbour Plant with a cleaner and more cost-effective fuel in furtherance of the goals of the National Energy Policy.

NFE will conduct the project through its NFE South Holding and with the sponsorship of Fortress Investment Group, a global asset management firm with approximately US$70.64 billion of assets under management and an experienced investor in transportation, infrastructure and energy assets around the world, the environmental report said.

The annual fuel savings from the project is projected at US$74.2 million which represents a 38 per cent reduction in cost. The report adds that, assuming a 75 per cent pass-through to the consumer and a 25 per cent mixed of the generating capacity of the JPS, it will result in a seven per cent reduction is consumer prices. This figure matches the fuel savings published in a separate EIA report on the JPS Old Harbour plant upgrade released in April, as the projects are complementary.

JPS, which has a licence from the Jamaican Government to operate the national electricity grid, is constructing the 190MW plant adjacent to its existing Old Harbour facility in St Catherine, which has the capacity to generate 220MW of power. The current plant will be dismantled once the new one is commissioned.

Gleaner