Category: Oil

Talk to a Big Oil executive these days, and the chances are they’ll steer the conversation toward gas.

“In 20 years, we will not be known as oil and gas companies, but as gas and oil companies,” Patrick Pouyanne, chief executive officer of French giant Total SA, told a conference in St. Petersburg last month.

Patrick Pouyanne

Pouyanne and his peers have pitched the fuel as a bridge between a fossil-fuel past and a carbon-free future. Gas emits less pollution than oil and can be burned to produce the power that grids will need for electric cars.

But with the cost of renewable technologies falling sharply, some are warning that the outlook may not be so rosy. Forecasters are beginning to talk about peak gas demand, spurred by the growth of alternative power supplies, in the same breath as peak oil consumption, caused by the gradual demise of the internal combustion engine.

In a long-term outlook published last month, Bloomberg New Energy Finance predicted that gas’s market share in global power generation will drop from 23 percent last year to 16 percent by 2040, and that gas-fired power generation capacity will start to decline after 2031. BP Plc has highlighted “risks to gas demand” as a key uncertainty, including the possibility that consumption plateaus by 2035, “squeezed out by non-fossil fuels.”

If those forecasts play out, it has huge implications for Total, BP and other oil majors already grappling with a possible surge in electric car use. Gas-exporting nations most notably Russia, Qatar and Australia will also be exposed. The global gas industry, based on multi-billion dollar pipelines and export plants, has decades long investment cycles and decisions being made today rely on rising demand until the middle of the century.

The energy transition is “fundamentally a force that cannot be stopped,” Royal Dutch Shell Plc Chief Executive Officer Ben van Beurden said last month. “It is both policy and public sentiment, but also technology that is driving it.” Oil demand will probably peak in the 2030s or 2040s, he said, while “gas will not peak before the 40s if not in the 50s.”

Shell is still betting heavily on the future of gas after last year’s $50 billion purchase of BG Group Plc, but it’s also planning to spend $1 billion a year on new energy technologies such as renewables.

“There’s no question that gas usage declines over time,” Geisha Williams, CEO of PG&E Corp, the largest investor-owned utility in the U.S., said at a conference in San Francisco. “But I don’t think it’s overnight. I think it’s something that we have to manage.”

Until recently, the energy industry had been hoping that natural gas would play the role of a bridge fuel between polluting coal and emissions-free renewables. That’s because producing electricity from gas generates around half the carbon dioxide emissions that burning coal does. The International Energy Agency predicted a “golden age of gas.”

But rapid changes in the economics of renewables, combined with low coal prices, have put that outlook in doubt. The IEA last week predicted global gas demand for power generation would rise just 1 percent a year in the next six years, down from 4 percent a year in 2004-2010.

To read a story on the IEA’s gas outlook, click here.

Driving the shift has been a sharp decline in the cost of building new renewable power –- which, unlike generating electricity from coal or gas, is almost free to run after the initial capital investment has been made.

“Wind and solar are just getting too cheap, too fast” for gas to play a transitional role, said Seb Henbest, lead author of the BNEF report.

The consultant estimates that onshore wind and solar power are already competitive with coal and gas in Germany, and that within five years they will be cheaper to build than new coal and gas plants in China, the U.S. and India. By the late 2020s, it will start to even be cheaper to build new onshore wind and solar power than run existing coal and gas plants.

The trends that are undercutting optimism about the global gas outlook are already playing out in Europe. Natural gas demand remains well below a 2010 peak, as greater energy efficiency, rapid adoption of renewables and resilient coal consumption cut into its market share.

The IEA does not see European gas demand returning to its 2010 high. In its base case scenario, European gas demand would be at the same level in 2040 as in 2020.

Still, most forecasts anticipate strong growth globally for natural gas demand for two decades or more. In the U.S., plentiful cheap supplies thanks to the shale boom helped gas displace coal as the primary fuel for power generation for the first time last year.

The IEA sees global natural gas demand growing almost 50 percent by 2040. Exxon Mobil Corp. sees a 44 percent increase. BP’s base case forecast is for a 38 percent increase in demand by 2035.

Several things could upend those predictions.

Much of the forecast growth in gas demand is dependent on China and India adopting policies that favor gas rather than coal in an attempt to improve air quality. The Chinese government, for example, has set a goal of getting as much as 10 percent of its energy from gas by 2020 and 15 percent by 2030, up from 6 percent in 2015. The country also plans to more than double import capacity by 2025. If that doesn’t happen, gas demand could peak sooner.

And the power sector, while the largest single source of natural gas demand, only accounts for 40 percent of the market. By contrast, nearly 60 percent of global oil use is as a transport fuel and vulnerable to the rise of electric vehicles.

“The future of oil is down to whether electric vehicles take off or not; the future of gas is quite nuanced,” said James Henderson, director of natural gas at the Oxford Institute for Energy Studies. “Gas producers are talking about how to adapt to a different type of gas market.”

To read a story on how the oil industry is pitching to millennials, click here.

While the outlook for wind and solar for power generation appears limitless, renewables will have a harder time replacing fossil fuels in other sectors. The IEA last week said industry will drive gas demand’s 1.6 percent a year growth through 2022 as it replaces crude oil as a raw material for petrochemical manufacturing, especially in the U.S.

“Gas will play a significant role in the decades to come,” Johannes Teyssen, chief executive officer of EON SE, told Bloomberg on May 24. “Coal will decline much, much faster, but gas probably needs also to accept that its own role will not grow to eternity.”

Bloomberg

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

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What will Donald Trump actually do?

It’s a question many Americans are asking themselves now that the U.S. has wrapped up one of its least policy-specific elections ever. The president-elect has offered only the loosest of legislative prescriptions, including whatever plans he may have for the energy industry.

The mystery hangs over turbine manufacturers like Vestas Wind Systems, which fell 12 percent since the election, and coal companies such as Peabody Energy Corp., which soared 73 percent. In his only major energy speech, Trump, 70, said he would rescind “job-destroying” environmental regulations within 100 days of taking office and revive U.S. coal. It’s terrible news for efforts to slow the pace of climate change, but the impact on the renewable energy revolution may be limited. Here’s what it could mean for America’s clean-energy darling, Tesla Motors Inc.:

1. Solar and wind subsidies are probably safe

Tesla is, first and foremost, an electric car company. But on Nov. 17 shareholders will vote on final approval of CEO Elon Musk’s $2.2 billion deal to buy SolarCity Corp. The acquisition would make Tesla the biggest U.S. rooftop solar installer and the first major manufacturer to integrate solar panels with battery backup to extend power into the night.

The swift spread of rooftop solar in the U.S. has been made possible by two government policies. First, most utilities are required to credit homeowners for the excess power they send back to the grid. Those requirements are state-level and shouldn’t be affected by Trump. Second is the 30 percent federal tax credit to offset the cost of installations. The credits were first signed into law under Republican President George W. Bush in 2005 and extended by a Republican Congress late last year. Given their broad support, the subsidies are unlikely to be repealed.

2. Even without incentives, renewables will get cheaper

Solar panel prices have dropped, on average, more than 15 percent a year since 2013. On a utility scale, solar power is already cheaper than coal-fired grid electricity across most of the U.S., after subsidies. Even if the incentives were suddenly removed next year—an improbable and economically destructive scenario—the industry would eventually recover as prices continue to fall.

Incentives are designed to make superior new technologies initially affordable, but once those technologies take off, economies of scale take over.

Source: Bloomberg New Energy Finance

A loss of the federal tax credit could slow the rollout of Tesla’s unusual new rooftop solar shingles. Traditional rooftop panels, however, are almost ready to stand on their own. The payback period currently ranges from about 5 to 10 years, after subsidies and state rebates. If Tesla can achieve the cost savings it hopes for with the merger, it won’t be long before that’s the payback timeline without subsidies.

3. Gasoline fuel-efficiency targets could be dismantled

One of President Barack Obama’s most significant climate achievements was to push through ambitious fuel-economy regulations for U.S. vehicles. The Environmental Protection Agency is scheduled next year to re-asses rules intended to double the average efficiency of cars and trucks to almost 55 miles per gallon by 2025. Those goals could be delayed or dismantled under Trump, accelerating America’s shift to trucks and SUVs. Stocks of Detroit carmakers have predictably surged, while Tesla shares fell 4.9 percent in the two days after the election.

This is obviously bad news for human health and the environment, but it’s impact on Tesla won’t be catastrophic. The price of batteries is dropping rapidly, and by the early 2020s electric cars should be cheaper and better performing than their gasoline-powered equivalents across the board. Lowering efficiency standards will make gasoline cars a bit cheaper to manufacture, but it will also make them more costly to drive over the life of the vehicle.

4. Electric vehicle incentives will expire on their own

The U.S. push for electric cars was set in motion by a $7,500 federal tax break. The Trump administration could eliminate the subsidy, but the impact would be short-lived for electric pioneers including Nissan Motor Co., General Motors Co., and Tesla. That’s because the electric-vehicle subsidies were already designed to phase out after each automaker reaches its 200,000th domestic EV sale. Tesla may be first to cross that finish line, probably in the first half of 2018.

The incentives were intended to overcome steep startup costs and slow initial demand for new electric vehicles. Removing the tax break now would effectively pull the ladder up behind Tesla and make it more expensive for other automakers to transition to battery power, a result that wouldn’t be in anyone’s best interest.

5. States wield the power of their own incentives

Some of the biggest incentives in renewable energy are offered by states, not the federal government. Each state has authority over its own solar and wind rebates, credits for power sold back to the grid, renewable-mix requirements for utilities, and electric-car subsidies. These policies cross ideological borders into deeply Republican states. For example, Louisiana residents can get an additional tax credit of almost $10,000 for buying a long-range electric car. In Colorado, it’s an extra $5,000.

Under Trump, the role of cities and states in regulating pollution and expanding clean energy will increase. So will the disparity between states that prioritize the issue and those that don’t. But again, don’t expect the energy revolution to follow rigid red-state, blue-state definitions. The states producing the most wind power in the U.S. include Texas, Kansas, and Oklahoma. For solar, Arizona, North Carolina, and Nevada are among the top ten. Of those, Hillary Clinton won only Nevada.

6. Keystone’s resurrection won’t make gasoline cheaper

This election was great news for oil companies. Reviving the Keystone XL pipeline, which was rejected under Obama, is on Trump’s list of priorities for his first 100 days. He is also likely to support the beleaguered Dakota Access Pipeline. The company building it, Energy Transfer Partners LP, says business is “only going to get better” under Trump.

These pipelines are hugely symbolic for climate activists who say we can’t keep building infrastructure for oil we can’t afford to burn. But the impact of the pipelines themselves is open to debate. They increase profitability for oil companies, but as oil trades on a global market, the impact on U.S. gasoline prices and by extension demand for electric cars is negligible.

7. Trade barriers with Mexico would hurt Tesla’s rivals

Trump wants to scrap or renegotiate the North American Free Trade Agreement (NAFTA). That could be a dicey proposition for the car industry. Since 2010, nine automakers, including Ford Motor Co., GM and Fiat Chrysler have announced more than $24 billion in Mexican investments. They rely on Mexican plants to produce millions of vehicles and a high volume of parts.

By contrast, Tesla’s manufacturing and assembly are done almost entirely in California and Nevada. Tesla also plans to begin solar-panel production next year at SolarCity’s massive plant in Buffalo, N.Y. Tariffs on solar panels made outside the U.S. would make Tesla’s American-made products more competitive.

In the end, the confluence of all of these forces, but especially the precipitous decline of coal and increasing affordability of renewable sources of energy, is probably too strong to be reversed by the incoming Republican administration. That’s good news for Tesla, and a lot of other companies working to clean up the energy supply.

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

Prime Minister Andrew Holness addresses the opening ceremony of the Organisation of Caribbean Utility Regulators Conference in Montego Bay, St James, yesterday.

Asserting that “we must get it right”, Prime Minister Andrew Holness has urged utility regulators to take seriously their role in helping the Caribbean ease its dependence on oil and embrace technologies and renewables key to energy diversification.

The regulators’ role, he said, is linked to the creation of partnerships with investors who want returns, consumers and governments pushing for the economic development of their countries.

Holness was addressing the opening ceremony for the 14 Organisation Of Caribbean Utility Regulators (OOCUR) conference at the Secrets Resorts & Spa in Montego Bay, St James.

A variety of issues are set for discussion over three days by the more than 160 regional and international experts.

However, Holness, noting the importance of energy to the region’s development and the current high levels of dependence on oil, made it clear that the issue should be at the top of the agenda.

“Energy is clearly the mission-critical frontier,” he said, pointing to the role of Jamaica’s Office of Utilities Regulation (OUR) in helping Jamaica introduce liquefied natural gas (LNG) as part of the energy mix.

“The OUR approved the funding for the conversion of the Jamaica Public Service Bogue plant to enable the move from heavy dependence on oil to diversifying to LNG. I applaud the OUR in this regard for being a strong regulator and helping to make this move a reality – to take Jamaica on this new platform. This is a great example of collaboration among Government, regulator, and utility,” Holness added.

A shipment of LNG supplies arrived in Jamaica last week Saturday, and in two weeks, is expected to be in full use.

TAKE ROLE SERIOUSLY

The prime minister emphasised that regulators have to take seriously their role in helping the Caribbean Community implement the Caribbean energy policy that was approved in 2013.

That policy promotes a shift in sustainable energy through increased use of renewable energy sources and energy efficiency, among other things.

“OOCUR, you have your work cut out for you as not only is Jamaica focused on diversifying its energy mix, so, too, is CARICOM, and we must get it right in the region. Access to affordable energy is a necessary requirement for addressing sustainable development in the region,” Holness said.

He also argued that while there is need for partnership with all stakeholders in the provision of utilities, the providers must insist on self-regulation to ensure that standards are upheld and service delivery is at a high quality.

Earlier, Albert Gordon, chairman of OOCUR, said the conference was happening at a time when regulation was becoming more important for sustainable development.

The conference schedule has placed heavy emphasis on renewable energy and investment.

Jamaica and many other small-island states of the Caribbean are heavy importers of oil, which increases their vulnerabilities to external shocks such as sharp oil price rises. Except for Trinidad and Tobago, the only net exporter of oil and natural gas, all other Caribbean countries are net oil importers.

“For importers other than Suriname, around 87 per cent of primary energy consumed is in the form of imported petroleum products. Imports are mostly diesel fuel for electricity generation, gasolene for transportation, and liquefied petroleum gas used as cooking gas in households,” experts noted in a paper titled ‘Caribbean Energy: Macro-Related Challenges’ released in March by the International Monetary Fund.

This, they said, has led to consistently high electricity rates, which affects the competitiveness and development of CARICOM nations.

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

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.

New Fortress Energy has committed to recurrent environmental monitoring and reporting on site preparation, construction and operation of the liquefied natural gas (LNG) terminal and pipeline project to be developed in St Catherine.

At a public consultation with residents of Old Harbour, the American company also promised, as far as is possible, to train and employ persons from the community to work at the facility instead of bringing in skill sets from outside.

The gas will be transported to Jamaica from the United States or other markets to a new offshore terminal at Portland Bight, where it will be regasified and distributed via an undersea pipeline to the Jamaica Public Service Company (JPS) power plant, said Managing Director of Fortress Investment Group Brannen McElmurray at the forum on Wednesday.

The main infrastructure will include a berth and regasification platform; a natural gas pipeline; and an automotive diesel pipeline and other facilities. The terminal is to be located on the western side of Portland Bight, about 2,000 metres from the shipping channel to Port Esquivel. It will have a depth of about 14 metres, sufficient to berth a floating storage unit for the LNG as well as LNG carrier vessels without the need for dredging.

McElmurray said the Port Authority of Jamaica has reviewed the general location and concluded it does not interfere with shipping activities. The floating unit, an LNG carrier refitted to for use as a storage vessel, will be located far enough from shore and, hence, will not be visually obtrusive.

Experts have recommended a 500-metre safety exclusion zone around the floating unit in which navigation is restricted.

However, environmental consultant Dr Carlton Campbell, whose company CL Environmental Limited undertook the environmental impact assessment presented at the public consultation, said that zone was reduced to 200 metres based on complaints from fisherfolk.

The exclusion zone would have denied them access to regular sites where they normally harvest fish.

However, one resident was against the compromise reached, saying the zone should not have been reduced to facilitate more fishing, given that the 500-metre recommendation was made by safety experts.

The LNG terminal being developed through NFE South Holdings will supply gas to JPS, which itself is finalising plans to build an LNG-fired power plant at Old Harbour.

According to the environmental impact assessment, monitoring of various aspects of the New Fortress project will be done by persons appointed by New Fortress Energy, the JPS, and “capable organisations”, the latter monitoring water quality, salinity and dissolved oxygen, among other conditions.

However, some residents suggested that members of the Old Harbour Bay community should be involved in monitoring as they did not entirely trust the National Environment and Planning Agency and the parish council to do so on their behalf.

McElmurray said some of the equipment for the project will be offloaded at Port Esquivel and transported by trailers to the Old Harbour Bay site, giving rise to concerns about road damage.

Campbell assured concerned residents that mitigation measures have been put in place for noise from heavy equipment, access road to facilitate movement of heavy vehicles and equipment, potential negative impact on marine life and various other environmental issues.

He said horizontal drilling would be used for the pipeline to ensure the reef is not destroyed, and that the developers would have to work with the fishing community to safeguard fish pots set to harvest fish.

In the regasification process, New Fortress will heat the LNG using seawater to convert it to natural gas and then release the water back to the sea. Campbell assured residents the water would be cooler at release and so would not affect marine life.

During construction an estimated 225 to 250 persons will be employed, McElmurray said. New Fortress Energy estimates that it can start delivering natural gas to JPS at Old Harbour by the second quarter of 2018.

 

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