KINGSTON, Jamaica
GOVERNMENT is giving US$7 million (approx J$630 million) in revenues to the Russian-based aluminium producer UC Rusal, under a one-year waiver of the bauxite levy, Energy Minister Phillip Paulwell announced yesterday.
The minister, who was speaking at yesterday’s Jamaica House press briefing at the Office of the Prime Minister in Kingston, said the concession was a win-win situation for all.
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“If we didn’t do that I believe the scenario would be quite different today. We wouldn’t have the US$7 million, plus we wouldn’t have the 600 jobs or the production,” Paulwell said.
“We (Jamaica) are now going to be part of the base location for UC Rusal and we will no longer be affected by the swing of supply and demand,” Paulwell said.
He told reporters that a similar deal would have kept the Kirkvine plant in Manchester open if it was not rejected by the previous administration. “In 2010 a similar approach was made to the then government and it was not pursued and that plant is still closed today,” Paulwell said.
It was not immediately clear what proposal was put to the former Jamaica Labour Party Government by the bauxite giant and what was put on the table by the then administration.
In the meantime, Minister Paulwell said no deal has been struck with UC Rusal for its other two plants — Alpart and Kirkvine — because the Government had no sweeteners to offer. “For three years Kirkvine and Alpart have been closed, so there is no levy concession to offer as a sweetener because right now they are not paying anything,” Paulwell said.
The minister announced in Parliament Tuesday that the Government had signed a concessionary agreement to waive the bauxite levy on UC Rusal’s operation at Ewarton, St Catherine from October 1, 2012 to September 30, 2013. He said, too, that an agreement was reached for the employment level at the plant to remain at the current 600 jobs during the period of the concession.
UC Rusal, Paulwell announced, would be investing US$100 million (J$9 billion) in the facility for the construction of a coal-fired electricity-generating plant. Construction is expected to begin next year and earmarked for completion in 2015.
“We wanted a similar definitive timeline for Kirkvine and Alpart, but we are some distance away as it relates to our position and theirs, and that is why the negotiations continue and by the end of November I will report to the country,” he said. Both plants, he said, would also need to have an energy solution as this will help in the creation of more jobs.
“We are seeing with the coal plant at Ewarton, 800 jobs being created, and so if a similar approach is adopted then even before the refinery is established you can have jobs being created by virtue of the energy transformation that has to take place,” he said.
The Government, he said, has given its support to the company to pursue energy options in accordance with the country’s National Energy Policy as well as local environmental standards.
He announced that Cabinet has also authorised negotiations for the sale of the Government’s seven per cent shares in Windalco. He said these negotiations should be completed in November.
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Oil prices plunged Wednesday on more evidence of slower growth in Asia and concerns about Europe‘s ongoing financial crisis.
Benchmark oil fell $3.43 or 3.7 per cent to $88.46 per barrel in afternoon trading on the New York Mercantile Exchange. Brent crude, which is used to price international varieties of oil, fell $2.59, or 2.3 per cent, to $108.98 a barrel in London.
China‘s services sector slowed in September. Analysts say the index was 53.7 compared with 56.3 in August. It was released just days after a survey indicated that the country’s manufacturing continues to slow.
China is the world’s second largest economy and a huge importer of commodities like oil. Slower growth in that country could cut demand for oil.
And it’s not only China. After years of rapid growth, Asia’s developing economies now face much more modest prospects, the Asian Development Bank said Wednesday in a report that slashes growth forecasts for this year and next.
The ADB said growth in developing Asia, which includes giant emerging economies such as India, China and Indonesia, will slow to 6.1 per cent this year from 7.2 per cent last year and only partly rebound to 6.7 per cent in 2013. It had previously forecast growth of 6.9 per cent for 2012 and 7.3 per cent for 2013.
The disappointing reports were overshadowing signs of improvement in US service companies, which employ nearly 90 per cent of the work force. The Institute for Supply Management says its index rose in September at the fastest pace since March.
Meanwhile, the US government says crude inventories fell slightly last week but remain 8.4 per cent above year-ago levels. Gasoline supplies rose.
In other energy futures trading in New York, natural gas is down 16 cents, or 4.6 per cent, to $3.37 per 1,000 cubic feet, a day after hitting a high for the year.
Heating oil has fallen 5 cents to $3.07 per gallon, and wholesale gasoline has dropped 7 cents, or 2.5 per cent, to $2.80 per gallon.
– AP
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Phillip Paulwell addresses the media at a Jamaica House media briefing on October 3. – Norman Grindley/Chief Photographer
Minister says plan to get other players into the electricity sector still on track despite LNG deal
Arthur Hall, Senior News Editor
Energy Minister Phillip Paulwell has underscored his intention to break up the Jamaica Public Service‘s (JPS) monopoly on the transmission and distribution of electricity, even as concerns grow that the company has been given a greater control of the sector.
Several concerns have been aired since Tuesday when Paulwell announced that the Government has decided – as reported by
THE Government says that it is withdrawing from the fuel source selection process to focus on creating a legislative and regulatory energy framework this fiscal year.
However, Minister of Science, Technology, Energy and Mining Phillip Paulwell told the House of Representative yesterday that the Government has not abandoned plans to introduce Liquefied Natural Gas (LNG) into Jamaica by 2015.
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Minister of Science, Technology, Energy and Mining Phillip Paulwell |
He said that plans are well advanced for the introduction of LNG, but given the result of the bidding process, the Government has determined that it has taken the matter as far as it can go. He added that it was also the Government’s view that private electricity and alumina producers would have much more flexibility in procuring fuel supplies and use their international leverage to get the best possible prices.
However, “as a Government, we (will) continue to support and facilitate private investors as we work together to achieve the best possible solutions,” Paulwell said.
He stated that the LNG committee will be immediately disbanded and replaced with a body that includes members of the Jamaica Energy Council, the Office of Utilities and his ministry.
“With the termination of the work of the LNG steering committee, there will be no need to access the remaining US$2.6 million that was originally budgeted,” he explained in reference to the fact that the Government has already spent US$2.8 million of the US$5.4-million proposed budget for the LNG project.
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The government’s unexpected abandonment of Liquefied Natural Gas as a possible alternative to national fuel came as a surprise, following negotiations involving multiple participants dealing with the different aspects of the ambitious concept. We bemoan the significant financial loss related to the hyperactivity over the years involving experts – both foreign and local – with bids and counter bids, all of which, at the end of the day, determined that the project was unaffordable. It was naturally anticipated that impact and feasibility studies at the start of the evaluation process would have indicated the viability of the project. It must be speculated, therefore, that a new influence has come to bear on the project rendering it redundant.
This occurrence has changed Jamaica’s long-standing approach with the objective of obtaining LNG from Trinidad and Tobago as an entitlement, according to the Revised Treaty of Chaguaramas (RTC) and invoking the principle of “national treatment“. It seems that the GOJ would no longer need to press its case to buy LNG at the same FOB Port of Spain price, as granted to the T&T manufacturing sector. Jamaica’s case now rests on equalising the cost differential enjoyed by T&T manufacturers due to the low preferential cost of their electricity, which is alleged to be subsidised.
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HYLTON… had talks in June with two Trinidadian energy ministers |
This tectonic shift in direction requires a revised appraisal of GOJ’s posture towards the defence of domestic manufacturers and exporters competing with duty-free imported T&T goods which are very competitively priced due to their low manufacturing costs enjoyed at home. The GOJ may now consider adopting a defensive mode regarding the ever-growing trade deficit with Caricom and T&T in particular. This necessitates identifying the alleged subsidy granted to the T&T manufacturing sector by the provision of preferentially priced electricity.
As reported in the media, on July 19 two Trinidadian energy ministers visited Minister Anthony Hylton for talks dealing with a possible solution to the perennial deficit problem with T&T. It was stated that the visitors agreed to get back to Minister Hylton in about a month with suggested ways to deal with the problem. To date nothing further has been heard.
Consideing the protracted period that the trade deficit with T&T has been endured by Jamaica’s private sector, the time has come for a “red line” to be drawn on the questionable practice of alleged subsidised goods being imported duty-free, and causing material injury to domestic manufacturers experiencing serious difficulty in competing against such preferentially priced merchandise.
Where such adverse effects take the form of material injury to a domestic industry in the importing country, the Subsidies & Countervailing Measures (SCM) Agreement authorises that country to levy countervailing duties to offset the subsidy. Such duties can be levied only if, after duly conducted investigations, the investigating authorities are satisfied that there is a causal link between subsidised or dumped imports and material injury to the industry concerned. Furthermore, such investigations can normally be initiated only on the basis of a petition from the affected industry alleging that such imports are causing it damage.
The second development, due to the reversal of GOJ’s interest in T&T LNG, is the possibility for Jamaican private sector extractive and power generation industries, considering conversion to LNG sourced from T&T and elsewhere, possibly together with other interested local businesses. As the GOJ would not be involved, such a private sector industrial group may have to negotiate directly with Atlantic LNG which own the four gas-producing trains. However, Atlantic LNG has indicated that its entire product is currently committed to long-term contracts, therefore arrangements would have to be discussed with Atlantic’s existing customers. Such a relationship would be a company-to-company initiative that excludes governments. The base price therefore would be determined by Atlantic LNG’s customer, using one of the four international gas-pricing models.
The question of “national treatment” then arises. As stated by a former T&T energy minister, in coming to a Caribbean price, it would have to be the price as determined by the net back position at the well head. This refers to a pricing mechanism that shares the end market value of gas with all parties in the value chain. The netback pricing formula is a common feature of most, if not all LNG contracts. The well head value of gas is the residual amount after subtracting from market value, the cost of liquefaction, transport, storage and re-gasification. To comply with T&T’s market value as granted to their manufacturing sector, that price could only be obtained from the T&T owned National Gas Company, and it is doubtful if such a price would be acceptable to an Atlantic LNG customer in a company-to-company price negotiation. However, as a Caricom product, the LNG should be duty-free when landed in Jamaica, according to the certificate of origin, for LNG purchased from both the National Gas Company or an Atlantic LNG customer.
Time and space do not permit a full examination of this complex situation dealing with the basic solution to Jamaica’s alternative energy dilemma. It is widely believed that Jamaica’s future prospect for alternative energy rests with the private sector. Now that government has withdrawn from the exploratory exercise with LNG, it is time for the private sector companies to get involved with the LNG option.
Meanwhile, the GOJ is expected to proceed with its negotiations to equalise the cost of Jamaica’s locally produced goods with those imported from T&T.
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JAMAICANS are being encouraged to pay keen attention to energy efficiency when purchasing home appliances and other devices that utilise electricity.
The appeal was made yesterday by officials of the Development Bank of Jamaica (DBJ), which is spearheading a national project that seeks to promote the benefits of energy efficiency and conservation. The project also seeks to encourage Jamaicans to make greater use of renewable energy such as solar, particularly in small and medium enterprises.
In addition to funding from the DBJ, the US$807-million DBJ GreenBiz Energy Efficiency Project receives assistance from the Inter-American Development Bank.
According to DBJ officials, who were guests at the Jamaica Observer weekly Monday Exchange, a number of Jamaican consumers can be described as being penny wise and pound foolish when purchasing appliances such as television sets, air-conditioning units, light bulbs, and refrigerators.
Christopher Brown, energy project co-ordinator at the DBJ, cautioned Jamaicans to pay attention to what he cited as the life cycle cost of a product versus the up-front cost. “Although you spend X amount for a TV now, the cost of electricity for the TV should also be factored in. I know that in Jamaica we are driven by purchasing power, and so one TV might cost one and a half times another, and because of that high capital cost people don’t invest in it. However, at the end of the day, the person who bought the cheaper TV would have paid a lot more, over time,” Brown explained.
His point was endorsed by president of the Jamaica Society of Energy Engineers, Owen Gunning, who pointed to a major difference between the amount of energy consumed by an old refrigerator, as opposed to a newer one. “An old fridge for example would give you about 600 watts, a newer fridge would probably take you down to 250 watts,” said Gunning as he encouraged consumers to look for the energy star on appliances.
He added that the same principle applies to air-conditioning units, some of which continue to be dumped on Jamaica, despite their high levels of inefficiency. “You have what is referred to as an Energy Efficiency Rating and you have people dumping on us AC units that have energy efficiency ratio of 7.5, but you can get energy efficiency ratio of up to 18,” said Gunning, a University of Technology lecturer who explained that the higher the ratio, the less it will cost to operate the unit.
He also chided persons who continue to use electric water heaters and argued that they would save significantly on their electricity bills if they were to invest in solar water heaters.
Gunning also pointed to significant differences in the amount of energy consumed by older type television sets as opposed to LCD and LED televisions.
Meanwhile, the DBJ energy project coordinator explained that a marketing campaign has been launched to support the project. The campaign will appeal to all Jamaicans, but will target operators of small and medium enterprises and will also target school administrators, many of whom have been grappling with massive electricity bills.
Brown indicated that as part of efforts to promote the energy efficiency project a fair will be held on October 12 at Emancipation Park in St Andrew.
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The Government‘s handling of the multi-billion dollar Liquefied Natural Gas, LNG, project is to be probed by Parliament’s Public Administration and Appropriations Committee, PAAC.
This follows a recent newspaper report that the Government has
Residents of Providence in Montego Bay, St James, who have not yet regularised their service with Jamaica Public Service Company (JPS) have until Friday to do so or be left without electricity.
The JPS said sections being targeted are Mahogany Drive, Church Hill Road and an area commonly known as Providence Capture.
It said these are the areas in which the company has been installing its new, more secure Residential Advanced Metering Infrastructure system.
According to the light and power company, it has been reaching out to residents to be a part of the electricity regularisation programme for more than a year.
It said it has offered house-wiring assistance loans and established temporary offices in the community to help resolve any outstanding matters.
editorial@gleanerjm.com
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Communities in ten parishes are without electricity as the rains have impacted Jamaica Public Service Company, JPS, supply systems.
JPS says its technical teams have been responding to reports of