Gasoline retailers could scrap a plan to stop accepting credit cards for fuel purchases if financial institutions agree to revise their processing fees.
The Jamaica Gasoline Retailers Association (JGRA), yesterday put on hold, its decision for members to cease accepting Visa and MasterCard credit cards.
The news came just hours before the scheduled implementation.
The suspension is until November 1.
JGRA President Derrick Thompson says if
Avia Collinder, Business Writer
Energy consultant Winston Hay says that while plans for use of LNG for power generation in Jamaica are in principle sound, the uncertainty around the cost of that fuel should not be ignored.
LNG is now selling at record prices in Asia where Japan as a top consumption market reportedly pays the highest price.
Hay, who was once the head of the Office of Utilities Regulation (OUR), said that application of relatively new technology – fracking – in the United States has led to greater extraction of “shale gas” at greater depths than had previously been exploited.
And it has dramatically decreased the price of natural gas in that country.
But the stability of those prices is uncertain and the Henry Hub price reports have already begun to show a significant upward trend, he said.
Production doesn’t affect price
Importantly, he adds, the price of LNG does not vary directly with natural gas production costs.
Flammable gasses trapped in the earth and consisting primarily of methane are found in many areas of the world – the Middle East, Russia, Nigeria, Australia, Nigeria and North America, for instance.
LNG has been used for decades as a source of heat for industrial processes, cooking, household heating, and other uses, but only in relatively small quantities for electricity generation until about the late 1960s, with development of the combined-cycle technology.
“The aggregate costs of delivering the gas to the liquefaction facility, the liquefaction process itself, transport by specially constructed vessels to the FSRU, operational costs of the FSRU and Jamaica Gas Trust, delivery by pipeline (yet to be constructed) to the end-users, etc, will all increase the price of gas from LNG significantly above that of the gas extracted from the earth,” Hay said.
Further, he notes, commodity prices are not necessarily determined by production costs.
“The demand-supply ratio is often more significant. The indications are that the demand for LNG internationally will steadily increase and therefore apply upward pressure on the prices of that commodity,” he said.
Several worldwide developments, he said, are likely to push LNG prices higher:
The Jamaica Gasolene Retailers Association (JGRA), says as of October 1, service stations will no longer accept Master or Visa credit cards for fuel sales.
However, it said traditional debit cards will be accepted.
In August, members of the association agreed to stop accepting credit cards as part of cost saving measures.
The JGRA has complained that the unacceptable processing fees charged by financial institutions are sometimes higher than profit margins.
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Power distributor Jamaica Public Service Company (JPS) remains committed to using liquefied natural gas (LNG) for its planned 360-megawatt power plant despite Government’s expected plan to scrap the supply of gas for the project, according to the utility’s boss.
The private sector can assume the role of supplying the gas, if allowed by Government, JPS Chief Executive Officer Kelly Tomblin said Tuesday.
The company will meet with Government this week to determine its next step.
“The private sector could secure LNG if Government permits it,” Tomblin told
EXIM Bank Jamaica has again cut lending rates on its renewable energy loans for investment in energy-efficient equipment.
The new rate on offer to small and medium enterprises in the productive sector is 8.5 per cent for Jamaican dollar loans, down from 9.75 per cent last September. The USD rate 5.75 per cent.
“We know that energy costs are high and this is adversely affecting the growth of our small and medium enterprises. Not only in them realising profit but in their ability to compete effectively in the international markets,” said Valerie Crawford, manager of trade financing and risk management at EXIM Bank in a bank-issued statement.
The energy loans are available to commercial and industrial users, energy service companies and manufacturers of energy efficiency equipment and devices.
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Worries about weaker economic growth dragged down oil prices Monday.
Oil has now fallen five of the last six trading days. It fell more than six per cent last week.
Benchmark crude fell 96 cents, or one per cent, to finish at US$91.93 a barrel on the New York Mercantile Exchange. Prices for other petroleum products dropped, too.
In London, Brent crude dropped US$1.61 at US$109.81 a barrel on the ICE Futures exchange.
Germany delivered the latest dose of gloomy economic news, with its index of business confidence falling for the fifth month in a row. Germany is an economic powerhouse, but 43 per cent of its exports go to its euro partners. And growth is stalling across the other 16 countries in the Eurozone.
Slower economies mean less demand for oil, pushing prices down.
Phil Flynn, a senior market analyst for Price Futures Group, said he’s surprised prices haven’t fallen further. He said one reason could be that commodity funds have not been bailing out of oil.
Still, oil prices have been under pressure from worries about Europe. The dollar has been stronger, which makes oil cheaper for holders of other currencies.
“You’re seeing demand destruction around the globe,” he said. “You’ve got Saudi Arabia saying they’re going to pump oil until the cows come home.” All of that drives down oil prices, he said.
Heating oil dropped 2.2 cents to US$3.0987 per gallon, wholesale gasolene decreased 2.49 cents to US$2.9176 per gallon and natural gas ended down 4.8 cents to US$2.837 per 1,000 cubic feet.
– AP
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Opposition Spokesman for Industry, Commerce and Energy, Gregory Mair says he’s seriously concerned with reports that the government has abandoned plans to introduce Liquefied Natural Gas.
In a statement today, Mr. Mair said Energy Minister, Phillip Paulwell needs to address the country forthwith on what he calls a disturbing development and state clearly the government
There’s a warning that Jamaica could suffer some fallout in the international investment community arising from the Government’s decision to change plans for the implementation of the multi-billion dollar liquefied natural gas, LNG project.
According to Opposition Spokesman on Energy, Gregory Mair, the country’s image will be tarnished in light of the fact that an international company had been selected for the project.
In July, Korean conglomerate Samsung Corporation was declared the preferred bidder for the development and operation of
Concern is mounting about the medium-term effects of a reported decision by the Government to change plans for the implementation of the multi-billion dollar liquefied natural gas, LNG, project.
Some members of the small business sector feel their operations will crumble if they continue to depend exclusively on the Jamaica Public Service Company, JPS, for electricity.
Chairman of the Energy Committee of the Medium Small and Micro -sized Enterprises, MSME, Alliance, Anthony Morgan, states that his members are in a state of limbo based on the report, and need clarification from the Government.
He explains that changes need to come soon or many jobs will be lost.
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Tyrone Reid, Sunday Gleaner Reporter
A comprehensive operations audit of Jamaica’s state-owned oil refinery has questioned the legality and financial oversight of several mega contracts totalling hundreds of millions of US dollars per annum that are being entered into by Petrojam officials.
This is among a number of concerns contained in a “strictly confidential” report prepared by Centennial Group, a consulting firm from Washington, DC, which conducted a special operations audit of Petrojam Limited at the request of Finance Minister Audley Shaw.
The inspection was spawned by a massive $7.3 billion loss incurred by the company in the 2009 financial year.
The consultants, who stated that Petrojam could have substantially reduced its losses during a particular four-month period when the refinery was operating at high negative margins by increasing its reliance on imports to meet local demand, determined that several critical issues in the petroleum sector were too murky for comfort.
“High-value contracts for purchase of crude oil and petroleum products amounting to hundreds of millions of US dollars annually are being negotiated by a few Petrojam officials without any external oversight. Delegation of such responsibility needs to be established more carefully with proper oversight for better transparency,” the consultants said.
No authority to sign
The report also stated: “The legality of some contracts seems questionable with the system of delegation of financial authority being not clear. Amendments and/or renewals of some very high-value contracts have been done by some officers who may not have the required financial authority to sign these contracts.”
The consultants recommended that “a competent and authorised team of strong negotiators with skills in the oil trade with GOJ representation in the team should carry out these negotiations”.
“This will get the best possible terms for the country and would ensure adequate transparency in the deals. Further, in cases where petroleum products are imported without competitive bidding, as in the case of imports from Petrotrin, increased oversight is necessary by the Ministry of Energy and Mining, PCJ and Petroleos de Venezuela (PDVSA),” the report stated.
Commenting on the report, Winston Watson, general manager of Petrojam Limited, insisted that no unauthorised personnel signed a contract on behalf of the company. “I haven’t seen any document to substantiate that,” he told The Sunday Gleaner. In an earlier response issued by Petrojam on Friday, the company said it had an internal governance policy that was detailed in its chart of accounts with signing authority and delegation clearly identified.
“This chart of account has been approved by the board of directors and is strictly adhered to. At no point in the audit did the Centennial team request documentation on proof of signing authority; nor is Petrojam aware of any particular contract, the legality of which could be in any doubt by virtue of its signatory,” the Petrojam statement said.
The consultants also pointed out that the freight rates for product imports were unusually negotiated based on Petrojam’s own assessment. “This lacks transparency and evaluation of freight rates should be based on international benchmark rates published by Worlds Scale and AFRA ,” the consultants stated. AFRA, the average freight rate assessment, is one of the methods used to determine crude-oil freight rates.
In addition to those issues, the consultants highlighted that the demurrage – the charge for detention in port of a vessel by the ship owner beyond the time allowed or agreed upon – paid by Petrojam for vessels bringing in petroleum products appears to be excessive, running into millions of US dollars.
“Although Petrojam’s explana-tion is that high demurrage is the result of the limited capacity of the terminal, the dock occupancy was only 78 per cent in 2006, 83 per cent in 2008 and 80 per cent in 2009 up to July. In this context, it is worth mentioning that in some countries there have been many instances of collusion of port personnel with vessel owners for collecting extra demurrage,” the report stated.
Important issue
To further clean up the abysmal state of affairs in the country’s petroleum sector, Petrojam can no longer appear to be operating as a law unto itself, Centennial Group, the US-based audit consultants, has warned the Government.
“One important issue for the Government to resolve is that currently Petrojam is functioning virtually without effective oversight by either PCJ or the Ministry of Energy and Mining.
“There is need to develop this capacity with competent personnel who have knowledge of the petroleum sector. The Government also has to develop a satisfactory regulatory framework for the sector. At present, Petrojam serves as a quasi-regulator,” the consultants stated.
The consultants recommended that Petrojam, a joint-venture company with 49 per cent shares held by a foreign company – Petro Caribe S.A., an affiliate of
