The Tesla Roadster electric car introduced in 2007. – FILE
FOLLOWING THE revocation of an exploration licence, which was granted to Rainville Energy Corp, a subsidiary of Sagres Energy, to drill for oil, Energy Minister Phillip Paulwell has signalled that another company that was granted a licence could have it cancelled if they don’t begin drilling soon.
The Petroleum Corporation of Jamaica yesterday said the failure of Rainville to meet its financial obligations has resulted in the revocation.
Under the agreement, which dates back to 2006, Rainville should have secured the necessary funding for the second phase of the programme which began in May 2012.
Among other things, this phase involved the drilling of an exploratory well by November 2013.
Paulwell told
THE Petroleum Corporation of Jamaica (PCJ) has pulled oil exploration rights from Rainville Energy.
The Canadian outfit’s licence was revoked due to its failure to meet its financial obligations.
Kelly Tomblin, president of Jamaica Public Service Company. – Ian Allen / Photographer
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
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
It is high time the Simpson Miller administration end the pussyfooting and come clean on the liquefied natural gas (LNG) project. For its policy-by-dribble is both confusing and confidence-draining and risks doing grave damage to the Jamaican economy.
First, let us place things into perspective. It is our view that alongside credible fiscal policies – which, hopefully, are being sorted out in current negotiations with the International Monetary Fund (IMF) – energy is the potential economic game-changer for Jamaica.
With the domestic price of electricity at upwards of US$0.41 per kilowatt-hour, Jamaican firms are difficultly placed to effectively compete with hemispheric and global manufacturers and service providers. Indeed, the higher price of energy has been a significant contributor to this country’s long period of anaemic advance in GDP.
A substantial part of our problem, of course, is that the bulk of our electricity is generated by old, inefficient power plants that burn expensive oil. Changing the fuel mix, therefore, is a critical component towards reducing the cost of domestic energy.
Settled on natural gas
For more than a decade, Jamaican administrations have deliberated on the issue and appeared, in the end, to settle on natural gas as the fuel of choice.
It is largely against this backdrop that the former Jamaica Labour Party administration, after a badly compromised initial tender process that it was forced to overturn, called for new bids for an LNG storage and regasification facility to begin to give effect to the fuel-conversion programme. Months ago, it was announced that Samsung was the preferred bidder for that facility.
Previously, the Jamaica Public Service Company, an electricity generator and monopoly distributor of power, won the bid to establish a natural gas-burning, 480-megawatt power plant. The expectation was that with natural gas and enhanced efficiency, this facility would drive down the cost of power by a third – not sufficient, but a start.
This newspaper has always felt, and argued, that coal, and other fuels, ought to be part of the energy mix. Our primary concern is for the delivery of the cheapest power to afford the economy a fighting chance at competitiveness. At the same time, we want to be assured of a predictability of supply, starting with the fuel.
Project could be sidelined
Unfortunately, the Government‘s poor communications strategy is injecting grave uncertainty and potential partisan rancour into the discourse.
Dr Carlton Davis, the highly respected public servant who heads the Government’s energy task force, had hinted that the LNG project could be sidelined if the Samsung bid did not meet specific price points for the delivery of electricity. It has for weeks been leaking out that those price points, whatever they were, have not been met and that LNG might be abandoned.
What, precisely, this means remains unclear. We would, for instance, wish to be told frankly whether Jamaica can find no supplier of LNG – the price of which has risen on the back of demand in Asia despite the collapse of the price of natural gas in North America – at a cost that makes sense. Or whether it is other elements of the pricing of the project that don’t compute, and which party they relate to. Or, perhaps there is another approach to the project, including a mix with other fuels.
Uncertainty, ultimately, breeds apathy.
The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.
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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
THE EDITOR, Sir: I note with interest that the Consumer Advisory Committee on Utilities (CACU), an entity established and funded by the Office of Utilities Regulation (OUR), has come out in strong support of the Jamaica Public Service Company on maintaining its monopoly licence. The CACU’s sudden advocacy for the retention of the monopoly would give one the impression that this is a group speaking on the behalf of Jamaican consumers. Nothing could be further from the truth. The CACU is simply a committee of the OUR set up to be the ‘consumer arm’ of the regulator. You should recall that the CACU was merely set up by the OUR because of the absence of effective utility consumer advocacy. While not accusing the CACU of anything unsavoury, you will understand my unease with the unit coming out in strong defence of the JPS, which, interestingly, partly funds the OUR, which, in turn, funds the CACU. There is an apparent incestuous and conflictual relationship. It would be more palatable if the views were coming from the Consumer Affairs Commission (CAC), a creature of Parliament. I call on the CAC to commission a research by experts on the feasibility of breaking the JPS monopoly and its implications on the cost of energy. DENNIS MEADOWS (JP) Opposition Senator dennis.meadows@hotmail.com Read more: