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
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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Lower light bills not coming anytime soon
Arthur Hall, Senior News Editor
The Sunday Gleaner has now confirmed that the Portia Simpson Miller-led administration will announce plans to abandon its long-stated intention to introduce liquefied natural gas (LNG).
After years of planning and millions of dollars in expenditure, the Simpson Miller administration has decided that it just cannot afford the cost of setting up the infrastructure and other requirements for the introduction of LNG.
Energy Minister Phillip Paulwell is scheduled to make that announcement early next month, but government sources say a new plan could be announced at that time as Paulwell continues his desperate push to reduce electricity bills.
“I can say that the numbers are not adding up,” a government source told The Sunday Gleaner late last week.
“As you would have suspected, we knew this was a likely outcome for some time now and had begun to support the offtakers (electricity and alumina producers) to rev up plans ‘B’ and ‘C’, and they are so doing,” added the source who asked that his name be withheld.
It is expected that plans ‘B’ and ‘C’ would see the Jamaica Public Service Company (JPS) being allowed to establish the LNG infrastructure and source the gas for the multibillion-dollar plant it plans to construct in Old Harbour, St Catherine.
The JPS would also sell LNG to the alumina producers which have long argued that the high price of electricity in Jamaica makes production uncompetitive.
“We have long told the Government that the introduction of LNG should be private sector-driven, but the People’s National Party administration before it lost the 2007 general election was adamant that it should be state-controlled and the Bruce Golding-led Jamaica Labour Party government followed that path,” said a source in the energy sector last week.
“If this was a private sector-led drive, EXMAR would have started construction in 2009 and, by this year or early next year, the country would have LNG and lower electricity bills,” added the source who asked not to be named.
Last year, The Gleaner first reported that a November 2010 report by a World Bank-recommended team of consultants suggested that the Government put on hold its plan to introduce LNG.
uncertainty with project
At the time, the consultants stated that there was ambiguity and uncertainties surrounding several aspects of the project which could make it a financial disaster for the Government.
According to the consultants, a focused economic and financial feasibility study should be completed quickly before a final design specification for the Floating Storage and Regasification Unit and pipeline system.
The consultants also warned that the Government could be exposed to great financial risk for future gas purchase.
But then Energy Minister James Robertson and members of the LNG Steering Team scoffed at the consultants’ report as they responded to the queries.
“That (consultants’) assessment report raised several valid questions of the project, for which comprehensive answers were provided,” Robertson told The Gleaner at the time.
Nedburn Thaffe, Gleaner Writer
Plans by the Government to scrap the liquefied natural gas (LNG) project, which was part of measures to diversify the country’s energy mix and cut electricity cost, are threatening to throw the business sector into disarray.
Yesterday, president of the Private Sector Organisation of Jamaica (PSOJ), Christopher Zacca, noting that the introduction of LNG was backed by his organisation, said there was now “concern” over the report carried in The Sunday Gleaner yesterday.
As such, Zacca said, he would be calling a meeting of the PSOJ energy committee in short order to have discussions on the matter.
The Sunday Gleaner indicated that Energy Minister Phillip Paulwell is scheduled to announce next month the intention of the Government to do away with the project.
Gleaner sources say the Government is likely to revert to plans B and C, which will see the Jamaica Public Service Company (JPS) being allowed to establish the LNG infrastructure and source the gas for the multibillion-dollar plant it plans to construct in Old Harbour, St Catherine.
Trouble for sector
Opposition Spokesperson on Energy Gregory Mair, when contacted yesterday, said the report spells trouble for the country’s energy sector.
“This matter that we have been stuck with heavy fuel oil is not good news at all,” he said before chiding the Government for its handling of the project.
“I don’t know what went wrong but the bottom line is that it was going to be the private sector that was going to be funding the entire LNG project and I think they just messed up the whole thing,” Mair said.
In the meantime, yesterday, president and CEO of JPS, Kelly Tomblin, said her company intends to go ahead with plans to build its multibillion-dollar plant in Old Harbour, St Catherine, but added that the shape of the development would be dependent on how the Government now intends to participate in the project.
She added that she was looking forward to meeting with Paulwell in the coming week to discuss the way forward.
The Gleaner understands that Paulwell is currently off the island and is expected to return tomorrow.
nedburn.thaffe@gleanerjm.com
Read more: http://jamaica-gleaner.com/gleaner/20120924/lead/lead6.html
ST GEORGE’S, Grenada, Thursday, September 20, 2012
ST GEORGE’S, Grenada, Thursday, September 20, 2012
Oil prices fell on Wednesday for the third day in a row as traders realised that a recent run-up to $100 may have been overdone.
Oil ended at $91.98 on Wednesday, dropping $3.31, or 3.5 per cent. That was its lowest close since August 3. Oil has fallen 7 per cent this week.
Several things have been pushing prices down. Analysts said traders are taking profits after oil got above $100 per barrel on Friday for the first time since May. And there have more signs this week that the global economy is slowing down, which tends to push oil prices lower because people and businesses use less energy.
Also, crude inventories rose three times more than analysts had expected last week. Crude supplies grew by 8.5 million barrels to 367.6 million barrels. That’s 8.4 per cent higher than at the same time last year, according to the Energy Information Administration‘s weekly report.
Analysts expected a rise of 2.5 million barrels, according to Platts, the energy information arm of McGraw-Hill Cos.
There were also reports that Saudi Arabia is keeping production high to drive oil prices lower.
Oil’s decline came despite some news that might have pushed prices higher. The Bank of Japan said on Wednesday that it would buy more government bonds, which is intended to boost Japan’s economy. And ongoing tensions in the Middle East have tended to drive prices higher.
“Yet we continue to fall,” said Addison Armstrong, senior director for market research at Tradition Energy. “I think that has accelerated some profit-taking. After all, crude did have a pretty good run from $86 up to $100.”
Brent crude traded on the ICE Futures exchange in London fell $3.84, or 3.4 per cent, to $108.19 per barrel.
Traders were also keeping their eyes on oil supplies as US Gulf Coast refineries returned to production after shutting down due to Hurricane Isaac.
“We’re getting back a few more refineries post (Hurricane Isaac), but on the flip side a few refineries had some restart issues and a few are headed into maintenance,” said Carl Larry of Oil Outlooks and Opinions in a newsletter.
Regular gasolene at the pump fell a half a penny to an average of $3.854 per gallon.
– AP
http://jamaica-gleaner.com/gleaner/20120920/business/business1.html
Oil prices fell on Wednesday for the third day in a row as traders realised that a recent run-up to $100 may have been overdone.
Oil ended at $91.98 on Wednesday, dropping $3.31, or 3.5 per cent. That was its lowest close since August 3. Oil has fallen 7 per cent this week.
Several things have been pushing prices down. Analysts said traders are taking profits after oil got above $100 per barrel on Friday for the first time since May. And there have more signs this week that the global economy is slowing down, which tends to push oil prices lower because people and businesses use less energy.
Also, crude inventories rose three times more than analysts had expected last week. Crude supplies grew by 8.5 million barrels to 367.6 million barrels. That’s 8.4 per cent higher than at the same time last year, according to the Energy Information Administration‘s weekly report.
Analysts expected a rise of 2.5 million barrels, according to Platts, the energy information arm of McGraw-Hill Cos.
There were also reports that Saudi Arabia is keeping production high to drive oil prices lower.
Oil’s decline came despite some news that might have pushed prices higher. The Bank of Japan said on Wednesday that it would buy more government bonds, which is intended to boost Japan’s economy. And ongoing tensions in the Middle East have tended to drive prices higher.
“Yet we continue to fall,” said Addison Armstrong, senior director for market research at Tradition Energy. “I think that has accelerated some profit-taking. After all, crude did have a pretty good run from $86 up to $100.”
Brent crude traded on the ICE Futures exchange in London fell $3.84, or 3.4 per cent, to $108.19 per barrel.
Traders were also keeping their eyes on oil supplies as US Gulf Coast refineries returned to production after shutting down due to Hurricane Isaac.
“We’re getting back a few more refineries post (Hurricane Isaac), but on the flip side a few refineries had some restart issues and a few are headed into maintenance,” said Carl Larry of Oil Outlooks and Opinions in a newsletter.
Regular gasolene at the pump fell a half a penny to an average of $3.854 per gallon.
– AP
http://jamaica-gleaner.com/gleaner/20120920/business/business1.html
The Consumer Advisory Committee on Utilities (CACU) has come out in favour of the Jamaica Public Service Company’s (JPS) retention of its monopoly on transmission and distribution of electricity, arguing that liberalisation of the grid will not lead to reduced electricity prices.
“This misplaced focus on electricity market liberalisation carries with it the danger of destabilising and delaying the actions that have real promise of bringing lower electricity prices to Jamaica,” the CACU said in a statement.
According to the group, whose acting chairman is Stephen Wedderburn, the most important issues to be addressed in achieving reduced electricity prices “are the introduction of an alternative fuel to oil and the installation of new, efficient generation plants”.
In addition, CACU said, “at this time, the loss of JPS’s exclusivity would threaten the successful implementation of the long-awaited LNG project and the installation of the new and efficient 360 MW combined-cycle plant.”
JPS is slated to construct the 360mw liquefied petroleum gas plant at Old Harbour, St Catherine, at a cost of US$600 million.
“If these projects are delayed, it means that Jamaica will spend even more years with high electricity prices, as there are no other projects on the horizon that could lead to a significant reduction in electricity rates,” the CACU said.
It added that market liberalisation by itself, would not lead to lower electricity prices, and may in fact lead to increased prices.
The eight-member advisory committee was established by the Office of Utilities Regulation (OUR) in 2000. It comprises an independent group of persons from the public, who provide the OUR with a forum through which its receives consumers’ views on broad regulatory issues as well as perspectives on issues which affect the relationship between utility companies and consumers.
Part of its mandate is to report to the OUR on matters pertaining to the provision of utility services which affect the interests of consumers.
Members of the committee include Yasmin Chong, Erwin Burton, David Barrett, Kadin Birch, Paul Goldson, Adrea Adams and Gary Jackson.
On July 30, 2012, Justice Bryan Sykes issued a landmark ruling that the exclusivity provisions in the all-island electric licence granted to the JPS were invalid, on the basis that the relevant minister does not have the requisite authority to grant a licence on terms that bar the possibility of any other person entering the market for the transmission of electricity.
The ruling has been accepted in some quarters as signalling the end of JPS’ monopoly in the transmission and distribution of electricity.
Major uncertainties
However, the CACU, in analysing the issues, said it “does not share this sense of euphoria at Justice Sykes’ ruling. The committee believes that the ruling has served to introduce major uncertainties in the Jamaican electricity sector at a very critical time and could very well have the effect of significantly delaying the realisation of lower electricity prices in Jamaica.”
It continued: “We believe that the victory claimed by those who brought the case against JPS is likely to be a pyrrhic victory resulting in no real benefit for Jamaican consumers.”
CACU observed that it may seem strange that a consumer advocacy group appeared to be siding with an “unpopular monopoly provider of electricity”, but its view was that Jamaica should now be giving maximum focus to those actions which would lead to lower electricity prices.
“We do not believe that a break-up of JPS’ monopoly status will lead to lower electricity prices – at least not for the majority of electricity consumers in Jamaica – and we believe the focus on trying to liberalise the grid is distracting the society away from those concrete actions that will, in fact, lead to lower electricity prices,” the statement said.
The CACU said that as a consumer advocacy group, “We believe that the path to lower electricity prices must be the main focus, and that regardless of whether the transmission grid is liberalised or not, Jamaica will not get lower prices until we introduce an alternative fuel to oil and install new and more efficient generation plans to replace the near obsolete steam turbine units that form a major part of Jamaica’s baseload electricity generation capacity.”
Great contributor
The group said Jamaica’s continued dependence on oil for electricity generation was a greater contributor to high electricity prices than whether the market was liberalised or not. “Liberalising the transmission grid and having additional players generate electricity with oil is not going to give us lower electricity prices,” the CACU said.
It also observed that electricity costs could not, and would not, be reduced until critical decisions were taken and measures implemented to replace old and inefficient generating plants with more modern and efficient units.
“The Government has taken unto itself responsibility for both sets of measures. Specifically, it is the Government that sets the timetable for new generation capacity and issues the tenders for this capacity, and it is well known that it is the Government which is spearheading the LNG project,” the group said.
Furthermore, it noted that “there seems to be a generally accepted assumption that a liberalised electricity market will automatically lead to lower prices.
“We are concerned that commentators on the matter are not seeking to educate the public that in a liberalised market, there is a risk that prices could very well go up, and not down,” the group said.
“The objective of any investor is to maximise returns, and in a liberalised electricity market, JPS and any other power producer will be seeking to maximise their returns and if they have the opportunity to increase prices, they will not hesitate to do so,” the group said, referencing the liberalisation of the petroleum sector which, it said, has not resulted in a reduction in prices.
The CACU also noted that should a decision be made to liberalise electricity transmission and distribution, “Jamaica would not, in our view, be able to attract enough players to sustain a truly competitive market. Rather, we would likely end up with a handful of electricity generators resulting in an oligopoly structure.”
Moreover, the CACU said, “the Jamaican electricity system, with approximately half a million electricity customers, is quite small. We believe [it is] far too small to sustain a liberalised electricity market.”
business@gleanerjm.com
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