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Government desperate to save LNG

January 13, 2011 jrobinson

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The Government’s plan to introduce liquefied natural gas (LNG) has been engulfed in even more controversy in the wake of a damning November 2010 report by a World Bank-recommended team of consultants.

While the consultants acknowledged that LNG was the right choice for the nation over coal, they have suggested to the Bruce Golding administration that it should put its plan on hold until the middle of this year while the Office of Utilities Regulation (OUR) presents a new regulatory framework.

However, the local LNG team is adamant that it is on the correct course and the energy ministry yesterday argued that while some of the changes recommended by the consultants should be implemented, others are to be discarded as they were not sufficiently informed and did not capture all the information gained by the local officials.

With the LNG project now being driven from the Office of the Prime Minister, the team from the energy ministry has sought to convince Golding that it has so far been heading in the right direction.

“That (consultants) assessment report raised several valid questions of the project, for which comprehensive answers were provided,” Energy Minister James Robertson said in a release yesterday.

“Further yet; audits, operational reports and reviews from respected local and international consultants on a sustained basis, inclusive of taking on board the opinions of our independent development partners, continue to be undertaken,” Robertson added.

The energy minister did not release the report of the consultants but The Gleaner has obtained an extensive response provided by the local LNG team, which operated out of the Petroleum Corporation of Jamaica and the energy ministry.

While dealing extensively with many of the concerns raised by the consultants, the local team did not comment on fears about the financial viability of Exmar Consortium, which has already been selected for a lead role in the project.

Parallel moves a must

However, the local team was strident as it dismissed the consul-tants’ call for the project to be placed on hold.

The local team argued that the development of a regulatory framework and the implementation of final rules must be done in parallel with the ongoing efforts to identify the offtakers, develop the commercial framework and land LNG.

The team also scoffed at the claims by the consultants 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 must be completed quickly before a final design specification for the Floating Storage and Regasification Unit and pipeline system.

But the local team argued that the pipeline would be fully regulated by the OUR while the other areas are being addressed.

The local team was most dismissive of the consultants’ claim that the Government could be exposed to great financial risk for future gas purchase.

This the consultants linked to the failure of the Government to obtain a letter of intent to purchase from the bauxite company Jamalco and its inability to obtain a purchase commitment from the Jamaica Public Service Company.

“This statement is incorrect. The Government of Jamaica will have no financial responsibility for gas purchases,” stated the local LNG team in a retort.

According to the local team, while it remains optimistic that Jamalco will participate in phase one of the LNG project, even without Jamalco, the threshold volume would be sufficient to support the venture.

Christopher Zacca, the head of the government team leading the LNG project, has so far refused to comment on the individual concerns raised by the consultants.

Jamaica Gleaner

News

PCJ donates solar panels to Bellevue

January 13, 2011 jrobinson

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The Bellevue Hospital in Kingston is looking forward to cuts in its electricity bill after receiving a gift of seven solar outdoor lighting system donated by the Petroleum Corporation of Jamaica (PCJ).

The solar panels, which were recently installed, will save the health facility some $700,000 per year, representing approximately five per cent savings.

PCJ Chairman Paris Lyew-Ayee said yesterday that with oil prices on the increase, it is important that the Government be a leader in saving the commodity.

News

Government agencies in Jamaica run high electricity bills

December 8, 2010 jrobinson

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Government departments and institutions accounted for up to $11 billion, or approximately $880 million monthly, in electricity costs last year – nearly 15 per cent of the total amount of electricity consumed annually in Jamaica.

Prime Minister Bruce Golding and Energy and Mining Minister James Robertson, who disclosed this information during a workshop staged last Thursday at the Knutsford Court Hotel in New Kingston, cited government agencies and departments, as well as public schools and hospitals, among the primary consumers.

Oil accounts for nearly 40 per cent of the country’s total import bill.

Golding said Jamaica, which has one of the world’s highest energy-intensive ratings, was also one of the most inefficient users of electricity.

“We use 20,000 BTUs (British thermal units) to produce one US dollar of output of value. The global average is less than quarter of that.

“We waste energy, and Jamaica’s economic future cannot be secured unless we address this problem in a fundamental way,” the prime minister lamented.

Golding said the Government, through the energy and mining ministry, had developed four significant platforms – the national energy, national renewable energy, national energy from waste as well as the energy conservation and efficiency policies – to address the issue.

However, the prime minister acknowledged that Jamaica experienced several challenges to fulfilling some objectives in the national energy policy, which called for increasing the mix of renewable energy sources.

“Right now, we’re somewhere near five per cent, and the policy requires we get up to 10 per cent by 2015 and 20 per cent by 2030. That’s ambitious and particularly challenging,” Golding admitted.

He said the challenges were even more pronounced when analysis examined Scandinavian countries, which were environmentally conscious and advanced in their use of renewable energy sources, albeit paying more for it.

“Renewable energy is not always cheaper energy, but they are prepared to pay more in order to get energy that is clean, green and sustainable. Our consumers can’t be asked to bear that burden, and that’s part of our problem,” Golding said.

Conservation important

The prime minister added that while any search for alternative energy sources also had to be cheaper – in order for them to be viable – conservation was important to sustainable energy management.

Golding accused Jamaicans of being price-insensitive when it came to energy conservation, citing motorists’ refusal to change fuel-consumption patterns during 2008 when oil prices rose as high as US$148 per barrel.

The Government’s 10 per cent GCT charge on the electricity bills of persons consuming more than 200 kilowatt-hours monthly in order to make up revenue shortfall had little effect on consumption patterns.

“The information I have from the JPS (Jamaica Public Service Company – the monopoly electricity provider) is that they haven’t even blinked. They pay the 10 per cent and consume the same amount of electricity,” said Golding.

Jamaica Gleaner

News

James Robertson places faith in LNG

July 28, 2010 jrobinson

FOR some time now the Minister of Energy and Mining James Robertson has been advocating Liquified Natural Gas (LNG) as Jamaica’s preferred energy source, maintaining that its cost would put less stress on the Balance of Payments than oil does. Last Tuesday he announced the selection of Belgium’s Exmar, and its consortium, as preferred bidder to develop a LNG project to supply Jamaica with cheaper energy.

Robertson proclaims switching to LNG could save Finance Minister Shaw US$350 million on the country’s annual oil bill and that manufacturers and householders are set to realise up to 30 per cent cheaper rates.

ROBERTSON

The Exmar consortium is expected to complete the LNG project by the first quarter of 2013.

At this point in time market conditions are favourable to LNG but like other commodities prices are subject to fluctuation and volitility. At this point in time there is little difference between the prices of oil and natural gas. It may be wise for the Government to consider a more diversified energy strategy that considers solar, wind, hydro and nuclear energy rather than opting primarily for LNG. Nevertheless the Government of Jamaica has actively been exploring the possibilities of LNG since 2001.

In real terms, therefore, Tuesday’s development is the culmination of efforts across two administrations and four Energy Ministers namely, James Robertson, Anthony Hylton, Phillip Paulwell, and Clive Mullings.

So why has the LNG option gained traction now?

Mainly because of two technological advances in the production of natural gas. Hydraulic Fracturing and Horizontal Completions have so dramatically changed the supply and pricing dynamics of the natural gas market, that it has become a buyers’ market for Jamaica and other importers.

For years, gas has been produced from shale with natural fractures. However, modern hydraulic fracturing has allowed producers to create extensive artificial fractures within the shale. Horizontal drilling has also revolutionised the industry by allowing the creation of extensive borehole surface areas in shale that is up to 10,000 feet deep. The resulting technological advances have birthed what is now commonly referred to as ‘Shale Gas’.

Shale gas production has literally shook up the entire global energy market, with proven reserves practically doubling in the United States in the last two years – to the extent that that country is an excess producer.

Even more significant, it is now possible to tap vast reserves identified in places as diverse as Qatar, Brazil, Algeria and Venezuela. Indeed, world supply of natural gas has so expanded that the buyers’ market now prevailing is expected to last for – at minimum – another 2 years. This is relevant because Jamaica’s consortium will be required to tie-down a long-term supply contract well within the next two years. In the LNG market, contracts typically run for twenty years and longer. The question that must be factored in here though is at what price? That must be the major determinant. Jamaica cannot afford to neglect its very own natural resources as it seeks to drastically reduce its fuel bill.

LNG’s potential was seriously considered by former Energy Minister Anthony Hylton. For to the point where he issued a Request For Proposal (RFP) for a facility to be established near Port Esquivel. The initial objective, he explained, was to supply the bauxite and mining industries in that area, as well as JPSCo. That effort was eventually dealt a body-blow, with Trinidad and Tobago coming up short on its agreement to supply the gas, as set out in a 2001 Memorandum of Understanding.

During the last Administration’s tenure Hylton said: “I became acutely aware of the extent to which the ‘energy component’ played a role in the cost structure of Jamaican products, and perhaps even contributed to the ‘de-industrialising’ of Jamaica”.

In addition to identifying a cheaper and more stable alternative to oil, Hylton aimed to a achieve “a certain coherence” in the then administration’s energy policy. “At the time, we were also looking at doing a major refurbishment of Petrojam, and it certainly didn’t make sense to look in the direction of a ‘dirty energy’ option such as coal – given the importance of Jamaica’s tourism industry, and given the fact that ‘carbon emissions’ was becoming a big issue”.

Hylton had a point. For despite the vast differences in manufacturing output, Jamaica has a larger carbon footprint per person than China.

Hylton’s forward-thinking replacement, Phillip Paulwell favours a more diversified mix which does not rely solely on LNG: He is reported to have commented, “I believe in natural gas as one of the fuel sources in a policy mix to diversify Jamaica’s energy sources”.

Paulwell, who assumed office in 2002, immediately embarked on an all-out mission to break Jamaica’s over-reliance on petroleum. It is widely acknowledged that under his stewardship, Jamaica witnessed the greatest push – up until that juncture – towards identifying a truly diverse energy mix.

Says Paulwell about his role in pursuing the LNG option, “I was the one who engaged Venezuela, and it resulted in the signing of an MOU. In fact, we were well on the way towards convincing the Venezuelans to exploit their natural gas reserves”. Having regard to the nature of the market, however, Paulwell was convinced that without a clear upfront gas supplier, he would not have taken the risk of advancing the project.

The country, however, changed leadership in 2007, with Clive Mullings serving as Minister of Energy. Under Mullings’ tenure, market supply conditions for LNG were not as favourable. He however continued the push to diversify the country’s energy mix.

Mullings was succeeded by James Robertson a politician renown for his “industriousness” He moved quickly to put together an RFP, initiated the bidding process, and selected a preferred bidder with whom to commence and complete negotiations by year-end. It does come as some surprise that only two bidders have stepped forward.

Says former Energy Minister and envoy Anthony Hylton about this week’s announcement of a preferred bidder: “I support the current administration’s push to ‘Catch the Curve’, because the country is in dire need of a more competitive form of energy. It is in the national interest that we do so”.

Jamaica Observer