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LNG ushers in price stability — JPS

August 19, 2016 Webmaster

As LNG partner New Fortress Energy begins shipment of liquefied natural gas to the island, power distributor Jamaica Public Service Company (JPSCo) is indicating that savings will depend on pricing, which varies from month to month.

Chief Financial Officer of the Jamaica Public Service Company (JPSCo) Dan Theoc told the Jamaica Observer: “The cost of LNG at Bogue is likely to be cheaper than the cost of oil next month (September) when Bogue is expected to come on line.”

But, based on current price differentials and the fact that Bogue will only represent approximately 12 to 15 per cent of the generation mix, it is expected that total savings — based on this price differential – will be marginal (less than five per cent), all other things remaining equal, Theoc told the Business Observer.

Spot prices for LNG on the Henry Hub (HH) index registered US$2.82 per million Btu in July after starting the year at US$2.28 in January and falling to US$1.73 in March.

Crude, on the West Texas Intermediate index, started the year at US$30.32 per barrel and crested at US$44.65 in July.

“Unfortunately, we cannot say definitively what the impact of natural gas will be in the future because of the volatility in oil prices relative to natural gas prices,” Theoc said.

JPS will be buying natural gas from Fortress under a 20-year exclusive gas supply agreement and they will be responsible for all of the supply chain logistics and infrastructure costs.

That includes the mode of delivery to the island, the frequency of delivery, the storage of the LNG, the regasification and the distribution by pipeline to the property.

Theoc noted, “We will pay for gas based on the Henry Hub Index plus an agreed margin (which we cannot disclose), similar to how we buy fuel today from Petrojam based on the US Gulf Average Mean Index plus an agreed margin.”

In general, he added, “It is worth noting that the HH index in the past five years has been far less volatile compared to Oil-based Indices (like US Gulf, WTI and Brent Crude), so we view the move to HH as being a plus for price stability.”

It is expected that Bogue will actually make up 12 to 15 per cent of the generation mix on natural gas and that when the 190MW plant in Old Harbour comes on line in 2018, approximately 40 per cent of our generation mix will be based on gas-fired power plants.

In general, it is expected that renewables penetration will increase from five per cent in 2015 to 12 per cent by 2018.

The consequence, Theoc said, will be an improvement in fuel diversity from a situation where 95 per cent of production was oil-fired last year to a situation where less than 50 per cent is fired by oil.

The CFO said the pending award of a gas project to Jamalco will also potentially increase the percentage of generation units which are fired by natural gas by about ten per cent to further replace oil-fired units by 2019.

Jamaica Observer

Alternative Energy JPS LNG News

NEPA Releases Hold On LNG Project After Weekend Stop Order

July 20, 2016 Webmaster

New Fortress Energy was issued at the weekend with a stop order by the National Environment and Planning Agency (NEPA) on pipe-laying works to link its LNG terminal to the Jamaica Public Service Company’s (JPS) Bogue plant in Montego Bay.

Representatives of the company, following a meeting with NEPA Tuesday morning, managed to secure a new permit allowing work to continue on the project, which has an end-of-summer deadline to start supplying gas to JPS.

New Fortress, a subsidiary of Fortress Investment Group LLC, is currently laying the pipelines from the port to the 120MW Bogue plant, but has faced setbacks getting landowners to allow the pipes to pass through their property.

“It’s a minor issue, actually. We had some property owners that were being difficult about their rights of way. So Fortress had taken a different route, which wasn’t permitted. They had to go back to get the permit just for the switch in the route,” JPS boss Kelly Tomblin told Gleaner Business.

She said, initially, all landowners were in agreement with the route “but then a property owner changed their mind”.

New Fortress had gone to NEPA for approval of the new route, but “NEPA hadn’t approved it yet. They did so today (Tuesday),” Tomblin said, while conceding that work on the project had continued.

Officials from NEPA visited the site at the weekend to enforce a stop order.

Tomblin said the project or its timelines won’t suffer any adverse fallout from the work stoppage, which roughly spanned two working days.

“I’m sure they can make that up,” she said.

New Fortress said as much last night, after affirming “utmost respect” for planning rules.

“We have received official notice that work can continue on our pipeline installation, subject to our permit conditions,” said New Fortress spokesman Jake Suski.

“We have the utmost respect for the rules and process and will continue to take direction from NEPA around permit issues. At this time, we don’t anticipate any delays as a result of these conversations around the pipeline installation,” he said.

The LNG project is already running about five months behind its original schedule. Gas delivery should have begun in April.

“The point is, we want to get gas to this power plant very quickly. So Fortress was moving very quickly. But we have to make sure we work very closely with the regulator and I think Fortress understands that now,” said Tomblin.

tameka.gordon@gleanerjm.com

The Gleaner

Alternative Energy Electricity JPS News Renewable Energy

JPS Launches Smart Meter Roll-Out

July 12, 2016 Webmaster

A smart meter is seen on display at the launch. Ricardo Makyn

The Jamaica Public Service (JPS) launched their nationwide smart meter roll-out at the JPS headquarters on July 7.

According to President and CEO of JPS Kelly Tomblin, “the future of energy is bright… Jamaica and JPS are embedded in a phase of unprecedented progress”. Gary Barrow, chief technology officer at JPS, underscored the importance of smart meters and the benefits to the current national grid.

“We’re actually putting more intelligence in the grid to provide the stability and reliability that is going to be necessary when we start to integrate mass amounts of these renewables and that is really the start of our smart grid, the primary driver,” he said. “This year, we’re going to be launching three applications … those are going to be smart-phone applications.” On these applications, customers will be able to get outage notifications, restoration times, and real-time consumption and see their bill online and pay it.

“All of our appliances in a short while will become Wi-Fi-enabled and it will mean that you will be able to use your smartphone wherever you are, whatever time, to actually look at your devices, to get access to your devices and turn them on and off,” he said. The company is also investing in other smart grid technologies and services, including smart LED street lighting, smart parking and smart vehicle-charging stations for electric vehicles. This is all part of building a smart energy economy.

A pilot programme was launched three years ago in sections of the Jacks Hill and Barbican communities and Barrow said the company learned much from both customers and on the technical side.

“Already, we have over 50,000 smart meters in the field right now that we’re able to control remotely and we’re able to get usage patterns, but we don’t have the software that actually allows our customers to dial in.”

This year, the company is targeting to roll out over 20,000 smart meters on that network at a cost of approximately US$5 million. Seven parishes will be covered: Kingston, St Catherine, Clarendon, St Ann, St Mary, St James and Westmoreland. JPS technicians will visit customers over the next four to five months and will change the current meters free of cost

Electricity JPS LNG Oil Renewable Energy

LNG can be sourced from anywhere – ESET

July 7, 2016 Webmaster

BY AVIA COLLINDER Business reporter collindera@jamaicaobserver.com

LNG is coming to Jamaica

New Fortress Energy, the company which has won the contract to supply the island’s sole power distributor the Jamaica Public Service Company (JPS) with LNG for substations in Bogue, Montego Bay and another to be developed in Old Harbour, St Catherine, said it buys supplies from sources worldwide.

The company has declined to comment whether its suppliers include Trafigura Beheer, from which the Jamaica Observer understands it has sought to make buys.

Meanwhile, the Electricity Sector Enterprise Team (ESET) has indicated to theBusiness Observer that it does not matter where in the world the gas comes from.

Trafigura is the world’s third-largest private oil and metals trader. That company is also seeking to grow its market for LNG supply globally.

However, in 2011 the Dutch company was involved in controversy for a $31-million political donation to the the People’s National Party administration, which was then the governing party.

The company continues to sell supplies through third-party deals to the local market, including spot purchases made by Petrojam.

Describing the surge in LNG demand as an “LNG revolution”, Trafigura says on its wesbite that it plans to double supplies sold year over year from base year 2013 when the company transported one metric tonne (mt) of LNG globally.

The company has three full-time traders based in Geneva supported by its US Natural Gas team in Houston, Texas, and a European Natural Gas team, working with 27 LNG regional offices in key export and import countries across the globe.

However, as to sales programmed for Jamaica, the company said it has no comment.

“We don’t comment on our day-to-day commercial arrangements,” Victoria Dix, media liaison for Trafigura said when asked to channel questions about the Caribbean market, including Jamaica.

Bloomberg describes Trafigura Beheer as the world’s current largest LNG trader, reporting at year end December 2015 that the commodity trader “boosted the amount of LNG handled to 4.2 million metric tonnes in the financial year ended September 30, from 1.7 million a year earlier following a doubling in volumes… that made it the world’s biggest independent LNG trader.”

A source close to New Fortress Energy told the Business Observer that it is normal for ships to swap cargo and there may have been spot purchases, but that there is, however, no long-term relationship with Trafigura.

More directly, the company, through a spokesperson, said it sources LNG from all over the world.

“In addition to supplying our own gas from the United States, New Fortress Energy sources gas from all over the world. As a matter of policy, we cannot comment further,” New Fortress said.

He stated that in relation to Bogue, “we’re making significant progress and are excited to provide natural gas to help further Jamaica’s clean energy transition. We’re in close coordination with JPS on the process and timeline”.

Chairman of ESET Dr Vincent Lawrence told the Business Observer on Monday that the source of LNG was immaterial.

“ESET is not aware of any trades, swaps or short-term source arrangements that New Fortress Energy may make in satisfying its contractual arrangements with JPS.

“NFE under its Gas Supply Agreement arrangements can supply gas from any origin. However, in ESET granting approval of the Gas Supply Agreement between JPS and NFE, in order to ensure security of supply, NFE had to demonstrate as to its long-term ownership of and access to gas from the United States including the ability to obtain any required export permits.”

Lawrence added, “The contractual arrangements are private and between two private companies,” further adding that “the GOJ is not a party to the contractual nor day to day delivery arrangements”.

The island is moving towards the majority use of LNG as fuel for energy, with the aim of reducing dependence on oil which is subject to price volatility.

To that end, JPS has retrofitted its 115MW gas turbine plant in Montego Bay from automotive diesel oil to dual fuel use. The conversion, it was projected, will result in an approximate 40 per cent fuel price reduction.

New Fortress has also secured the supply contract for the JPS’s planned 195MW plant in Old Harbour which is being razed and will be rebuilt and expanded.

Start-up of LNG use at the JPS Bogue plant is due to begin in August, when construction of fuel lines and storage facilities are expected to be completed.

New Fortress is also slated to construct an expandable 100MW, natural, gas-fired, cogeneration plant for alumina producer, Jamalco, replacing a previous plan for a coal-fired alternative

The Observer

Crude Oil Electricity JPS LNG

Light bills to go up this month

June 14, 2016 Webmaster

JAMAICA Public Service (JPS) customers will be asked to pay more for their electricity this month — partly due to the recent increase in the Special Consumption tax (SCT) on heavy fuel oil (HFO), the light and power company advised yesterday.

The company said the spike is also due to an increase in the cost of the fuel used for electricity generation, caused by rising oil prices on the international market, and the continued devaluation of the Jamaican dollar.

“This is definitely not the best news for us at JPS, or for our customers,” JPS President and CEO Kelly Tomblin said in a release.

The Government last month introduced the $7 per litre increase as part of the revenue package to help finance its $580-billion 2015/16 Budget, but Finance Minister Audley Shaw, at the time, assured the panicking public that the tax would only apply to fuel at the pumps.

“This tax doesn’t apply to JPS at all. It is only related to SCT for fuel for road transport,” Shaw said at a post-budget press conference. The SCT is expected to yield $6.4 billion for the Government’s coffers.

In announcing the 12.8 per cent increase yesterday, the JPS urged consumers to “conserve on their electricity usage, as the upward trend in oil prices has resulted in an increase in the cost of electricity”.

“The overall increase will result in residential customers paying US$0.21 per kWh on average for electricity in June, compared to US$0.19 in May. This means that the average residential customer using 165kWh of electricity for the month, will see a $500 increase in his or her June bill, which will move from $3,875 in May to approximately $4,372 this month,” the JPS said.

The JPS president stressed that, despite the increase, electricity bills are still 20 per cent lower than they were in June 2015 when customers were paying US0.27 per kWh. The company argued that Jamaica continues to enjoy one of the lowest electricity rates in the region, behind Belize and Trinidad.

Reacting to the news, Private Sector Organisation of Jamaica (PSOJ) President William Mahfood reiterated that the sector had recognised from the outset that the imposition of the tax on the HFO and Liquefied Natural Gas (LNG) would have an incremental increase in the cost of electricity of five per cent.

“As far as the price of oil goes, this is a matter that is beyond our control (but) we still feel there should be some amount of hedge put in place to mitigate against future increases in the price of oil,” he remarked, noting that the sector is in full support of the phasing out of older power plants which rely on HFO and diesel.

He said that, while the phasing out of JPS’ 190-megawatt facility at Old Harbour will take a couple more years, eventually more plants will convert to LNG.

Mahfood said also that, like rising oil prices, the devaluation of the dollar against the US currency is out of Jamaica’s hands and can only be militated against by economic growth.

The Observer

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LNG Shipper Under Financial Pressure

June 3, 2016 Webmaster

Golar LNG, the company which secured a two-year contract to ship liquefied natural gas (LNG) to Jamaica, posted huge net losses, has a working capital deficit and its chief executive officer resigned last month.

The shipping company continues to suffer from a slowdown of the LNG industry during a global oil price drop, symptomised by almost US$700 million of negative working capital.

The Jamaica contract is a bright spot for the company amid declining revenue.

“Partially mitigating the loss of this income was revenue earned by the Golar Arctic which commenced its two-year FSU service with New Fortress Energy, offshore Jamaica,” said Golar in financial results issued this week.

Golar also aims to refinance debt and launch new growth initiatives to adapt to the soft global LNG market.

New Fortress, an American company, is contracted by Jamaica Public Service Company to supply LNG to its Bogue plant. The pipeline and terminal have been developed but delivery of the gas, which should have started in April, has been pushed back to August.

On Wednesday, New Fortress promised responses on the implications of Golar’s finances for its contract, but had not followed through up to press time.

Golar reported net losses of US$80 million for its first quarter ending March. The loss was mainly due to its US$61.5 million in operating expenses towering over its US$18.6 million in revenues for the period.

Adjusted for exceptional items, losses would only have amounted to US$41.2 million.

Fundamentally, its revenue gap has defined the accounts since at least 2014. Consequently, Golar posted a US$197.6-million net loss for financial year 2015 and US$43 million in net losses for 2014.

Last month, CEO Gary Smith resigned and its former CEO, Oscar Spieler, retook control of the company. Golar cited restructuring as a necessary move to adapt to the new LNG reality, and the reason for the resignation.

Spieler, a naval architect, previously served as CEO of Golar between July 2009 and June 2011. He has a “successful track record of delivering complex offshore and shipping-related projects,” stated the financials. A release from the company indicated that both men previously traded the CEO position. Smith, who was promoted to CEO in January 2015, previously served as Golar CEO between March 2006 and July 2009.

Amid these changes, the company’s current assets

of US$530 million were overpowered by current liabilities of US$1.23 billion as at March 2016, resulting in negative working capital of US$670 million.

Burning through cash

Additionally, Golar has been burning though its cash holdings, which dropped from US$376 million to US$93 million in the space of one year.

The company still holds a strong US$1.8 billion in equity, but it fell from US$2.2 billion a year earlier.

Golar explained that the fast-growing LNG industry is going through a “rapid transformation” where monetisation of stranded gas, lowering the cost of LNG production and the opening of new markets are all critical success factors.

“An anticipated delinking of LNG prices from oil prices will also create additional demand for LNG. The traditional approach to executing LNG projects favoured by many oil majors may not cost effectively meet this new demand,” the company said.

Natural gas prices are reportedly at seven-year lows. The commodity is currently trading around US$2.40 per 1,000 cubic feet in the US.

At the same time, however, oil continues to trade below US$50 per barrel, which is still less than half the price crude was trading at two years ago.

The Gleaner

Electricity Energy Saving JPS News

JPS To Invest $6.5b In Smart Meters, Estimates Illegal Connections Of 180,000

May 25, 2016 Webmaster

Norman Grindley

A JPS technician works on power lines in this 2015 Gleaner file photo.

Power utility company Jamaica Public Service (JPS) has reassessed the cost of its smart metering programme, aimed at curtailing energy losses and possibly electricity theft, at US$52 million ($6.5 billion) to be spent over five years.

Concurrently, the JPS revealed that it conservatively estimates that 180,000 consumers are illegally connected to its grid. That number is equivalent to more than a third quarter of its customer base.

JPS previously told The Gleaner of plans to invest US$40 million over five years in smart meters. It upsized the plan in its latest annual tariff review submission to its regulator last week.

The utility plans to install 205,000 Smart Grid advanced meter infrastructure (AMI) units between 2016 and 2020 with an intended impact of 2.81 per cent reduction in losses.

“The average cost per customer is estimated at US$250 with a total investment of US$52 million for the planning period,” said JPS in its annual tariff review. It plans to spend US$6.8 million this year on residential AMI.

The Smart Grid AMI project involves the replacement of existing meters with smart meters for residential and small commercial or rate 20 customers. JPS would then install transformer meters and build out a “smart grid communication network” to support remote connectivity to these meters.

REVAMPED SOLUTION

“This revamped solution will revolutionise the way in which technology, human resources, systems, analytics and energy measurements are integrated towards realising both utility and customer expectations,” said JPS.

Over the last two years, the light and power company installed around 60,000 smart meters covering one-tenth of its 580,000 customers. All large commercial and industrial consumers, totalling around 5,000 accounts, were already on smart meters.

The JPS ultimately wants to reduce its system losses which hovers above 26 per cent, of which eight percentage points or 31 per cent are technical in nature. The bulk of its losses are due to theft.

“While theft through energy diversion continues to be a challenge, the evolution of smart grid technologies has brought about better ways to analyse and identify potential diversion in a more deliberate and sustainable way. Smart meters and grid devices provide the type of data that can be leveraged by back-office analytics and software techniques to detect theft and support the next steps of revenue protection prosecution and payment collection,” said JPS.

The utility estimates that around 180,000 households receive electricity illegally, but says the figure is likely higher. It said a comparison of its near 600,000 customer base with the estimated 800,000 households within the 2011 Census conducted by the Statistical Institute of Jamaica reveals a disparity.

“JPS’ Customer Information System indicates that over 200,000 households may be connected illegally to JPS’ grid. We recognise that a segment of the population resides in tenement housing facilities and therefore, we cannot say definitively, without further information, that all 200,000 households are illegally connected,” the power company said.

“Our conservative assessment indicates that there are approximately 180,000 illegal consumers.”

steven.jackson@gleanerjm.com

The Gleaner

Electricity JPS News

JPS wants big jump in annual tariff adjustment 10% increase!

May 24, 2016 Webmaster

Kelly Tomblin

Light and power company Jamaica Public Service (JPS) has asked the Office of Utilities Regulations (OUR) to approve an increase in its annual revenue target to $45.07 billion, up from a base year target of $40.6 billion, or a jump of 9.53 per cent.

“This increase includes fluctuations in the value of the Jamaican dollar against the United States dollar and the inflation in the cost of providing electricity products and services,” the Our said in a press statement.

The OUR is currently reviewing the JPS’s submission for its annual tariff adjustment for 2016. The request for tariff review was made on May 4, 2016, and the OUR is expected to complete its review and issue its determination by July 3, 2016, the regulator said.

“The adjustment will be the first under the provisions of the new Electricity Licence, 2016. On January 27, 2016, a modified licence was issued by the Government of Jamaica to JPS. The provisions of the new licence fundamentally changed the regulatory framework and the methodology for the calculation of the tariff,” the statement said.

If granted, the JPS’s submission for an adjustment, which is in keeping with the provisions of the Electricity Licence 2016, that allows it to make annual filings to the OUR, will require the OUR to apply the amended provisions of the licence in respect of such matters as adding a surcharge to the revenue requirement.

This includes a surcharge from foreign exchange, interest rate and revenue. JPS is proposing to add on $526.6 million which represents the foreign exchange and interest surcharge. As a result of the amendments to the licence, JPS is now allowed to include the total net interest expense or income which is paid or earned in the revenue requirement.

Additionally, the Kelly Tomblin-led JPS is now entitled to an adjustment on its revenue requirement for any foreign exchange loss which it may incur in the prior year in relation to working capital and debt service driven by Jamaican to US dollar exchange results.

The company is also entitled to adjustments to the 2014/2015 approved prepaid rates for the Residential Rate 10 and Commercial Rate 20 customers, and to introduce interests rates on outstanding balances owed by commercial and the Office of Utilities Regulation (OUR) is reviewing the Jamaica Public Service Company Limited (JPS) submission for its annual tariff adjustment for 2016. The request for tariff review was made on May 4, 2016, and the OUR is expected to complete its review and issue its determination within 60 days, that is, by July 3, 2016.

The Observer

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OUR Won’t Allow Bogue Delay To Lead To Higher Light Bills

May 20, 2016 Webmaster

The Office of Utilities Regulation (OUR) says it will ensure that power utility Jamaica Public Service Company does not increase bills to consumers based on the delay in the delivery of cheaper gas fuel.

The first delivery of liquefied natural gas – LNG – by JPS’ supplier was expected in April, but has been pushed back to August.

New Fortress Energy has developed a terminal in Montego Bay to feed gas to JPS’ Bogue plant, which has been converted to burn either LNG or automotive diesel oil.

“The OUR has moved to assure consumers that it will be vigilant in ensuring that the delay in the delivery of liquefied natural gas to the Bogue power plant will not result in an increase in the price of electricity,” said the regulator in a statement.

While welcoming the completion of the conversion of the 120-megawatt combined cycle plant, the OUR signalled disappointment with the “four-month delay” in the delivery of the overall project.

The gas supply agreement signed by JPS and New Fortress Energy on August 5, 2015, stipulated that gas delivery would commence April 2016, the OUR stated.

“Safeguards for customers were included in the agreement with New Fortress to ensure that any delay on its part would not result in negative cost implications for customers,” noted OUR Director General Albert Gordon. “The OUR has been monitoring the project closely and will continue to keep the public abreast of its progress.”

Project’s goal

The Bogue project’s goals, which are aligned to those in the National Energy Policy, were to reduce fuel cost, and lower the operations and maintenance expenditure of electricity generation. Gordon noted that the OUR’s involvement in the project began in 2008 and that the agency mandated that the plant be upgraded to burn gas in the 2014-2019 JPS tariff determination.

“To ensure this, the OUR also made provisions for the setting up of the Bogue Plant Reconfiguration Fund (BPRF), financed through the tariff, to facilitate the conversion cost,” the agency said.

The revenues for the BPRF – which totalled $15 million – were collected by the JPS through a line item in the monthly fuel rate calculation on customers’ bills, over a twelve-month period, between February 2015 and January 2016, the OUR said.

Requests to JPS for comment were unanswered up to press time.

The Gleaner

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Paulwell Says Fuel Tax Will Impact Consumers Negatively

May 13, 2016 Webmaster

Former Energy Minister Phillip Paulwell says consumers who have been benefiting from reduced electricity rates from the Jamaica Public Service (JPS) over the last 12 months could see a hike in the cost of energy with the Government’s imposition of new taxes on heavy fuel oil and liquefied natural gas.

The JPS recently concluded work to convert its Bogue Power Plant in Montego Bay, St James, to dual-fuel capability.

United States-based New Fortress Energy is expected to bring liquefied natural gas into the island by August, at which point the newly converted Bogue power plant will begin to use the more environmentally friendly fuel.

Paulwell’s concerns came as he spoke with journalists yesterday at the end of Shaw’s opening contribution to the Budget Debate.

“Currently, the JPS does not pay taxes on heavy fuel oil. Government has now imposed a tax both on liquefied natural gas, which will arrive in August of this year, and on heavy fuel oil, so it means a significant increase in the price of electricity that has been trending down by almost 50 per cent over the last year.”

At the same time, Opposition Leader Portia Simpson Miller is taking the Government to task for “breaking its promise” by imposing new taxes to fund the tax-relief plan.

“All I can say is that they have broken their promise to the Jamaican people – no new tax – but, from all indication of what Minister Shaw said today (yesterday), it is the poor that will suffer,” she said.

Central Manchester MP Peter Bunting argued that the increased taxes would affect everyone, but have a more significant effect on those who earn under $600,000 per annum, and who will have to face increased transport and electricity costs.

He described the tax measures as regressive, noting that persons at the bottom of the society are being burdened to give relief to those earning at a higher level.

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