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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

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

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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

Crude Oil Electricity JPS LNG News

Bogue Plant Conversion To Wrap Up Next Week

May 6, 2016 Webmaster

The JPS power station at Bogue, Montego Bay.

The Jamaica Public Service Company (JPS) said it expects to complete the conversion and upgrade of the Bogue combined-cycle power plant in Montego Bay, St James, within a week.

The US$22-million ($2.5-billion) project kicked off in January and, when completed, it will be able to operate on either liquefied natural gas (LNG) or its current fuel source, automotive diesel oil.

JPS said it will be buying natural gas under a long-term supply agreement from Fortress New Energy and expect to start receiving the product within the next four to six months.

JPS indicated that Bogue would be ready by the end of the second week in May in an email to the Financial Gleaner.

The company said New Fortress “is responsible for all activities associated with delivering the LNG to the port in Montego Bay, storing the LNG in tanks, regasifying the LNG and delivering it by pipeline to our power plant at Bogue”.

The project to convert the Bogue power plant, which is being undertaken by General Electric, kicked off on January 11 this year.

The work involves removal of a gas turbine and heat recovery steam generator from service, which was expected to clear the way for General Electric to start installing equipment.

JPS said the project would add significantly to the country’s energy diversity, fuel security, flexible generation and production of clean energy.

New Fortress Energy began developing its terminal and pipeline at the Montego Freeport at the end of last year, but JPS has no stake in that project.

mcpherse.thompson@gleanerjm.com

The Gleaner

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Jamaica After Obama: Obama Visit Improved Energy Prospects For Jamaica

April 6, 2016 Webmaster

Kelly Tomblin, president and chief executive officer of the Jamaica Public Service Company (JPS), is arguing that the visit of United States President Barack Obama to Jamaica last year has improved the energy prospects for the island.

Tomblin, one of the participants in a Gleaner project ahead of Friday’s one-year anniversary of Obama’s visit, said: “Obama’s visit gave Jamaica greater strength in gas negotiations with gas suppliers by signalling support for US gas to Jamaica, thus increasing competition and the number of available suppliers and supporting greater optimisation of Jamaica’s renewable resource.”

During his two-day visit to the island, Obama announced the formation of an energy fund to finance clean-energy projects in the region. He made the announcement at the Caribbean Community (CARICOM)-US Summit.

“Caribbean countries have one of the highest energy costs in the world. Today, we are announcing new partnerships and a new fund to mobilise private-sector projects in clean energy for the Caribbean and Central America,” he said at the conclusion of the summit.

OPPORTUNITIES NEEDED

The energy fund now forms part of the Caribbean Energy Security Initiative, which aims to reduce the region’s reliance on fossil fuels.

According to Tomblin: “Obama’s visit created more opportunities throughout the energy sector by voicing confidence in Jamaica’s landscape and supporting US investment in Jamaica’s energy sector.”

She called for Jamaica to act fast in capitalising on the opportunities created in the energy sector by the initiatives announced by Obama.

“The only threat exposed during Obama’s visit was the truth that if we don’t act fast, other Caribbean countries will take advantage of the new open door in the energy market and secure the hub position,” she said.

In giving further reflections on the anniversary of the visit, Tomblin highlighted the need for Jamaica to position itself as the hub for the provision of gasolene as a cheaper source of energy.

“Let’s make sure we step fully into this moment he opened up by driving this gas-procurement process through quickly and position Jamaica as an obvious hub for that product which will be key for our neighbours to meet their overall environmental commitments,” she said.

“We cannot afford bureaucracy now.”

Gleaner

Electricity JPS LNG News Oil

JPS Gets Green Light To Build 190MW Plant

March 29, 2016 Webmaster

The oil-fired JPS power plant in Old Harbour Bay, St Catherine is to be replaced with a gas-fired plant.

Jamaica Public Service Company (JPS) says the National Environment and Planning Agency (NEPA) has approved the construction of the 190-megawatt gas-fired power plant at Old Harbour Bay, St Catherine.

The Office of Utilities Regulation and the Electricity Sector Enterprise Team have also given formal approval of the power purchase agreement for the new facility, the power utility said.

JPS President and CEO Kelly Tomblin said the utility was now finalising details of the project with equipment supplier General Electric Corp, and engineering procurement and construction company Power China. The latter company has been contracted to build the plant.

The arrangements for the project are to be finalised within the next two weeks.

JPS’ disclosure of the project approval follows its weekend announcement, via a posting on its website, that it had finalised an agreement with New Fortress Energy to supply the Old Harbour plant with natural gas.

“We are now at an advanced stage in relation to closing the financing of the project, which we expect to be completed by the end of April,” said the JPS chief executive.

New Fortress is also the utility’s gas supply partner for the power plant at Bogue in Montego Bay.

The Old Harbour plant will be a brand new facility. Once built, JPS plans to dismantle the current oil-fired plant at Old Harbour and return the site to brownfield status.

“We anticipate that this new power plant will be generating electricity at below 13 US cents per kWh when it comes on line, which is remarkable, given the necessity to build new infrastructure and bear the transportation and other logistic costs,” Kelly said.

The timelines for the project were laid out during last November’s public consultations on the environmental impact assessment report.

JPS said yesterday that there are no changes to the timeline for site preparation for the liquefied natural gas plant, which is scheduled to begin in the first quarter of 2016, giving the utility just days to hit that deadline.

Construction will begin by the second quarter and the plant’s commissioning is expected by July 2018.

JPS entered into a memorandum of understanding in December 2015 with a Chinese company, now identified as Power China to build the 190, megawatt plant.

The Chinese company replaced the Spanish engineering and renewable energy firm Abengoa, which filed for bankruptcy protection just days after striking a deal with JPS.

The Jamaican utility reaffirmed on Wednesday that the 190MW project is expected to cost around US$300 million.

The gas component, which includes development of a terminal and pipelines to the JPS plant, is a separate project to be undertaken by New Fortress. The arrangement is similar to that agreed for the Bogue plant.

JPS also already had dealings with General Electric, which is converting the diesel-fired Bogue plant to a combined cycle operation to burn either diesel or LNG.

The conversion is costing JPS US$22.74 million or about $2.7 billion, and is scheduled to wrap up by midyear.

Gleaner

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New Fortress Secures LNG Ship For Jamaica Project

March 4, 2016 Webmaster

The JPS power station at Bogue, Montego Bay, which is being converted to run on LNG.

New Fortress Energy, the company seeking to supply liquefied natural gas (LNG) to Jamaica, has secured a two-year contract for an LNG vessel and is to start shipping gas this month.

Golar LNG Limited, a Bermuda-registered company which operates the vessel Golar Artic, revealed the contract details to its investors.

“Golar has now concluded a two-year charter agreement with New Fortress Energy Transport Partners LLC (NFE) for the employment of Golar Arctic in Jamaica,” said Golar its statements obtained by the Financial Gleaner.

New Fortress has an agreement with Jamaica Public Service Company (JPS) to supply gas to its 120MW power plant at Bogue in Montego Bay, a contract New Fortress will service via gas infrastructure under development at the Montego Bay port. JPS has been mum on the price at which the gas will be supplied to Bogue.

The American company is also expected to develop gas infrastructure and supply JPS’ Old Harbour plant with LNG once it is built, but those negotiations continue.

Bogue is currently being converted to run on gas as well as diesel oil, the fuel on which it was originally commissioned in 2003. General Electric is doing the retrofitting under a US$22.74-million contract from JPS. Bogue will become a combined-cycle plant, capable of switching between gas and diesel.

New Fortress Energy assumes the costs for delivering gas to the burner tip. JPS has no stake in the gas infrastructure project.

New Fortress’ ambition Golar said the deal it has with New Fortress solves a long-standing problem regarding the cost of regasification, and that it fits with New Fortress’ ambition to become a regional supplier of LNG to Caribbean countries.

“Jamaica has long sought to replace liquid fuels with LNG, however, the size of the market has always made it difficult to justify the cost of a conventional floating storage and regasification unit,” said the fuel shipping company.

“New Fortress have now solved this challenge by utilising ship-to-ship transfer of LNG from Golar Arctic on to smaller LNG carriers to service a number of locations within the country of Jamaica.”

Golar Arctic is scheduled to load the first LNG cargo in support of this new business “during March 2016”. Golar and New Fortress believe this new approach to delivering LNG to niche markets has wide application within the Caribbean and other similar markets around the world, stated Golar.

“New Fortress have, with their entrepreneurial approach to business development, shown that downstream LNG markets can be developed within a much shorter time frame than is customary. Similar fast-track solutions will be essential if consumers are to benefit from the large incremental volumes of LNG that will be delivered to market over the next three-four years,” stated Golar.

The Financial Gleaner sought a project update from both JPS and New Fortress, but none came up to press time.

Golar LNG this week reported a fourth-quarter adjusted operating loss of US$35.9 million.

The Gleaner

Crude Oil Electricity Government JPS News Oil

Using Oil, LNG Might Negligibly Affect Electricity Prices – JPS

February 17, 2016 Webmaster

The Jamaica Public Service Company (JPS) says it is unable to definitively state how the use of both automotive diesel oil and liquefied natural gas (LNG) at the Bogue power plant in St James will impact the price of electricity to consumers.

It said the power plant currently burns on automotive diesel oil “and we are doing a conversion that adds the capability to also burn natural gas. So we will end up with the ability to burn both fuels at no extra cost”.

Responding to Wednesday Business queries about the rationale for the dual-fuel facility, the JPS said natural gas will be the primary fuel on which the plant operates and automotive diesel oil will be a back-up fuel “in case we have any problems with receiving natural gas”.

It added that under normal conditions, the plant will effectively be a gas-fired power plant.

IMPACTON ELECTRICITY PRICES

As to how it will impact the price of electricity the JPS said in emailed responses that “we cannot speak to the likely impact on electricity prices given the uncertainty of prices in the future (for oil vs LNG)”.

However, it said that the impact is expected to be negligible given that Bogue only represents approximately 10 per cent of the company’s total costs.

“What we can say with fairly good certainty is that the cost of electricity today is 30 per cent lower than it was one year ago, and we expect that trend to continue throughout 2016, given that 80 per cent of our net generation (production) will still be based on oil, 10 per cent will be from natural gas, and we expect renewables to make up 10 per cent of our net generation once the three renewable energy projects currently under construction (for circa 80 megwatts) are completed before the end of 2016.”

The JPS, an integrated electric utility company and the sole distributor of electricity in Jamaica, added that “that means we continue doing a good job as a country of increasing the penetration of renewable, while also diversifying our fuel mix and reducing our overexposure to oil”.

It said that it is hoping to continue doing more of that through the 37 megawatts of renewables currently being pursued by the Office of Utilities Regulation through a request for proposal, as well as its 190 megawatt gas-fired power plant that will be commissioned in mid-2018.

IMPROVING COMPETITIVENESS

Reducing the cost of electricity is critical to improve competitiveness, according to the International Monetary Fund’s latest updated memorandum of economic and financial policies.

It said that the action plan prepared by the Electricity Sector Enterprise Team foresees replacing current oil-fired generation capacity with gas, coal and ethane-fired plants to achieve significant cost savings.

Next steps will include the conversion of the Bogue power station from oil to gas, a process which the JPS is currently undertaking.

In addition, said the memorandum, the Government has approved the construction of Jamaica’s first natural gas-fired power plant, a 190-megawatt facility to be built and operated by JPS, and to be completed by 2018. Several renewable energy projects are also under way.

The Government said it will prepare a plan to ensure that all public entities – central government, local government and public bodies – meet their financial obligations in a timely manner.

In the memorandum, the Government also pointed out that urgent actions will be taken to reduce the time needed for entrepreneurs to get an electricity connection. Plans foresee the automation of the work processes within the government electrical regulator and the acquisition of an Application Management and Data Automation (AMANDA) software to streamline procedures for scheduling, inspecting, approving and certifying electrical installations.

An action plan for implementation of the reforms and adoption of the AMANDA system are expected to be completed in fiscal year 2016/17, with support from the Inter-American Development Bank.

The Gleaner

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