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Cancellation of LNG project could cause fallout in investment community

September 25, 2012 Webmaster

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

Government JPS LNG News Oil

EDITORIAL – Gov’t Must Come Clean On LNG

September 25, 2012 jrobinson

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.

Government JPS LNG News Oil

Dumped! Government to throw out LNG project

September 24, 2012 Webmaster

Prime Minister Portia Simpson Miller and Energy Minister Phillip Paulwell.-file

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.

Government JPS LNG News Oil

Scrapped LNG plans worry private sector

September 24, 2012 Webmaster

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

Alternative Energy Government JPS LNG News Oil

Consumer Group Against Break-Up Of JPS Monopoly

September 19, 2012 Webmaster

Corporate headquarters of the Jamaica Public Service Company Limited, Knutsford Boulevard, New Kingston.

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

Government JPS LNG News Oil

Dismantling the monopoly mindset

September 18, 2012 Webmaster

HEART TO HEART

With Betty Ann Blaine

Tuesday, September 18, 2012

Dear Reader,

There is a monopoly mindset that seems to have taken deep root in the psyche of certain individuals and organisations in Jamaica, but perhaps more detrimentally inside the corridors of government.

DAVIS… a properly regulated monopoly is perhaps the best option for Jamaica

That monopoly mindset reared its head a few weeks ago when the senior adviser to the prime minister, Dr Carlton Davis, was quoted as saying that a properly regulated monopoly was perhaps the best option for Jamaica – the statement made within the context of the monopoly licence currently held by the light and power company, the Jamaica Public Service Company.

Dr Davis’s statement sent shock waves across the country for more reasons than one. First, it breached acceptable protocols in that it usurped the portfolio of the Minister of Energy Phillip Paulwell, who should have been the person to speak on such matters. Second, Dr Davis’s comment was diametrically opposed to the stated public position of the minister of energy who has been heralding the cause of competition and bemoaning the untenable nature of the current monopoly arrangement with the JPS. Third, Dr Davis’s position as head of the LNG (Liquified Natural Gas) Steering Committee represents a de facto conflict of interest inasmuch as it reflects the very same position of the monopoly provider with a potential interest in the LNG market.

I believe that the question must be asked: “Whose side is Dr Davis on?” In addition, as he is senior adviser to the prime minister, are we to deduce that any advice to Mrs Simpson Miller regarding the JPS would favour the retention of that company’s monopoly status?

My question to Dr Davis is, “Monopoly best” for whom? The senior adviser should be asked to delineate how the JPS monopoly has been “best” for Jamaican consumers.

The litany of complaints against the JPS is as extensive as it is long-standing. From overbilling, back billing, connections, disconnections and reconnections, Jamaican consumers have continually expressed their disgruntlement with the costs and services offered by the light and power company.

In fact, the formation of the consumer advocacy group, CURE (Citizens United to Reduce Electricity), was as a direct response to the insatiable menu of complaints against the JPS, particularly the cries that went up about the new digital meters that have been introduced for the first time in Jamaica.

And householders were not the only complainers. One of the sectors affected most severely by the high cost of electricity is the country’s small and medium-sized businesses. Many have already collapsed and some of those remaining are teetering on the brink of insolvency.

Separate and apart from Jamaica’s particular and precarious energy situation, the notion of perpetuating monopolies is fast becoming a thing of the past, but there are those amongst us who simply don’t get it.

By definition, a monopoly is a market with only one seller – where a business is the only provider of certain goods or services. Anyone who has ever played the popular game, Monopoly, would have a pretty good idea of what a monopoly is. In the board game, one of the goals is to own all of the properties of a particular colour, or in economic terms, to have a monopoly on properties of a particular colour. It is also the case that when a player has a monopoly on a set of properties, the rents on those properties go up. This is also a realistic feature of the game since it’s generally true that monopolies lead to higher prices.

The general agreement is that monopolies are bad for consumers. Under a monopoly, the producer is assured of his profits and his inducement to introduce innovations is unlikely. He is not under any competitive urge to introduce changes or increase output. According to one economist, “The monopolist functions from a position of privilege. He works from behind a protective shell. If capitalism stands for constant changes which provide vitality to the capitalist system, monopoly cannot sustain it.”

In 1997, New Yorkers, faced with mounting increases in their electricity bills, moved to dismantle the monopoly held by the light and power company, Con Edison. The plan split Con Edison into three companies. “One will own power plants and compete on the wholesale level with other generators. A second will be a power retailer, buying power from wholesalers and competing with other retailers for customers’ business. The third will maintain monopoly ownership of the wires that link customers to the state’s power grid and will charge competing retailers for the use of the “network”. Although it was not a perfect plan, one official described it as “a floor we can build on”. Consumers in New York experienced an immediate 10 per cent cut in electricity rates as a result of the dismantling of the monopoly.

Here at home, dismantling the monopoly mindset appears to be a critical pre-requisite, but one that appears to be inevitable.

With love,

bab2609@yahoo.com

Government JPS LNG News

Smell Of Death Hits LNG Idea

September 10, 2012 Webmaster

Paulwell

Gary Spaulding, Senior Gleaner Writer

There are clear indications that the long-proposed introduction of liquefied natural gas (LNG) into Jamaica’s energy mix could be abandoned.

It now seems certain that with the current price of LNG, the Government will not achieve the expected 30 to 40 per cent reduction in the cost of electricity to the Jamaican consumer, and that could lead to the death of the project which was first put on the table more than 10 years ago.

Last month, the head of the LNG Steering Committee, Dr Carlton Davis, told a

Government JPS News Oil

Will JPS Save The LNG Project?

September 10, 2012 jrobinson

President and CEO of JPS, Kelly A. Tomblin.-Rudolph Brown/Photographer

The much maligned and criticised Jamaica Public Service Company (JPS) could be the one to save the Government‘s floundering liquefied natural gas (LNG) project, which will bring cheaper electricity to Jamaicans.

Having stuck to the letter of the law and prevented the parent company of the JPS, Marubeni Corporation, from bidding to supply LNG to Jamaica, the Government now seems ready to eat humble pie and beg the firm for help.

Marubeni had wanted to submit a bid to supply the LNG to Jamaica but was disqualified after it arrived minutes after the 5 p.m. deadline.

However, with the qualified bidders offering prices that would not lead to any appreciable decline in the cost of electricity to Jamaicans, it appears negotiations are set to be initiated with Marubeni.

“The prices quoted by the bidders are much higher than Jamaica can pay and would not attract the JPS or the bauxite companies,” a source close to the talks told

Government LNG News

Samsung Team To Visit Jamaica For LNG Talks

September 10, 2012 Webmaster

A team from South Korean company Samsung is to visit the island this week to hold talks with the government on its LNG project.

Samsung has emerged as the preferred bidder for the development and operation of the LNG floating storage and re-gasification terminal.

It is understood that Samsung has written to the Energy Minister Phillip Paulwell asking for a meeting with him and all the parties involved.

Paulwell has admitted that after three months, a formal deal is yet to be struck with Samsung.

He stressed that the negotiation is a process and the government is proceeding with caution.

The government had projected to introduce LNG by 2014 but there are doubts that this timeline may be achieved because the administration is yet to secure a supplier of the LNG.

There are also fears that the current cost of the fuel may prohibit the government from realising its aim of reducing the cost of electricity by 30 per cent.

Paulwell said he is awaiting the final report from the LNG steering committee, which is due this month.

He added that after reviewing the report, the government will indicate its position going forward.

editorial@gleanerjm.com

http://jamaica-gleaner.com/latest/article.php?id=39798