The government is moving to liberalise the renewable energy market with amendments to the Petroleum Corporation of Jamaica Act.
The Petrojam Ethanol Limited (PEL) processing plant will remain shuttered for this year and probably until 2014 because of ethanol shortages, but it will continue to import and distribute the fuel for cars.
PEL hopes that market conditions will eventually normalise allowing it to produce ethanol following the shutdown of its 40-million gallon hydrous or wet-alcohol processing plant in November 2009 after its partnership with Brazilian company Coimex ended and its supply source dried up.
The state-owned energy company does not expect the current “unfavourable market conditions” to change during this fiscal year, according to disclosures to Parliament.
“Specifically, the unpredictability of viable supplies of hydrous ethanol for processing is not anticipated to improve, hence the company will not pursue the production of anhydrous ethanol,” said the Jamaica Public Bodies report produced by the Ministry of Finance.
Operators of the energy plant did not return calls for comment.
The sale of sugar cane to ethanol producers carries an opportunity cost for sugar producers. But as sugar prices spike on the world market, it has been increasingly difficult for fuel processors to maintain secure supplies of raw material or feedstock.
Sugar commodity prices have doubled over five years to US$0.20 per pound in May 2012 compared with US$0.09 in May 2007.
These market changes resulted in eroding the profit margin for production and left PEL without cheap raw material.
“With the unfavourable price differential for Caribbean Basin Initiative producers, it is now expected that stability will only be realised in another one to two years,” said the Public Bodies report. Jamaica’s fuel enter the US market duty-free under the Caribbean Basin Economic Recovery Act or CBERA.
PEL intends to capitalise on opportunities to process ethanol under toll processing arrange-ments if they arise in the current financial year.
Even without manufacturing fuel-grade ethanol, the plant expects to double its profit from ethanol sourced from the United States – projected at J$43 million net profit this fiscal year from J$22 million last year. The profit projection rests on hitting a target of J$4.01 billion or 30 per cent increase in revenue. But it is still below earlier profit levels nearly three years ago when the plant was pumping out fuel-grade ethanol for export.
PEL will mainly import denatured anhydrous ethanol from the US to satisfy the local demand for E87 and E90 gasolene processed and sold by oil refinery Petrojam Limited. Ethanol was added to the fuel mix in November 2008 to save on cost and replace a less eco-friendly additive to gasolene.
PEL was formerly owned directly by Petrojam but was restructured in 2008 as a subsidiary of Petroleum Corporation of Jamaica, which is now parent to both energy operations.
Steven Jackson, Business Reporter
http://jamaica-gleaner.com/gleaner/20120615/business/business2.html
PRIME Minister Portia Simpson Miller has reiterated her administration’s commitment to the integrated use of renewable energy to develop the economy and eradicate poverty.
The prime minister gave the assurance at last Wednesday’s opening of the joint University of Technology (UTech)/German Embassy Sustainable Energy Conference and Exposition at the institution’s Main campus in St Andrew
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“The choices we have to make are very clear. The current level of energy consumption is unsustainable,” she said, noting that the introduction of LNG as a part of a short to medium-term plan to diversify the energy supply mix is proceeding apace.
Simpson Miller told the gathering of stakeholders in the energy industry, ministry officials and members of the diplomatic corp at UTech’s Alfred Sangster auditorium that a small developing country such as Jamaica cannot expand its productive capacity, attract business and ensure the well-being of its people, with the unprecedented increases in the cost of energy annually.
“Next to debt-servicing, the cost of energy represents our greatest outflow of foreign exchange, and the outlook is for this to worsen,” she said.
She said the Government has set itself a very ambitious goal to see renewable energy sources making up 30 per cent of the national energy mix by the year 2030.
“We have embarked on a clear path for introducing and encouraging the development of the renewable energy sector,” Simpson Miller noted.
She said that she will also be closely monitoring energy consumption in the Office of the Prime Minister (OPM) under the Public Sector Energy Efficiency and Conservation Programme, which is in partnership with the Inter-American Development Bank, and is currently underway.
Under the programme, government ministries and agencies will have set targets by which they will be required to reduce their consumption. The OPM was one of the first government buildings to be retrofitted.
Germany’s Ambassador
The state-owned oil refinery Petrojam has dismissed claims that it obtains crude oil at discounted prices under the PetroCaribe agreement with Venezuela but does not pass on the lower costs to consumers. “It is not at a discount to Petrojam,” the refinery’s general manager, Winston Watson, declared at last week’s energy meeting at the refinery complex in Kingston. There is he said a lot of misinformation and misdirected facts in the marketplace. “We buy the crude oil from Venezuela at a competitive The days of cheap natural gas are gone, Trinidad’s Minister of Energy and Energy Affairs Carolyn Seepersad-Bachan has said. The low-cost sources of gas were fast depleting and it will cost more to find and extract new reserves, she said. Seepersad-Bachan’s statement came in response to an appeal by Methanol Holdings Trinidad Ltd’s (MHTL) CEO Motilal Rampersad for governmental support in keeping MHTL competitive in the downstream energy industry internationally. Rampersad spoke during the commissioning ceremony of AUM1 Complex at the Point Lisas Industrial Estate. The Jamaican government is relying on Trinidad to supply it with cheap natural gas as it looks to rely more on the commodity. This news will come as yet another set back to its energy policy. Already there are allegations of rampant corruption at its Petroleum Corporation of Jamaica (PCJ) and controversy surrounds the awarding of a contract for a liquified natural gas facility to the former head of the PCJ. Only this week, former President Bill Clinton called on Jamaica to use its natural resources of solar and wind and focus more on renewable energy rather than imports that cost around 10 per cent of GDP. MHTL, one of the largest producers of methanol in the world, is a subsidiary of the CL Financial empire and is considered one of the most profitable entities in the financially troubled conglomerate. Finance Minister Winston Dookeran recently said MHTL may be divested and listed on the international stock market. Seepersad-Bachan said while Government “is committed to the expansion of the downstream sector, we need, however, to accept that there is no more cheap gas available”. She said, “Most of the explored acreage, the available low-cost sources of gas are depleting very quickly and, as a result of that, we are on an exploration drive.” She said even in the current bid round just closed, Government expected the cost structures to go up and, as a result, production cost would rise. “In addition to that, as we move further out into deep-water area, you recognise the high capital-intensive, high-risk areas that we’re dealing with and therefore, as result of that, gas prices will not be what [they] used to be.” She said Government recognised the challenges gas-based projects face in terms of the cost structure and competitiveness and, as a result, Government will partner with the companies to identify creative and innovative strategies to address these challenges. This, she said, is also why the National Energy Corporation of Trinidad and Tobago Ltd (NEC) has been requested to conduct a study to establish a framework for the execution of energy audits for plants in the Pt Lisas area. “We want to encourage all of the industries based at Point Lisas to improve on their energy efficiencies because gas prices have been increasing significantly so it is a challenge that is faced by all.” Last Tuesday’s function was to celebrate the completion of the US$1.7 billion project, the first for ammonia and urea plants that are integrated into a complex capable of producing third-stage downstream products of 60,000 metric tonnes per year of melamine and 1.5 million metric tonnes per year of urea ammonium nitrate solution. The AUM ammonia plant was started in March 2009 and fully commissioned by June of the same year. All other plants of the complex have been mechanically completed since March 2010. An economic relationship between Stephen Wedderburn – the technical director for the Government’s effort to develop a liquefied natural gas (LNG) facility in Jamaica – and the Belgian firm designated the preferred bidder on the project will likely be a major focus of Contractor General Greg Christie’s ongoing probe of the scheme, a series of emails and letters on the project obtained by The Gleaner suggest. Wedderburn’s relationship with Ian Moore, the former chairman of the Petroleum Corporation of Jamaica (PCJ) whose involvement in a consortium headed by the Belgian firm, Exmar Corporation, triggered Christie’s investigation, will also likely fall under scrutiny. Wedderburn, who has not returned phone calls from The Gleaner, could not be contacted for comment. No commercial relationship But in a September 6 email last year, to then PCJ managing director Ruth Potopsingh, querying a delay in renewing his contract, Wedderburn confirmed his participation in a project in Colombia in which Exmar was also involved, but denied a specific relationship with the Belgian firm. He, however, undertook not to participate in the evaluation of any bid by that company. Said Wedderburn: “In terms of a connection with Exmar, please note that on numerous occasions I have explained to officials at the ministry of energy and mining, including the former permanent secretary (Marcia Forbes), that I have been involved in a project to develop floating LNG liquefaction in Colombia. Exmar is also involved in this project, but I do not have any commercial relationship with Exmar.” He added: “Nevertheless, if the project is successful both Exmar and I will benefit. My involvement in the project was on a success-fee basis and even where I have ceased active involvement in the project, I will still have a financial interest. I have no other commercial connections with Exmar. “Given this background, it has already been decided that I would not be involved in the evaluation of any LNG FSRU proposals for Jamaica.” Wedderburn accused persons he did not name, of “creating a red herring out of this matter” and complained about being assigned work without pay. Wedderburn did not provide details of the Colombia project, or say what work he did on it, or the level of his potential compensation. Wedderburn, a former official of the now defunct National Investment Bank of Jamaica, has worked on LNG efforts to shift a substantial segment of the nation’s energy requirement from oil to natural gas. He joined the PCJ in 2004 as group technical director and a year later was assigned to the Cabinet office to work on the LNG project with Anthony Hylton, who former Prime Minister P.J. Patterson had named to spearhead the project. He returned to the PCJ when Portia Simpson Miller, who succeeded Patterson, reverted the LNG scheme to the central government and the PCJ, under the direction of then energy minister Phillip Paulwell. When Simpson Miller’s administration lost office in September 2007, Wedderburn continued to work on the project. The project, however, had slowed down under new energy minister Clive Mullings, who had a greater partiality to coal than LNG. It was during that period that Wedderburn worked with Ian Moore, who had been appointed by the new administration as chairman of the PCJ. Fuel diversification Moore was a strong advocate of LNG and, insiders suggest, it was this difference with the minister that was partially responsible for his firing by Mullings in November 2008. Soon after Moore’s departure from the PCJ, Wedderburn followed and joined the Colombia liquefaction project, sometime in 2009. He, however, returned to the PCJ on a consultancy basis when Mullings was himself fired by Prime Minister Bruce Golding and replaced by James Robertson. Robertson was clearly keen on Wedderburn rejoining his team, as was firmly stated in an August 2009 letter by his then permanent secretary, Forbes, to the PCJ’s Potopsingh. Declaring the Government’s decision to give natural gas priority in “its fuel diversification plan”, Forbes said: “We wish to confirm that Mr Stephen Wedderburn is to be employed by the PCJ as project coordinator.” It is not clear whether Wedderburn stuck to the undertaking of not participating in the evaluation of the proposals on a project for which, despite the Government’s engagement of foreign consultants to help, he was the key domestic technocrat. It is, however, known that Wedderburn formulated the arguments against Jamaica acceding to the request of two major potential bidders, Korea Gas Corporation (Kogas) and Samsung C&T Corporation (Samsung), for more time to file proposals. This effectively left Exmar consortium – which includes a firm, Caribbean LNG Jamaica Ltd, in which Moore is apparently a major shareholder – the sole bidder on the LNG project. Request for proposals When the PCJ, the vehicle used by the Jamaican Government for its energy projects, put out its request for proposals on the LNG project, it set a close date of February 15. But by early January Kogas, Samsung and Gloat LNG of Oslo, Norway, were signaling they could not make that date. On February 4, the two South Korean firms, Kogas and Samsung followed up their informal communications with a letter to Wedderburn and then PCJ chairman Kathryn Phipps, formally requesting an extension to April 30. They argued that the proposed time frame to complete the proposal for such a complex project was too tight. “… We need further time … in order to meet the RFP’s requirements properly and provide a far better proposal for your esteemed company … Otherwise, we will inevitably not be in the position to proceed further and to stop here without participating in the tender,” stated the letter signed by Hyeok Lee, Kogas’ senior manager, and Samsung’s deputy general manager, Se-Ik Oh. But days earlier, in response to the firms’ initial intimation they needed the extra time, Wedderburn, in an email to Hillary Alexander, who by then had replaced Marcia Forbes as the permanent secretary in the energy ministry, was expressing his opposition to the extension. That email was copied to Phipps and other members of the PCJ board. Wedderburn argued that the original bidding of “slightly in excess of 90 days” was “the standard period for bid exercises of this type”. In any event, he said, two firms had said they would deliver their bids on time. “This extension request, coming from a group that has not previously developed an FSRU project, suggests that inexperience may be the underlying cause for the request,” he said. He also claimed that a delay would risk the collapse of the project because of the likely jitteriness of potential natural gas customers. Moreover, he said, Jamaica’s reputation in the LNG industry was “pretty tattered” because of its failure over the years to bring its announced project on stream. A further delay would brand Jamaica as “flirts” in the LNG market. Alexander agreed. In a response the same day to Wedderburn and copied to the PCJ board, she said: “I agree with your analysis. In my considered opinion, and given the policy directives and the extension already given (in December 2009), further extensions should not be contemplated.” Later, when it seemed that the PCJ board might still have been keen to grant the extension, Alexander stamped her authority on the matter in another email to Wedderburn. She insisted it was both a procurement and policy matter, demanding that the PCJ directors “act within the guidelines and policy framework” of the Government”. In the end, PCJ received two tenders, one from the Norwegian firm Hoegh LNG, and the other from the Exmar consortium. Hoegh’s bid, however, did not cover the gas pipeline of the request for proposal. But questions have since been raised over whether the Exmar consortium, which includes the Colombian pipeline company Promegas and CLNG, had inside information. Indeed, it was out of such accusations that the Office of the Contractor General launched its investigation into the bidding process. CLNG Jamaica, for which Jamaica company records list Moore as a director but not a shareholder, is, according to these documents, 80 per cent owned by Caribbean LNG, a company registered in the British Virgin Islands (BVI). Both Moore and another CLNG Jamaica director are believed to major shareholders in the BVI-based firm. In June, Moore wrote to a trust services company in that British territory giving permission for the Jamaican contractor general to peruse its records. Caribbean LNG Jamaica was incorporated in Kingston in June last year, seven months after he demitted office as chairman of PCJ, but the contractor general suggested that this did not rule out “a potential conflict of interest, taking into consideration Mr Ian Moore’s former position as board chairman of the PCJ and his now documented position as a director of the local company, Caribbean LNG Jamaica Ltd”. Additionally, the OCG’s investigation would seek to determine whether Moore’s prior involvement in the consideration by the PCJ of the LNG project would have given the companies, with which he is now involved, an advantage in the procurement process, which was “initiated in earnest in April 2007 and which overlapped his tenure as PCJ board chairman”. Development guidance Critics of the way in which the project has evolved, also have other concerns, including the seeming shifting role to be played by Caribbean LNG in the arrangement. For instance, outlining Exmar consortium structure describes Caribbean LNG Jamaica as being formed for the “sole purpose of providing development guidance to the consortium partners for the LNG infrastructure RFP and potential implementation and execution”. But a memorandum of understanding (MOU) between Caribbean LNG and the other consortium partners, as well as documents delivered to banks for possible financing said it intended “to take part in natural gas and LNG marketing in relation to the project”, which was to be covered by a separate MOU.
