Mullings needs to provide more details on energy options
Published:Friday | September 23, 2011 | 12:00 AM
R. Anne Shirley, Business Writer
Now that Clive Mullings has once again taken over responsibility for the energy portfolio, it would be useful if he clarified the Government's position as to the preferred energy source for Jamaica going forward. As a backbencher, the minister had indicated an interest in the use of coal, so he needs to indicate if the Bruce Golding-led administration, under his watch, is still taking the position that liquefied natural gas (LNG) is the preferred energy source for Jamaica going forward. If this is so, then it would also be helpful if he would indicate:
(a) the options being sought by the current administration with potential suppliers such as the Government of Trinidad and Tobago, the Government of Venezuela, and other suppliers, and
(b) the time frame and pricing arrangements being negotiated.
For example, under the previous People's National Party (PNP) administration, the Government signed two bilateral memorandum of understand (MOUs) with the T&T Government in 2004 and 2006, respectively. Under both previous agreements, Trinidad agreed to supply 158 million standard cubic feet of natural gas per day to Jamaica on a long term basis. However, in the November 2004 MOU signed by P.J. Patterson, the agreement called for LNG to be priced at the post-liquefaction stage (i.e. when it is in liquid form as LNG).
Wellhead stage
The major difference with the April 2006 MOU signed by Portia Simpson Miller was that under the new arrangement, the gas would be priced on the basis of natural gas as opposed to liquefied natural gas. In other words, the 2006 agreement called for the gas to be priced at the wellhead stage when it is still in a gaseous state.
The Simpson Miller-led administration posited the view at the time that the proposed change in the pricing basis offered a potentially significant advantage to Jamaica, as this would link the price offered by Trinidad to Jamaica more in line with the domestic gas market in Trinidad as opposed to the price for LNG on the international market.
In addition, the government argued that the conversion of the MOU from an LNG MOU to a natural gas MOU also provided future flexibility in the method of delivery of natural gas to Jamaica. In essence, the argument that was advanced suggested that whilst at present LNG is the most cost-effective mode for the transport of gas from Trinidad to Jamaica, developing technologies are taking place in other delivery modes such as the transport of compressed natural gas (CNG) by ship, which would allow us to receive natural gas on a price-competitive basis whilst bypassing the relatively expensive liquefaction and regasification processes associated with LNG.
What is the current pricing policy and delivery arrangements being pursued by the Bruce Golding-led administration? And what are the short, medium and long-term advantages that are being anticipated re its preferred option(s)?
Joint-venture company
Minister Mulling should also indicate if the joint-venture company which was a part of the 2006 MOU with Trinidad & Tobago is still functioning? Under the 2006 MOU, a joint-venture company was established - the Jamaica Natural Gas Project Company - in which Trinidad would take a stake up to 40 per cent. In this arrangement, Jamaica would benefit from Trinidad's expertise at all stages of the project, and this would help to mitigate some of the additional responsibilities/costs that the Jamaican Project Company would have to undertake under the terms of the MOU. The company would have to pay (a) a liquefaction fee for the natural gas to be converted to LNG; (b) the shipping cost to Jamaica; (c) the storage and regasification costs and (d) the pipeline-distribution costs to Jamaican gas users.
When the previous administration demitted office, work was far advanced on the project-development activities for the Jamaica Natural Gas Project, with Trinidad contributing 40 per cent of the costs involved. The major activity undertaken was the conduct of the Front End Engineering Design or Feed study, which included updated cost estimates for implementing the project and a detailed construction schedule.
Preliminary investigations were also undertaken re the conversion of an existing LNG ship into an interim floating terminal, which would allow for a speedier startup time for the delivery of LNG to Jamaica and the attendant benefits in terms of reduced energy prices.
The PNP government had also pursued a bilateral MOU with the Government of Venezuela re the provision of LNG under concessional terms, and while this was not signed off on, it would be helpful if Minister Mullings could indicate the extent to which the Government and the PCJ is committed to pursuing the Jamaica Natural Gas Project as conceptualised by the PNP administration, or if it's pursing another type of arrangement(s), and the impact that all of this has had/will have on the country's supply and cost of energy, and the time lines under the present and proposed arrangements.
Minister Mullings should also indicate whether the bauxite companies, particularly UC Rusal and Alcoa, have given a firm commitment to the Government re the use of LNG as their preferred energy source, or are they still undecided? In the past, there was some indication that these companies saw coal as a viable and cheaper option - have they changed their minds, and, are they now firmly committed to the use of LNG?
The country has long passed the stage where we can be kept in the dark or the details of our future energy arrangements. It is time for the Government to provide greater particulars on the direction in which it is taking the country with respect to the energy options available, and the extent to which it is anticipating upcoming changes in the volatile world-energy markets going forward and is therefore positioning Jamaica in the most advantageous position.