KINGSTON, Jamaica, Oct 3, CMC – The Jamaica government says it intends to introduce liquefied natural gas (LNG) here by 2015 as it seeks to make the island more competitive by reducing the cost of energy to the various stakeholders.
In a detailed statement to Parliament, Science, Technology, Energy and Mining Minister Phillip Paulwell said despite earlier efforts to get the LNG project off the ground, plans are well advanced for making this a reality.
“I am happy to reiterate to this Honourable House and to the people of Jamaica that LNG will indeed be introduced into Jamaica by 2015,” Paulwell told legislators.
He said Jamaica had executed a Memorandum of Understanding (MOU) with Trinidad and Tobago for the development of an onshore LNG project in Jamaica based on LNG supplied by Port of Spain.
But the negotiations with the oil rich Caribbean Community (CARICOM) country “stalled indefinitely in or around 2006, as did subsequent efforts to secure LNG supply through alternate government to government negotiations.
“Notwithstanding the disappointment experienced, and in consideration of the continued burden of the cost of oil, the administration persisted in looking at natural gas,” he said, outlining the efforts of the Portia Simpson Miller government to ensure the viability of the energy project.
Paulwell said that the decision to continue with projects such as the LNG, “should not be politicized, and halted merely because it was started by the opposition”.
He said it was also necessary to preserve Jamaica’s credibility in the international arena, given the fact that the country already had an issue with the first iteration of the LNG Project.
“In the spirit of continuity, the Government also retained the same LNG Steering Committee appointed by the previous administration, save for two persons.”
Paulwell said that the South Korean multi-national firm, Samsung, had been declared the “preferred bidder” for the LNG project after the tendering process closed in April this year and the bidding process for the supply of LNG was extended to July 27, “and out of that process emerged bids from two companies: Shell and Morgan Stanley”.
He said as a result of the bids, the government “now has a more complete picture of what the price of gas is likely to be.
“The bids received indicated that the best case scenario, given the imponderables related to the financing of the Special Purpose Vehicle (the Jamaica Gas Trust) and the pipeline infrastructure, is that the LNG Project, as conceptualised, would yield a price of US$15.60 per MMBtu.
“At that price of US$15.60 per MMBtu, the overall estimated costs to the users would be somewhere in the order of about 50 per cent greater than what JAMALCO could accept …and 25 per cent greater than the highest cost level that JPSCO (Jamaica Public Service Company) could possibly go in order to achieve a 30 to 40 per cent reduction of electricity to the users in Jamaica”.
Paulwell said that regarding cost, the government since January 2012, has made no new financial commitments towards the project.
“The proposed budget for the entire project developed in 2011 was 5.4 million US dollars, of which, 2.8 million US Dollars have been spent to date”.
Paulwell said that the government regards natural gas as a “viable option” for the island’s energy mix and a good fuel option in the fight against climate change.
He said given the result of the bidding process, the government had taken the matter as far as it could go and would therefore “continue to support and facilitate private investors as we work together to achieve the best possible solutions.
“It is the considered view of the government that the electricity and alumina producers would have much more flexibility in the procurement of fuel supplies and could use their international leverage to get the best possible prices.
“We have modified the government’s role in this LNG project to better meet the needs and interests of all and to bring it in line with the country’s National Energy Policy, which calls for “an energy sector that is driven by private sector investment within a policy and regulatory framework that forsters investment, competition, efficiency, a level playing field and transperency”.
Paulwell said that as a result, the government will remove itself from the process of fuel source selection and instead focus on creating the legislative and regulatory framework, which its aims to establish and promulgate during this fiscal year.
He said the LNG Steering Committee will be disbanded with immediate effect and replaced with a body that includes members of the Jamaica Energy Council.
Paulwell told legislators that JPSCO is obligated to bring into service by 2015 a new 360 megawatt gas fired combined cycle generation plant, providing new capacity to replace approximately 292 megawatts of aged plants.
He said following a series of meetings in Korea, Japan and Jamaica , he has been able to get a “firm assurance from the JPSCO that they will undertake this LNG project within the timelines established, and will achieve a 30 per cent reduction in the price of electricity to the consumer.
“In the spirit of transparency, I will say to this Honourable House that the supply of LNG under a long-term contract may not commence by 2015, but JPSCO will be able to purchase LNG on spot price deals during that interim phase,” he added.