Jamaica, TT at loggerheads over natural gas pricing

Jamaica is moving full steam ahead with plans to introduce a natural gas project to its high energy consumption economy with a 2006/2007 implementation date. While Trinidad and Tobago remains Jamaica’s preferred source for the importation of Liquified Natural Gas (LNG), a wrangle over cheaper pricing has forced the PJ Patterson administration to look towards the possibility of getting the environmentally-friendly fuel from countries such as Qatar, Algeria and Nigeria. Ambassador Anthony Hylton Jamaica’s Special Envoy in the Office of the Prime Minister sees the introduction of natural gas to replace oil as the energy source in its light and power and bauxite/alumina sectors as satisfying development objectives.

Among these are security of energy supplies, long term stability of prices, improvement in energy use, reduction in green house gases and a cleaner environment, and development of an industrial park using natural gas. Jamaica requires approximately one to 1.2 million tonnes of LNG annually to supply their domestic power and bauxite sectors. Importantly, the importation of LNG will serve to reduce Jamaica’s hefty oil bill calculated at US$640 million last year in the face of export  earnings of US$837 million. This year’s expenditure on oil imports is projected to be in excess of US$700 million. Jamaica’s energy landscape is highly dependent on oil which accounts for 90 to 92 percent, while the remaining power sources consist of hydro and solar power. Wind power is also being explored. The introduction of LNG into Jamaica however requires significant investment in infrastructure including a jetty, a terminal facility, storage facility and a re-gasification facility to prepare for distribution to end users.

Ambassador Hylton is hoping to have the LNG storage facility and re-gasification plant operational between 2006 and 2007, handling over a million tonnes of LNG a year and displacing up to 62 percent of the 25 million barrels of oil that Jamaica imports annually. Ambassador Hylton said proposals have been received from three of the world’s leading financial and investment advisors in the LNG business and that a decision should be reached very soon on the preferred advisor for the project. A number of measures have already been put in place to facilitate the introduction of the LNG project including the recent launch of the National Energy Diversification Strategy (NEDS). Jamaica is also the recipient of a US$750,000 grant from the Japanese Trust Fund, managed by the Inter-American Development Bank to conduct a feasibility study.

In addition, the United States Agency for International Development (USAID) has provided a technical assistance grant to assist with the legal, financial and regulatory advisory services to prepare for the project. Ambassador Hylton said an invitation would soon be issued for proposals for advisory services on the development of a regulatory framework for the  introduction of natural gas into Jamaica. Jamaica’s move towards Qatar and other countries as possible sources for LNG follows Port of Spain’s refusal to supply LNG at a concessionary rate, contending that LNG did not properly form part of the Caribbean Single Market and Economy (CSME) as the case being argued by Kingston and other  Caribbean Community (CARICOM) member states. Regional leaders in fact have asked the Caricom secretariat to prepare a legal opinion on the matter “in respect of access to, and pricing of natural resources as these relate to energy within the context of the CSME.”

With pressure mounting on Trinidad and Tobago to supply cheaper fuel to Caricom member states, the twin-island at last February’s Inter-Sessional meeting held here, presented a report on the state of the country’s energy industry, including petroleum products and natural gas. It also reviewed the implications of fluctuating energy prices on the economies of the other member states. Following the indepth presentation, Caribbean leaders agreed to establish a Task Force to develop elements of a regional energy policy which should include issues such as security of energy supplies, and pricing and procurement arrangements. That Task Force comprised Barbados, Grenada, Guyana, Jamaica, Suriname and Trinidad and Tobago. With all the disagreement over sourcing cheaper natural gas and oil from Trinidad and Tobago — the lone energy powerhouse in the sub regional grouping, it seems that the regional energy policy is long overdue.