Thu | Jan 17, 2019

Jamaica, US eye LNG collaboration around regional hub

Published:Friday | April 10, 2015 | 12:00 AM
Energy Minister Phillip Paulwell (left) and US Energy Secretary Ernest Moniz at the signing of a cooperation agreement on energy on at Eden Gardens Hotel, Kingston on Thursday, April 9, 2015.

United States Secretary of Energy, Dr Ernest Moniz, says the United States is seeking willing partners for execution of a regional hub to supply liquefied natural gas, an initiative proposed by the Inter-American Development Bank.

Moniz, who spoke during the signing of a Statement of Intent between the US Department of Energy and Jamaica's Ministry of Science, Technology Energy and Mining, said in talks with Minister Phillip Paulwell that he appeared to have found a willing partner to work with on gas and renewable energy.

Moniz was present in Jamaica as part of a visiting US delegation headed by President Barack Obama.

He requested feedback from Paulwell on the IDB study - completed by Castilia Strategic Advisors - which reviews the feasibility of establishing a competitive commercial supply chain for natural gas in the Caribbean region.

The analysis, finalised in August 2014, looks at the entire Caribbean region to develop the best scenario for developing a supply chain for natural gas, paying particular attention to The Bahamas, Barbados, Belize, Dominican Republic, Guyana, Haiti, Jamaica, Suriname, and Trinidad & Tobago.

The study posits that regionally, replacing oil products with natural gas in the Caribbean could reduce energy prices.

"The high price of oil products leads to high energy costs in the region, which slows economic growth and hurts competitiveness. Electricity prices in many Caribbean countries are at US$0.30 per kWh or more, three or four times higher than prices in neighbouring Florida," the study found.

The report notes that most Caribbean countries have been unable to import natural gas and take advantage of the price difference compared to fuel oil, because their demand is too small to justify investing in the expensive infrastructure needed to import natural gas, and because tight global supply has made it difficult to contract natural gas at a competitive rate.

The IDB is promoting the development of a 'Hub and Spoke' supply model, where a private company in a country in the Caribbean acts as a hub for purchasing large shipments of LNG.

It is expected that LNG will then be redistributed by the same company that purchased the gas, or by another private company, in smaller ships to off-takers in other countries. In this scenario, all the countries would participate in the regional market, except for Belize and the island of Grand Bahama, both small markets where the cost to deliver natural gas would be too high.

The IDB study proposes that the cost of infrastructure to import and use natural gas would be about US$3.7 billion for the region from 2015 to 2022, including the cost of infrastructure to import LNG in each country and the cost of the trans-shipment hub.

Nearly half of infrastructure investments, it said, would be in new power plants - investments that will need to be made to meet growing demand whether natural gas is used or not, the IDB suggested in its report.

In the US-Jamaica signing in Kingston on Thursday, the statement speaks to the development and deployment of energy-related technologies. It promises technical cooperation on energy, modernisation and efficiency, development of the energy sector, fuel diversification and especially in relation to natural gas, strengthening of energy efficiency in public sector buildings and use of renewable energy by the private sector.

Implementation will involve workshops, exchange of information and periodic reviews measuring achievements against agreed targets.

"We believe that Jamaica could be a part of the hub because of our geographic proximity to places like Haiti in the Caribbean. After these meetings we are hoping to zero in some of the specificities," said Paulwell.

"This has been an area that has eluded us for years. We have been trying as part of our diversification strategy to incorporate gas to the mix, but we have not been able to secure a deal," said Paulwell. "So when we saw the report of the IDB in relation of the feasibility of gas for Jamaica we were absolutely excited. Even at those commercial terms without subsidy we will be able to change the profile and landscape of the energy sector of Jamaica."

Moniz commented that the US was willing to assist with system analysis to facilitate Jamaica's meetings with the IDB.

"It's something I am personally interested in advancing if we have eager partners, and you seem to be one," the energy secretary said, referencing both gas and renewables.