Jamaica Public Service wants to import gas tax free
The Jamaica Public Service Company Limited (JPS), which is finalising a deal with United States-based Fortress Energy to supply it with liquefied natural gas (LNG), is hoping that the government will permit the company to import the gas tax-free and on terms similar to the state refinery Petrojam.
Petrojam pays common external tariff (CET) on products it imports, but is able to reclaim sums paid on an annual basis from the Jamaica Customs Agency. The tax is 10 per cent on the value of imports.
Data seen by the Financial Gleaner show that claims for CET paid by Petrojam ranged between J$1.1 billion and J$2.89 billion between 2007 and 2011. The company imports in the region of nine million barrels of crude oil annually, in addition to refined petroleum products.
Chief executive officer and president of JPS, Kelly Tomblin, told the Financial Gleaner that if the light and power supplier was allowed to import gas tax-free it would be to the benefit of consumers.
"Petrojam does not pay. We hope for the same tax treatment for gas as for Petrojam. It will be to the benefit of customers. Tax treatment does make a difference," she said.
Tomblin noted that such a move would make investment in a gas terminal to serve the greater Caribbean region more attractive.
The company has already approached the Government on the matter of tax breaks. "We have had conversations," Tomblin told the Financial Gleaner in an interview.
Long-term natural gas solution
In June, the JPS made a preliminary deal with Fortress Energy to provide a long-term natural gas solution for its power plants, starting with the one at Bogue, Montego Bay, St James.
The company is also about to begin the conversion of the 115-megwatt combined cycle plant at Bogue from automotive diesel oil to dual fuel supply using oil and gas.
JPS is also soliciting bids for the construction of a new combined cycle plant at Old Harbour, St Catherine.
The new 190-megawatt power plant will replace two old plants with capacity of 292 megawatts at Old Harbour and Hunts Bay, St Andrew.
The old plant is expected to be shuttered at the close of the financial year in December 2015 and construction is expected to take place over 26 months. The new plant is expected to be in operation some time in 2018.
Additionally, the company is weighing whether to invest in a gas terminal project mooted as a hub to supply the wider Caribbean. The cost is estimated at between US$200 million and US$300 million to develop the infrastructure, as well as for internal and external supply,
Delivery of gas to Bogue is expected by early 2016.
The conversion of the plant, it is projected, will result in an approximate 40 per cent fuel price reduction.