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Editors' Forum | LNG to supply 80% of power by 2023

Published:Friday | April 12, 2019 | 12:44 AMSteven Jackson/Business Reporter
Emanuel DaRosa, president and CEO of JPS, addresses journalists at a Gleaner Editors’ Forum on Thursday. To his left is Winsome Callum, director of communications and customer experience.

Jamaica’s transition to cleaner liquefied natural gas (LNG), now at nearly 25 per cent of generated power for the national grid, will move to 80 per cent in four years.

It will result in one private supplier, United States-based New Fortress Energy, replacing the state-controlled Petrojam as the main supplier of energy to power utility the Jamaica Public Service Company (JPS) and other private projects.

“New Fortress is a single supplier, and if they run into problems, we could have issues,” conceded JPS President and CEO Emanuel DaRosa when asked whether the concentration of power in the hands of one supplier made the electricity provider liable to shocks. “Having said that, our Old Harbour power plant is a dual plant, so while the main power source is natural gas, it can use diesel as a backup. So, should there be a problem, we can run diesel.”

DaRosa and other JPS executives were at a Gleaner Editors’ Forum at the newspaper’s North Street, Kingston, headquarters on Thursday.

LNG will supply roughly 65 per cent of the island’s energy by next year, and New Fortress will supply all of that capacity, according to the JPS president. By 2030, LNG is likely to move to 80 per cent of the energy mix, with renewables accounting for 11-13 per cent. It will follow the replacement of 160 megawatts of ageing power plants to run on LNG. The JPS has not yet decided on a supplier for those units.

DaRosa said that the paradigm shift signalled the island’s increasing reliance on LNG and the reduction in purchases from state-owned Petrojam oil refinery, which he estimates will drop by some 75 per cent after opening its Old Harbour power plant later this year.

The JPS inked an exclusive LNG deal with US-based start-up New Fortress for existing LNG projects. While New Fortress also forged supply deals with private-sector entities Caribbean Broilers, Desnoes & Geddes, and IGL, it will also supply gas to the Jamalco LNG power plant set for commissioning in 2020. Jamalco is a joint venture between the Noble Group and Clarendon Alumina Partners, a company owned by the Government.

New Fortress’ key assets in the island include a terminal in Montego Bay, an offshore terminal at Old Harbour, and assets at Jamalco.

Earlier this year, New Fortress, founded by US billionaire Wes Edens, raised roughly US$300 million from its initial public offering of shares, covering 12 per cent of the company on the US markets. New Fortress intends to use one-third of the proceeds to finance the local buildout plants in Clarendon and Old Harbour in Jamaica.

New Fortress would have spent more than US$350 million since 2014 to set up its facilities, most of which was spent in Jamaica. It, however, has capital commitments totalling US$1.35 billion for new projects spanning the Caribbean, Latin America, Africa, and Europe.

LNG, seen as cheaper and more efficient than heavy fuel oil. Fuel accounts for 69 per cent of customer bills, followed by costs related to operations and maintenance at 14 per cent, asset amortisation at 8.0 per cent, regulated return on equity at 4.0 per cent, finance costs at 3.0 per cent, and taxes at 2.0 per cent.