Dr Andrew Wheatley | Jamaica open for business in the natural gas space
The following are excerpts of a speech by Dr Andrew Wheatley, the minister of science, energy and technology, delivered Wednesday at the opening of a three-day natural gas conference at The Jamaica Pegasus hotel, New Kingston.
As a non-oil-producing country and a developing economy, successive Jamaican governments have long recognised the necessity of a reliable and sustainable energy supply. Historically, our energy profile has been characterised by an overdependence on imported fossil fuel.
On average, we need 20.4 million barrels of oil, annually, which can cost the country as much as $2 billion depending on market prices. In fact, Jamaica's national oil bill accounts
for our largest outflow of foreign exchange, and it continually exceeds our total annual export earnings.
And, while the oil market has been relatively stable over the last 18 months, we know that the volatility of oil prices can drive up demand for foreign exchange and trigger inflation, which can result in the devaluation of Jamaican currency and the erosion of our purchasing power.
The impact of higher energy costs is felt across all sectors, including manufacturing, hospitality, agriculture, and commerce, driving up the price of Jamaican goods and services, which makes our exports less competitive.
While an indigenous gas supply would be our hope for the future, the reality that faces us is the need to fully utilise the affordable, efficient energy sources we have at our disposal here and now.
Jamaica's National Energy Policy identified natural gas as an alternative to heavy fuel oil, which currently accounts for more than 80 per cent of the energy generated in the country.
The policy established that natural gas should make up 26 per cent of Jamaica's total energy supply by 2020 and 42 per cent by 2030. Having identified natural gas as the fuel for our energy evolution, the Government's primary mission has been to facilitate a seamless introduction of this fuel of the future.
A major turning point of the Government's mission to introduce natural gas was a determination by the Office of Utilities Regulation, which mandated that the 120-megawatt power plant operated by the Jamaica Public Service (JPS) in Bogue, St Catherine, be converted to use natural gas for electricity generation.
Following on this, through the efforts of key government departments and agencies and the Electricity Sector Enterprise Team, New Fortress Energy, emerged as the front runner of a competitive bidding process to supply liquefied natural gas (LNG) to the Bogue plant.
New Fortress Energy signed a 20-year supply agreement with JPS and invested US$750 million in the construction of a new LNG terminal in Montego Bay.
This significant initial step has opened up prospects for numerous local entities and has also given rise to several new ventures. A few of the developments along this line include:
- A new 190 MW gas-fired, combined-cycle, electricity-generating plant is being constructed at the JPS facility in Old Harbour.
- A cogeneration plant to provide 94 megawatts of baseload capacity to the national grid will be built at the Jamalco plant in Clarendon.
- And recently, the University of the West Indies (UWI) and Red Stripe announced plans to power their operations with LNG.
So, I think I can confidently state that Jamaica is now open for business and investments in the natural-gas space.
Looking forward to competitive industry
While we are talking a lot about the prospects of liquefied natural gas, let me point out that LNG is only a storage and transportation medium for methane, which is what we call natural gas.
There are other mediums for storing and conveying this fuel. I want to convey to you that the Government is willing to have discussions with all parties who are interested in obtaining the appropriate licenses or permits to deliver these services within Jamaica.
We are looking forward to the creation of a robust, competitive gas industry that will attract investment, create jobs, and spur economic growth. In fact, we anticipate that the benefits of the roll-out of natural gas will accrue to several other industries, and the Government is encouraging interests across the board to take note.
Regional hub for natural gas
It is this Government's intention to strategically position Jamaica as the regional hub for natural gas. This will ignite prospects in bunkering, shipping and logistics, so we are advising service providers in those industries to get ready.
There will also be opportunities for providers of professional services in areas such as law, taxation, and management, and we are encouraging practitioners and tertiary institutions to develop the expertise and modify curricula that will enable us to adequately serve the industry with local talent.
Driven by the Petroleum Corporation of Jamaica (PCJ), our oil and gas-exploration effort has moved into high gear over the last decade. The PCJ has aggressively pursued foreign investment and sought to engage proven explorers to work within our acreage.
Under a production-sharing agreement between the Government and Tullow Oil - a proven explorer, Tullow has been carrying out work in 11 of our offshore blocks. Within the last 18 months, they conducted two rounds of 2D seismic surveys off Jamaica's south coast.
Today, I am thrilled to announce that, based on the findings of these investigations, Tullow has recently confirmed that they will now move forward to 3D surveys. This means that the data from previous investigations has been so encouraging that the explorers now want to take a more in-depth look. This is a significant development as it marks the first time in the history of Jamaica's oil and gs exploration programme that an explorer will carry out such detailed analysis of our offshore.
This development will no doubt send a signal to other prospective explorers that they should consider Jamaica. This will pave the way for the PCJ as it continue its drive to engage other capable explorers to take up Jamaica's 20 available blocks.