EDITORIAL - Mr Zacca and the LNG project

Mr Christopher Zacca must be aware of the monumental importance of the job to which he was assigned last November by Prime Minister Bruce Golding.

If he gets it right, it could represent for the Jamaican economy the critical game-changer, for which our policymakers have so long searched.

That is why Mr Zacca, as we have been suggesting all along, and as recent events appear to have confirmed, must reshape the terms of reference of the assignment, or tell Mr Golding that he cannot continue.

Put starkly, Mr Zacca's task force can no longer be merely about plugging, patching and, ultimately, implementing that botched project to convert from oil to liquefied natural gas (LNG), the fuel that fires the bulk of the island's electricity- and power-generating facilities. The energy programme has to be completely rethought, and a decision arrived at based on the fuel that represents the genuine least-cost option to the national economy.

In that regard, the process has to be open and transparent and the debate robust, even as we appreciate the urgency of having an efficient and cost-effective energy system so as to improve the competitiveness of the Jamaican economy.

Flawed approach

The first order of business, therefore, is for Mr Zacca to publish the report of the consultants who reviewed the structure of the LNG project up to the time Mr Golding apparently concluded that the only responsible thing to do was to yank it away from his energy minister, Mr James Robertson. If Mr Golding objects, Mr Zacca has a single option: walk.

The approach by the Golding administration to energy conversion has been flawed from early. It has lacked transparency and seemingly oblivious to the fundamental reason for conversion: to improve the competitive position of the Jamaican economy.

Indeed, we have known for a long time that with the cost of producing electricity at US$0.29 per kilowatt-hour, Jamaica's economy would always strain badly to compete with its regional neighbours.

LNG was an undisputed alternative option when Trinidad and Tobago's former Prime Minister Mr Patrick Manning promised two Jamaican leaders, Mr P.J. Patterson and Mrs Portia Simpson Miller to supply our country with LNG at preferential prices. Mr Manning, unfortunately, couldn't deliver and is out of power. No one in Trinidad now uses that language.

Process far too opaque

Yet, our government, or Mr Robertson's advisers, appeared to have locked themselves into LNG without considering other fuel sources, including coal, which fires nearly half the world's electricity output and, in the United States, at half the price of natural gas.

So, even without a buy-in on LNG from the critical consumers, including the domestic light and power company - Jamaica Public Service - or any of the alumina refineries, Jamaica named a consortium led by Exmar Corporation as its preferred bidder for LNG storage, regasification and pipeline facilities. Without off-takers for gas, LNG supply agreements cannot be negotiated. And this is a market where demand is rising. Nor can the project developers negotiate financing.

In any event, the whole process has been far too opaque. This absence of clarity about project specifics, including regulatory arrangements and the obligations of the Jamaican Government, caused concern for the consultants. And we have not got to the matter of the impact on the competitiveness on the Jamaican economy.

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