EDITORIAL - Dr Hutchinson's case for LNG transparency

Dr Gladstone Hutchinson, the director general of the Planning Institute of Jamaica (PIOJ), has made the case, perhaps with even greater clarity than we have, for the need for a full, frank and open discourse on the energy source that Jamaica should adopt to drive its economy into the future.

Our Government has decided on natural gas, and is negotiating with a preferred bidder for liquefied natural gas (LNG) storage and regasification facilities, as well as pipelines to deliver gas to end-users.

It has also asked for bids for the provision of 480 megawatts of power generation based on natural gas, even though it is far from completing negotiations for these facilities, creating the regulatory framework within which they will operate, or knowing from whom Jamaica will buy natural gas and at what price.

Bluntly put, bidders for the power plants will, to a substantial degree, just have to wing it: that is, make broad assumptions about price.

Surrounded by uncertainty

It is this uncertainty that emerged in the speech given by Dr Hutchinson last Wednesday at a seminar on energy, organised by the energy ministry.

The PIOJ, as yet, has no precise numbers on the price of LNG and, therefore, the ultimate cost of gas-fired energy in Jamaica to put through its economic models.

It has used the assumptions of the Petroleum Corporation of Jamaica, of which Dr Hutchinson had this to say: "LNG may potentially lower the cost of electricity generation; however, it is not entirely clear ... the final effect will be a significant reduction to end-users' electricity prices."

He added: "What we found is that by 2014, the sum total benefit [from the use of gas] would be an additional 1.3 per cent of GDP and, by 2030, the total benefit would be an additional 7.3 per cent of GDP.

"In other words, we would average 0.4 percentage points of additional GDP over the 2013 to 2030 period from implementation [of the LNG project], based on the numbers we get from Petrojam."

Unattractive to Jamaicans

That may be the best Jamaica can hope for in any conversion programme, whatever the fuel employed. But many Jamaicans would find that particularly unattractive.

What's worse, they do not know what other fuels might deliver. There has been no public disclosure of any cost-benefit or economic analysis of any other fuel, say coal - not even based on the limited assumptions employed by the PIOJ for LNG.

This newspaper believes that cheaper, efficiently supplied energy could be the game-changer for the Jamaican economy. But deciding on a fuel source and moving to implementation based purely on secret information, available only among a few government officials, is not the way to go about policy formulation and/or implementation.

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