The Government, or elements thereof, apparently felt it to be smart politics to allow weeks of confusion and speculation about liquefied natural gas (LNG) in Jamaica's energy future. Such uncertainty, this mode of political communication presumes, dampens expectations and softens up the public for accepting less than what was initially promised.
So, the Government has announced that it isn't abandoning natural gas, only that its introduction will now be driven by the light-and-power company, Jamaica Public Service (JPS).
JPS will build its planned 360-megawatt gas-fired power plant and promote an LNG storage and regasification facility as well as procure the LNG.
Essentially, having deemed Samsung's bid for the LNG project would not cut the price of energy deeply enough to make a substantial difference to the Jamaican economy, the Government has withdrawn itself from promoting the venture.
The Government could have avoided the drama of recent weeks by being open and frank with the Jamaican people. We, however, have no fundamental problem with the new strategy. Maybe if the Government gets itself out of the way, then something positive will happen for energy, giving the economy a fighting chance.
Our broad support notwithstanding, we believe that there remain areas for clarification in Energy Minister Phillip Paulwell's statement which, unfortunately, were not tested by MPs after his presentation to Parliament on Tuesday.
The first, and most apparent, of these is the scope of the project for the LNG to be promoted by JPS and its parent firms, Japan's Marubni and East West Power of South Korea.
The original project on which the Government invited bids was for an LNG facility to handle 800,000 tonnes of fuel a year. Of this amount, JPS's requirement would be around 250,000 tonnes, or 31 per cent.
The other presumed offtakers would be the alumina refiner Jamalco, with 350,000 tonnes or approximately 44 per cent of the total volume, and Jamaica Private Power, with 200,000 tonnes or 25 per cent. It was on these volumes, and acquisition of LNG at an appropriate price point, that the widely anticipated 30 to 40 per cent reduction in the cost of energy was predicated. Minister Paulwell said it will be delivered.
No strong commitment
However, with a project delivery deadline of 2015, we do not have the sense that there is any firm commitment by Alcoa to a deal with JPS, or that there is yet any substantial discussion between the parties. Jamalco, 55 per cent owned by Aloca, operates in a very competitive global market where Jamaica is in the second half of the efficiency table of alumina refiners. Alcoa has insisted on very specific price benchmarks if it is to join the LNG pool.
An obvious question, therefore, is what would happen to the project if an offtaker representing nearly half of the LNG requirement was not on board. This would seem to have implications for the price at which energy would be delivered.
Further, Mr Paulwell appears to have not much more than verbal undertakings from JPS to undertake the project and lower the price of electricity by at least 30 per cent. At some point, this will be put in writing.
But the minister suggested that regulatory oversight by the Office of Utility Regulations will not extend to pricing. That demands clarification.
It would make sense if, at this stage, the Government publish all the documentation on the LNG project.
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