EDITORIAL - Chavez's victory and the LNG project

Whatever else might have been the relevance of Venezuela's presidential election to Jamaica, the most immediate concern for Kingston was the future of the PetroCaribe energy agreement.

It is little wonder, therefore, that our Government - particularly the energy minister, Mr Phillip Paulwell - has hardly masked its glee at President Hugo Chavez's retention of power and, in all likelihood, the survival of the PetroCaribe accord.

Mr Chavez's rival, Mr Henrique Capriles, had vowed to abandon the programme if he won Sunday's poll, saying the cash foregone under the scheme would have been better used in developing Venezuela's economy, rather than - as he felt it was - frittered away in Latin America and the Caribbean. That would have been bad news for Jamaica.

Under PetroCaribe, Jamaica receives around seven and a half million barrels of oil a year from Venezuela. Crudely, when the price of oil reaches above US$40 a barrel - as it has been for several years - up to 70 per cent of the value of the shipment becomes a loan from Venezuela, for up to 25 years at an interest of one per cent. If oil falls below the US$40 benchmark, between five and 25 per cent of the value is financed by Caracas for 17 years at two per cent.

BENEFITS OF PETROCARIBE

The beneficial effect of PetroCaribe to the Jamaican economy is obvious. First, the country does not immediately have to find all the foreign exchange to pay for around a third of its domestic oil imports. Further, the soft loans generated, and managed through the PetroCaribe Fund, are available to finance development projects.

Indeed, in the absence of PetroCaribe, Jamaica would have to find an additional US$500 million a year in upfront payments for its oil imports, with all its implications for an already straitened economy.

But President Chavez's electoral survival does not mean that Jamaica is out of the energy woods. It merely provides a bit of cushion and breathing space.

For even within President Chavez's government there are technocrats who remain uncomfortable, if not with the concept, the depth of concession offered by PetroCaribe and would like to see some rollback. Further, questions remain about Mr Chavez's health. What a successor, even from his Socialist Party, would do if he had to leave office is an imponderable.

IS HORIZON CLEAR?

Additionally, even with the PetroCaribe concession, the cost of electricity reaches up to US$0.41 per kilowatt-hour, a rate that helps to keep the economy uncompetitive. A coherent energy policy predicated on the use of a mix of cheaper fuels to generate power is, therefore, crucial. The proposal for the use of liquefied natural gas (LNG) is important.

But there is need for clarity, from all parties, about this project.

For example, the Jamaica Public Service Company (JPS) says it is moving ahead with its plan to build a 360-megawatt gas-fired plant. But a court ruled that its declared monopoly on the distribution of power is illegal. The question is whether JPS can fulfil its plan in the absence of legal clarity on this matter.

The same question arises over the announcement that JPS is to take over the promotion/development of an LNG storage and regasification facility, a matter further complicated by the fact that there are no agreed offtakers for two-thirds of the LNG to be processed by the plant.

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