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Jamalco plans US$26m temp fix to energy problem - Source says future plans include coal-fired plant

Published:Wednesday | January 16, 2013 | 12:00 AM

Steven Jackson, Business Reporter

Alumina producer Jamalco has been granted a permit to operate its own energy plant, but the refinery said Tuesday that it will not develop its own facility but will lease power-generation equipment from an unnamed party.

Spokesman Leo Lambert said the lease will cost Jamalco US$25 million, but that the company would also spend US$1.2 million on supporting infrastructure - for total investment of US$26.2m (J$2.4b).

Jamalco's information is counters information disclosed by National Environmental Planning Agency (NEPA), which said it had granted a permit to Jamalco to develop a power-generation plant, as well as a fuel storage stockpiling facility at Halse Hall, Clarendon.

"We are not building a plant, we are leasing energy-generating equipment," Lambert said when the discrepancy was highlighted.

"The lease cost will be in the region of US$25M with an additional US$1.2M in infrastructural cost," he said.

He declined to name the lessor.

Lambert said the plant is a temporary fix, and that a more comprehensive energy programme was under consideration for implementation likely in two to three years.

Wednesday Business sources say that Jamalco's more permanent fix involves a coal-fired plant and that the "indicative" costs on that project is about US$400 million.

The leased plant will not wean Jamalco entirely off the national grid operated by Jamaica Public Service Company, but is expected to generate some savings on the refinery's energy bill.

"This project is part of Jamalco's strategy to control energy costs and ensure power stability at the refinery," said Lambert.

"It will greatly reduce our dependency on JPS and allow for the sale of excess power to the national grid," he said.

The investment is expected to pay for itself in less than a year, he told Wednesday Business.

Oil-powered plant

The plant has a capacity of 17 megawatts and will be powered by fuel oil. The fuel source is convertible, Lambert said.

Jamalco is owned 55 per cent Alcoa Inc and 45 per cent by the Government of Jamaica-owned Clarendon Alumina Partners.

"There is no future in Jamalco using fuel oil," said bauxite expert Carlton Davis in a phone interview, who himself was unsure whether the plant would be convertible to coal or liquefied natural gas.

Referring to Jamalco's project, Davis said the plan to stockpile petroleum represents a means to convert coal into energy but is not necessarily an indication of the fuel source itself.

"If you use coal, you will still need oil to provide the electricity and steam," he said.

Jamalco's managing director Jerome Maxwell had signalled last August at a Gleaner Editors' Forum that the refinery would effectively apply for a permit to build its own energy plant if the Government-led LNG project was scrapped.

A month later, the Government announced that it would scrap plans to handle the sourcing and pricing of LNG. JPS is currently studying the feasibility of stepping into the breach.

"If you had an alternative fuel and Government said we are not going with natural gas ... all I need to do is apply to NEPA for a permit to operate a coal facility and get the conditions to operate and I convert," said Maxwell at the forum.

"We look at all options. We look at what to keep on fuel oil. We look at what we want to keep on gas. What we want on petcoke, or whatever it is. We have an energy area that looks at all options, at all times."

Jamalco, back in the early 2000s, had planned a US$1.6-billion expansion of its refinery but needed a cheaper energy source to make the project feasible. Those plans were scrapped as the Jamaica Government could not determine pricing and supplies for LNG from expected supplier, Trinidad and Tobago.

Davis, at the same Gleaner Editors' Forum last August, said the initial Jamalco expansion would have produced a surplus of 85-100 megawatts of power that could have been exported to the grid.