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Price cut pipe dream

Published:Monday | January 19, 2015 | 12:00 AM

Jamaicans to bear US$65m Bogue conversion cost, says JPS

Daraine Luton, Senior Staff Reporter

Light and power provider, the Jamaica Public Service Company, yesterday warned that customers could be forced to shoulder more than five times the US$15-million price tag they are already set to underwrite for the conversion upgrade of the Bogue plant in St James.

Consumers will fork out a total of US$15m, through a special fund reflected in their bills, over the next year to pay for the changeover of the plant from diesel oil to gas, this after the Office of Utilities Regulation (OUR) approved a cess for the capital works. However, the total cost of the conversion is expected to be about US$80 million.

"The pipelines, as well as storage facilities, represent an investment by the fuel suppliers, who will be recovering the money they have spent for the infrastructure in the cost of fuel," John Kistle, the senior vice-president for generation and project development at the JPS, told The Gleaner yesterday.

According to Kistle, it would be erroneous to think consumers would automatically benefit from the cheaper fuel soon, as infrastructure costs would be a significant add-on.

"Some of the things we have heard of late is [that there will be a] very short payback and that is based just on the difference in fuel sources. But it is not a short payback given the significant capital required for these terminals and pipelines and the conversion. This is not a US$15-million conversion; it is more expensive when we consider all of the other infrastructure that needs to be put into the island," Kistle said.

Kistle said further that there are three critical things need to happen in order to convert Bogue to gas. He said first there needs to be a mechanism to bring gas into a terminal and get it on to land. That, he said, has to be a ship-receiving terminal or some method of transporting gas from the ships into a facility that can discharge the gas in either liquid or gas form to the site. The other steps involve transporting the gas from the terminal at the port where it is likely to be collected, and converting the units to receive the gas.

Meanwhile, the JPS executive said the conversion plan is causing major environmental concerns, with the location for the offloading of gas for the plant being a crucial issue.

The JPS is proposing to offload the gas at the Freeport harbour in the resort town of Montego Bay.

"The location is certainly an issue, and we are quite concerned about the environmental constraints, as well as the safety concerns, when you have to bring gas into an operating terminal where there is a cruise ship operation," Kistle said.

As far as getting the gas into Bogue is concerned, Kistle said the JPS is currently working with the National Environment and Planning Agency (NEPA) and the Port Authority of Jamaica to find a viable solution.

"The Port Authority of Jamaica has very well-documented rules, so we are looking to work with them to bring gas into that harbour, if we are to use that harbour. We are not sure if we have to go somewhere else yet. The Port Authority of Jamaica has been working with JPS, and there are very clear guidelines on what we need to do," Kistle said.

He pointed out that the guidelines relate to how long a fuel vessel can sit in harbour to discharge "such that we can offload sufficient fuel to run the facility".

The senior JPS representative said the determination on the way forward will be based on the fuel storage capacity, either at the harbour or at the site, as well as how often a vessel will be required to fill the storage tank.

"There are a couple of options, and we are working with other authorities to understand which of those is an acceptable option. There are a number of constraints that would affect the type of option that we employ," he said.

"Primarily, we are working with NEPA to make sure that we understand what their issues are," Kistle added.

The push to convert Bogue to use a gas-based fuel is part of the Government's plan to reduce the dependence on oil and lower electricity bills. The JPS said the conversion to gas will also save the country millions of dollars each year in foreign exchange currently spent on importing oil.

JPS said the Bogue conversion project will begin as soon as the necessary due diligence is completed and JPS gets the final approval from the OUR.