Home' Trinidad and Tobago Guardian : January 4th 2018 Contents news BG7
Thursday, January 4, 2018
Jamaica’s LNG ambitions
Jamaica has signalled its intention
to be a player in Caribbean energy
and, in particular, in liquefied nat-
ural gas (LNG).
The importation of cheap en-
ergy to replace the high-priced, diesel-
powered, power generation plants has long
been articulated as Jamaican policy with
the then PJ Patterson government seeking
to negotiate LNG from T&T at preferential
rates, which never worked out and placed
a strain on bi-lateral relations between the
two major players in Caricom.
Jamaica is now on the cusp of receiving
the much sought after LNG and wants to be-
come a transshipment hub for small scale
LNG in the region.
Already its partnership with US company
New Fortress Energy has led to the con-
struction of a natural gas-fired heat and
power plant in Jamaica.
The plant is expected to provide electric-
ity for the Caribbean island’s national grid
and its aluminium company, Jamalco.
The US$270 million project will include
the construction of a floating storage and
regasification terminal in the Portland Bight
Protected Area, the installation of a pipeline
from the Rocky Point port to the Jamalco re-
finery, as well as the construction of the nat-
ural gas-fired power station at the Jamalco
location and construction of an electricity
distribution network to deliver power to Ja-
maica’s national grid.
The project is expected to be completed
by the first quarter of 2019.
At the sod turning last year, Jamaica’s
Prime Minister Andrew Holness said the
plant will also benefit ordinary Jamaicans
through a power-purchase agreement that
is yet to be negotiated and through reduced
“This development signifies the power of
win-win partnerships with the benefits for
Jamalco, including reduced cost, as well as
increased reliability and efficiency,” Hol-
Recently a team from T&T’s Extractive
Industries Transparency Initiative visited
Kingston to talk to stakeholders about the
EITI and the challenges and opportunities
in becoming a player in the Caribbean en-
Professor at the University of the West
Indies, Andrew Jupiter outlined four major
challenges that Jamaica will face if it is to
become an LNG transshipment hub.
He noted that the concept of small scale
LNG is an attractive one but often requires
dense populations to be successful.
Jupiter said a critical component to mit-
igate the cost of transporting small scale
LNG is fleet utilization and maximising the
volume of LNG moved each year.
He said, “Due to the low density of the
Caribbean countries in terms of the dis-
tance a fleet must travel to deliver the prod-
uct across the Caribbean from Bahamas to
Jamaica to Barbados it will impact the fleet
utilization. Small LNG has been successful
in markets with higher population densities
than the Caribbean such as Japan and Scan-
Jupiter, who is a former permanent sec-
retary in the Ministry of Energy, told the
Jamaican audience that based on reports of
a similar project in Africa, chartering of 3
small scale vessels will cost US$420 million
over 10 years.
This works out to be US$38,000 a day
charter rate per vessel and questions re-
main whether in fact there are enough of
these vessels globally to charter in the first
Jupiter argued that the ability of small-
scale power generators to justify conversion
is predicated on their ability to integrate
natural gas into the existing supply chain.
He said power generators need to ensure
that natural gas conversion allows for mul-
ti-fuel capabilities to be retained in order to
guarantee fuel security.
Additionally, small LNG buyers may lack
the capital and technological know-how to
develop and manage LNG supplies.
“In many cases, power plants in the Car-
ibbean may not be located in the proximity
of ports that have the capacity to service
smaller LNG ships. Expensive gas pipe-
lines or LNG trucking may, therefore, be
required to supply the plants with natural
gas,” Jupiter warned.
Jupiter told the EITI seminar that small
scale LNG may also one day face competi-
tion from renewables and this will have to
be considered in investments in the sector.
Only recently managing director of New
Fortress Energy Brannen McElmurray said
the transformation of Jamaica’s and the Car-
ibbean’s energy environment is hinged on
the beginning of the use of LNG.
“Transforming the Caribbean’s energy
landscape, improving energy efficiencies
and reducing environmental impacts start
with LNG as a fuel source.”
He added, “LNG has been shipped inter-
nationally with no incidents resulting in a
loss of cargo at sea or in port. LNG is also
the safest of all hydrocarbon fuels due to
its unique physical properties: non-toxic,
odorless, not pressurised, colourless, and
Jupiter points out underlying challenges
Oil inventories are dropping, federal reg-
ulations are dissipating, and OPEC mem-
bers are committed to limiting production.
The year ahead holds immense promise
for oil companies.
Oil field services are getting expensive,
labour is in short supply, and higher prices
could limit demand growth. Exploration
and production companies will struggle to
compete in 2018.
The energy business is finally getting
back to normal.
After three and a half years, the oil
glut produced by horizontal drilling and
hydraulic fracturing in the United States
is shrinking. Inventory at the Cushing,
Oklahoma, trading hub fell to 51.4 million
barrels, the lowest level since March 2015,
according to the US Energy Information
Shrinking inventories have triggered
In June 2017, the price for West Texas In-
termediate crude was $42.53 a barrel, but
this year begins about US$60.
Most analysts predict WTI will average
US$55 a barrel in 2018, a price high enough
for the best wells to make money, but low
enough to keep producers from drilling
second-tier wells. Prices are nowhere near
June 2014’s US$107, but are far better than
the US$26 barrel of February 2016.
President Donald Trump’s administra-
tion, meanwhile, is promoting US “energy
dominance” by slashing regulations.
The Bureau of Land Management on
Thursday repealed its rules for hydraulic
fractured wells on federal land, leaving
only state regulations in place. The federal
Bureau of Safety and Environmental En-
forcement, responsible for offshore wells,
is rolling back safety regulations put in
place following the 2010 Deepwater Hori-
zon accident in the Gulf of Mexico.
“It’s time for a paradigm shift in the way
we regulate,” said Scott Angelle, the direc-
tor of the Bureau of Safety and Environ-
While these changes should boost US
oil profit margins, the Organisation of the
Petroleum Exporting Countries holds the
real key to keeping prices high. And its 14
members along with Russia appear com-
mitted to keeping 1.8 million barrels a day
off the market in 2018.
Saudi Arabia needs high prices to gener-
ate value for the shares it is selling in Ara-
mco, the country’s national oil company.
Other cartel members need high prices to
cover government budgets.
That leaves American shale drillers to
meet new global demand. The US added
one million barrels a day of new produc-
tion in 2017 and exported 954 million bar-
rels a day of it, according to the EIA.
In early 2018, oil producers are expected
to break the American record of 10.4 mil-
lion barrels a day pumped in November
2017. Higher production comes from more
drilling and longer wells, though, which
means higher costs.
The fundamental problem of excess oil
production capacity remains, and that will
cap how high prices can go and limit prof-
its. The oil business may be looking up in
2018, but that doesn’t mean it will be easy.
Hard work in 2018 for oil
and gas business
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