By Dennise Williams, Staff reporterJAMAICA'S OIL import requirements could end up costing a record US$800 million in 2004, states Conroy Watson, senior director of the Energy Division of the Ministry of Commerce, Industry and Technology.
The country has never paid more than US$700 million to import petroleum, but based on rising world prices that could change significantly, he said. Paying for its energy requirements is the single biggest drain on the country's foreign exchange earnings.
Zia Mian, energy advisor in the Office of the Prime Minister, said "At the end of the day, you and I will pay as the consumer."
The 2002 petroleum import bill was US$641 million and is expected to grow by 9.2 per cent in 2003 to reach about US$700 million. Bank of Jamaica data shows that as at June of 2003, the country had earned US$661.9 million from exports.
"We are price takers," states Mr. Watson. "Whatever the price is on the world market, we have to pay."
DOLLAR FIGURE WENT UP SUBSTANTIALLY
Between 1999 and 2002, the volume of usage only went up by less than two million barrels, Mr. Watson said. But if you look at the dollar figure went up substantially more.
In 1999 consumption was 23.6 million barrels, costing US$431 million. By 2002, the figure had increased by 1.9 million barrels to 25.5 million, costing US$641 million.
But Courtney Williams, senior fiscal economist in the Ministry of Finance, said "Petroleum consumption is one of those ironic things that grows whether the economy is growing or not."
Research by the Canada Jamaica Green Fund reveals that, 'between the late 1980's and early '90's more than 80 per cent of Jamaica's primary energy demand was satisfied by imported oil. In 1990, it was predicted that the consumption of oil and petroleum products would increase at a rate of approximately one per cent per year.'
"The Government itself is also a consumer," Mr. Mian said, "So whatever their expense in terms of transportation, air conditioning in their offices and other energy uses such as street lights - this is how it impacts on the national budget."
THE PROBLEM IS COMPOUNDED
Mr. Mian said, "The real question is Jamaica's ability to generate sufficient US dollars.... a significant per cent of our foreign exchange earnings goes to oil. The problem is compounded when you add the cost of bringing in raw materials for production."
Ultimately, what the country pays for oil also impacts on the exchange rate, Mr. Mian said. And there are also indirect implications of the cost of importing petroleum. Thus it :
Forces the Government to borrow foreign exchange to fund the budget
Drives up the cost of products
Lowers the overall productivity of workers
Inhibits the productive sector's ability to plan ahead
Mr. Mian also stated that the rising cost of petroleum has a detrimental impact on the growth rate of the economy.
"There are positive as well as negative implications," Mr. Williams said. "It is understood that petroleum imports affect the balance of payments in terms of outflow of foreign exchange. But, it can be looked at as an indication of economic growth."
INCREASED DEMAND
Both the energy and transportation sectors are benefiting from increased demand, Mr. Williams said. Additionally, the Petrojam refinery closing down for six months in 2003 impacted the price of oil in Jamaica in 2002 compared to 2003, because the more expensive refined oil had to be imported.
There are alternative energy sources that the Government is pursuing Mr. Mian said.
"We are looking at liquefied natural gas (LNG) which can bring in long term stability," the energy advisor said. "We want to be in a position to negotiate a 20-year contract that will lock in supply and prices."
But before Jamaica signs such a contract, it must build the infrastructure to store the LNG in the form of a terminal. This terminal will cost about US$250 million to construct.
In previously published reports on LNG in Jamaica, it was stated that imported LNG is expected to initially replace, 'the high sulfur fuel oil consumption in the bauxite/alumina and the power sectors. This would initially replace about five million barrels of oil in the power sector alone, thus reducing Jamaica's energy import bill by about US$30 million per annum.'
And the benefits of LNG would not just be for the power and bauxite sectors.
CHEAPER ELECTRICITY
Mr. Mian said that for a few hundred US dollars, a motor vehicle can be converted to accept compressed natural gas while consumers would pay a lower electricity bill, as cheaper electricity will be available because of the use of LNG.
The source of funding for the construction of the LNG terminal is not clear at this point.
"I can't address the source of funding now," Mr. Williams said. "But for a costly project like that, it is likely to be external funding from the Inter American Development Bank or the World Bank."
Other alternative sources of energy available to Jamaicans are solar power, hydropower and windmills. And perhaps most critically, Mr. Watson says, "there is a need for energy conservation."
