Camilo Thame, Business Reporter

( L - R ) CHANG and DAVIS

Jamaican officials say that the need to protect the adequacy of domestic electricity supplies, as much as the requirements of the proposed expansion of the Jamalco alumina refinery, is placing pressure on them to decide on a natural system to fire energy plants here.

"Frankly, we can't go beyond January 2007 and still be guessing at what we are going to do," said Dr. Carlton Davis, the secretary to the Jamaican Cabinet and a critical player in the emerging energy policy.

Supply arrangement

"Of course, the alumina thing is huge, but we can't risk electricity shortage," Davis told Wednesday Business. "So the key right now is to tidy up our supply arrangement."

The issue is that with the estimated three to four per cent growth in electricity consumption in Jamaica annually - consumption reached three million megawatt hours last year - officials fear that the 25 per cent reserve margin on the country's electricity capacity will soon fall under pressure. Stronger economic growth in recent years has intensified such concerns.

The decision facing the country is whether to go ahead with floating liquefied natural gas (LNG) or the alternative compressed natural gas (CNG) technology.

"These are among the options now on the table," Davis said.

Jamaica depends on expensive imported oil for over 90 per cent of its energy needs and last year spent US$1.5 billion for the 27 million barrels of oil consumed by the island. Approximately 24 per cent of that oil is used in power plants for the domestic grid.

However, experts point out that it is inherently inefficient to convert oil into electricity.

With the latest technology, only 50 per cent of the energy would be lost from the oil burnt. However, Jamaican officials say that with the island's ageing technology, electricity producers are losing up to 70 per cent in the conversion process.

It is against this backdrop that when Alcoa decided to spend US$1.5 billion to more than double the capacity of the 1.3 million tonne alumina refinery it now owns 50:50 with the Jamaican Government, it made it one of its stipulation that the island had to find a cheaper energy source.

That fitted neatly with a proposal by then Energy Minister Anthony Hylton to convert nearly a quarter of Jamaica's energy need from oil to natural gas, imported from Trinidad and Tobago.

Natural gas is cheaper than oil and technologies for its conversion to energy are more efficient.

Initially, it was projected that a 1.2 million tonne LNG storage and regasification plant would be built here, from which natural gas would be piped directly to a 193 megawatt plant to Alcoa refinery in Clarendon, as well as to power plants operated by Jamaica Public Service Company (JPS) as private producers.

When the idea was floated more than three years ago, the expected price tag for the LNG facility was US$250 million, but recent engineering studies suggest that it will be nearer to US$400 million.

That is giving officials here second thoughts, who now say it would befar cheaper, and just as effective, to set up a floating facility at Port Esquivel in St Catherine, from which the gas would be piped to the power plants. It would cost perhaps US$50 million to establish the berthing facility and installing pipelines.

Jamaica has been talking with the LNG division of the Norwegian shipping company, Leif Hoegh & Company, which recently has been promoting floating terminal solutions to their LNG storage and deliver needs.

Under this proposal Trinidad and Tobago would provide the LNG, which Hoegh LNG would transport to Jamaica and transfer to the floating vessel for re-gasfication.

"We have been talking to them about this method," said Davis, who is also chairman of Clarendon Alumina Production (CAP), the company that holds the government' share in the Jamalco alumina refinery. "It is the quickest way of doing it."

The problem, though, is that while Trinidad and Tobago says it is committed to the LNG project, in which it planned to take a minority stake, Port of Spain has supply problems. Recently sunk gas wells for which there was great promised have turned out to be dry and sharing arrangements are still be resolved with Venezuela from finds in the narrow gulf which separates the two countries.

As a back-up, officials say, Jamaica has also been talking to Colombia's state-owned oil and gas company, Ecopetrol. But what is on offer from Ecopetrol is CNG.

While details were not immediately available, Wednesday Business sources say that Ray Chang, the Jamaica/Canadian mutual fund owner, who also now has investments in shipping, has shown interest in providing a floating CNG solution for Jamaica.

"There are those who say that the CNG technology is newer and are therefore a bit sceptical," said Davis. "But it is well developed."

Added Davis: "The key thing is that you have to have the gas. It has now become a critical factor.... Ecopetrol has the gas."

All this is crucial to building out electricity generating capacity to supply the national grid around an expansion plan that takes on the least cost to the country.

Oil, in this regard, is far from the preferred option. In the United States, for instance, only three per cent of electricity production comes from oil.

In this least-cost scenario, the authorities have already made room for a 150 megawatt coal plant being planned by the nation's single-largest producer, JPS.

Of the US$250 million, 193 megawatt combined cycle power station Ñ 80 per cent of the power to be producers from gas is to be sold to the national grid.

JPS and Jamaica Energy Partners (JEP) also have plans to take up the LNG facility immediately.

JPS' plan is to substitute petroleum with LNG to produce more than 300 megawatts of its current production of 600 megawatts of electricity. Eventually, the JPS Hunt's Bay facility would be expanded by 120 megawatts, using LNG. The Old Harbour steam units would be converted to LNG to produce some 200 megawatts of electricity.

- camilo.thame@gleanerjm.com