Elpert Fitzwarren, Business Writer

Carlton Davis: Trip to Ireland exceeded his expectations. - Rudolph Brown/Chief Photographer

Trinidad and Tobago's announcement that it will have no natural gas to sell Jamaica in the near future will definitely delay the proposed US$1.6 billion expansion of the Jamalco alumina refinery here and could even derail the project entirely, Jamaican government sources confirmed this week.

At the same time the Government has placed coal firmly on its agenda as an alternative source of energy for the expanded refinery as well as for the national energy grid, officials say.

"Coal has to be an important part of our consideration from henceforth," Dr. Carlton Davis, the Cabinet secretary, told the Financial Gleaner, in an interview on Wednesday. "Coal was always going to be part of the JPS' (Jamaica Public Service, the light and power company) future, but now it has to take a broader scope."

"Jamalco is now thinking about coal," he added.

But the more immediate concern for technocrats like Davis as well as members of the political administration, is how Port of Spain's stance on gas supply to Jamaica will impact Alcoa's plan, announced two years ago, to more than double the capacity of the refinery it now owns 50:50 with the Jamaican government. If the project goes ahead, the plant, in south-central Jamaica, would have a capacity of 2.4 million tonnes by 2010.

But the expansion, beyond an additional 140,000 a year, to come on stream by next March, was predicated on the use of cheaper, and cleaner, liquefied natural gas (LNG), for whose supply Kingston and Port of Spain signed a memorandum understanding in 2004.

The Trinidadians planned to deliver 1.1 million tonnes a year.

But recent signals from Port of Spain it might not be in a position to deliver was public confirmed at a recent energy seminar in the country's capital by head of the state-owned National Gas Company (NCG), Frank Look Kim.

Jamaica's gas requirement would be about a fifth of Trinidad and Tobago's current production, but Look Kim said the country, with its export commitments, had "none to spare". Supply to Jamaica would have to await now fields coming on stream and there is no timetable for this.

"It is no point beating around the bush, that this is a set back for the expansion momentum," said Davis, an acclaimed expert on bauxite/alumina, who also chairs Clarendon Alumina Production (CAP), the vehicle through which the government holds its current half stake in the 1.2 million tonnes a year refinery. The governments stake will dilute to around 46 per cent when the current phase of expansion is completed and fall further to 23 per cent if the big project went ahead.

But added Davis: "It is clear that the Jamalco expansion cannot commence in 2007. It cannot commence without an assured source of gas."

The Trinidadian stance is particularly galling to Jamaican officials from both a political and economic stand-point. Firstly, the MOU, signed much fanfare between Trinidad and Tobago Prime Minister Patrick Manning and his former, Jamaican counterpart, P J Patterson was re-inked by Manning and Patterson's successor, Portia Simpson, after she took over the government in March.

"The Trinidadians have strung us along for two years and now this," said a senior Jamaican government source. "The fact is that this a major project for Jamaica which could now be in jeopardy. Port of of Spain clearly has not taken into account that Jamaica has a trade deficit of US$400 million a year with them."

In other words, the thinking in Kingston is that it should make economic sense for Trinidad and Tobago to ensure the viability of the economy of one of its Caribbean Community (Caricom) partners, even at the expense of another LNG customer.

While Jamaica has begun to look around for other sources of LNG, like Venezuela, Qatar and Colombia, and coal is being view as an alternative energy source, there are also deep fears that the Jamalco expansion could miss a crucial business window.

For instance, China plans to push its alumina production capacity from the current eight million tonnes a year to 22 million tonnes in the short-term, which would lessen its demand for imported product. Experts say, new production lines could force out of production older alumina refineries in the US Gulf region, in Quebec Canada or in Ireland Ñ facilities that are far from the sources of raw material.

"But it is also possible to lose the window of opportunity," conceded Davis. "When you plan a project and there is a setback and someone comes ahead of you, it is possible to be knocked out by the changed market conditions."

business@gleanerjm.com