Anthony Hylton (second right), Minister of Foreign Affairs and Trade, chats with Ruth Potopsingh (left) group managing director of the Petroleum Corporation of Jamaica, during the opening session of the eighth meeting of the Task Force on Regional Energy Policy at the Hilton Kingston hotel in New Kingston, October 17, 2006. - File

The Acting Editor of the The Trinidad Guardian, Anthony Wilson, has responded to a Gleaner editorial of February 25 headlined "Myopic economic nationalism" in which the Patrick Manning government was chided for reneging on its agreement with the Jamaican government to supply liquefied natural gas (LNG) and The Guardian's support for that decision.

Mr. Wilson's reply is published below.

"We feel that your readers would be able to make more informed judgements on the issue of intra-regional trade if The Gleaner were to quote from the Guardian's February 15 editorial.

"For ease of reference, I have provided the relevant excerpt of The Guardian editorial.

"The editorial speaks for itself and makes it clear whose interest The Gleaner is defending.

"As well, the excerpt hints at the huge amount of revenue that Trinidad is being asked to forego given "conjoined interests" that advocate two sets of natural gas subsidies (for the production of alumina in Jamaica and the production of aluminium in Trinidad) in favour of a publicly-held U.S. multinational in which neither Trinidad nor Jamaica have a shareholding.

EXCERPT

At the centre of the potential dispute between the two Caricom neighbours is the American aluminium giant Alcoa, which proposes to build an aluminium smelter in Trinidad.

Reports out of Jamaica indicate that Alcoa is proposing to double the capacity of the 1.5 million tonne alumina refinery it now owns 50/50 with the Jamaican Government.

As a result of Jamaica's huge foreign debts, Alcoa is undertaking the refinery upgrade by itself, rather than in partnership with Jamaica, which means that at the end of the project, Alcoa will own about 80 per cent of the equity in the three-million tonne per annum alumina refinery.

Jamaica looked to Trinidad and Tobago (T&T) for LNG because one of the conditions of Alcoa's proposed US$1.6 billion investment in Jamaica was that Kingston should secure a cheap source of energy at a predictable price to operate the alumina refinery. Cheap, predictable energy would make the refinery more globally competitive, it is felt.

Jamaica is insisting that it should not pay the United States market price for the LNG, arguing instead that it should pay the same price that T&T domestic users pay for natural gas, plus liquefaction and transportation.

The Jamaican argument assumes that T&T's domestic users of natural gas all pay the same price, whereas the truth is that the local market for the commodity is segmented according to size.

Additionally, Jamaica's position seems to assume that T&T has control over the LNG complex when, in truth, the natural gas is supplied by BP and British Gas and liquefied by a company in which T&T, at best, has an 11 per cent ownership stake.

Like the first four, the establishment of a fifth liquefaction plant will have to be based on sound financial propositions and air-tight supply contracts. The fifth plant is still being called Train X because there has been no policy decision on moving forward with it.

Subsidy

It appears to be Jamaica's position that in order to advance regional integration, T&T should supply subsidised LNG to Jamaica (from the minority state-owned Atlantic LNG complex) to facilitate the profitable operation of a three million-tonne alumina refinery in Jamaica that would be 80 per cent owned by Alcoa.

Alcoa would then transfer the alumina, which is being produced at a lower price because of subsidised LNG, to T&T, where it would be smeltedinto aluminium in the 100 per cent Alcoa-owned facility in T&T.

Alcoa proposes that the smelter in T&T should make aluminium by using natural gas that has been heavily subsidised by T&T taxpayers.

Combined interests

In effect, Jamaica and Alcoa appear to have conjoined interests that T&T should subsidise the production of alumina in Jamaica (at the 80 per cent Alcoa-owned refinery) and then subsidise the production of aluminium in Trinidad (at the 100 per cent Alcoa-owned facility).

The reality of the situation is an insistence that money that could be used to benefit T&T taxpayers by helping working mothers pay for day care or by providing food to starving children will end up largely benefiting Alcoa (or BHP Billiton) shareholders.

By vertically integrating the production process in the region and by seeking to drive down energy costs at T&T's expense, Alcoa is setting the stage to maximise its profits in the region while regional leaders argue over crumbs.

What is required is for the leaders of T&T and Jamaica to sit down face to face and talk about these issues in such a way that the looming regional trade war is nipped in the bud.

Those talks should focus on what course of action is in the region's best interest and devise a way of ensuring that that best interest is achieved.