Cross-Caribbean energy link-up

Declaring a preferred bidder is only the first step in acquiring the new generation capacity. The preferred bidder must not only find the finances to build the new plants (both generation and natrual gas receiving facility), but must also find the fuel to generate elecricity.

The preferred fuel for the proposed 360MW generation plant is natural gas. This gas would have to come to Jamaica in either compressed or liquefied form. Has the preferred bidder demonstrated its ability to source the required volumes of natural gas within the stipulated time and finance the gas-receiving facilities to land it in Jamaica?

I hear that gas might be sourced out of Puerto Rico. Does it mean that Jamaica will be getting Trindadian LNG via Puerto Rico? Or will it be sourced out of the United States where new liquefaction facility would also have to be built? At what price, and when, are the questions which need definitive answers.

Further, Jamaica has not yet articulated its gas policy, nor has it enacted legislation or established a regulatory framework to introduce natural gas into its energy-supply mix.

For some time now, the Government has been urged to complete these prepratory steps before holding gas negotiations. As a matter of fact, a World Bank project has been in place for some time to support the development of a regulatory environment for the introduction of natural gas in Jamaica. What is the status of the proposed studies and consultancies? Will the rules governing the gas sector be in place before arrangments for the supply of gas are finalised?

If the LNG is to come from Puerto Rico, which actually imports LNG from Trinidad and Tobago (T&T), wouldn't it be cheaper to source it directly from T&T? Not only that, Jamaica is far from addressing the issues of security of supply, reliability of supply, or the price of fuel; but it does not have the technical capacity in place to deal with these issues.

T&T-Venezuela alliance

Last week, T&T entered into an interesting phase in its gas production and supply logistics. It signed a bilateral agreement with Venezuela to resolve some outstanding border issues and produce/share natural gas from three jointly shared gas fields which lie on their border. The three gas fields are: Loran-Manatee gas field, with 10.25 trillion cubic feet (tcf) of gas reserves, 73.8 per cent of which belong to Venezuela; Cocuina Manakin gas field, with 0.74 tcf of gas reserves, 66 per cent of which belongs to T&T; and Dorado Kapot, with 0.31 tcf of gas reserves, 84.1 per cent of which belongs to T&T.

After T&T informed Jamaica that it had no gas to honour its commitment to supply 1.125 tonnes of LNG per annum to bauxite and power sectors, I developed and suggested an interim gas-supply option. This option was predicated on trilateral cooperation among Jamaica, T&T and Venezuela.

After having a quick look at the offshore gas-production map of T&T, I determined that T&T was producing natural gas from an offshore field which is situated on the border with Venezuela (Cassia-Dorado field). According to the map, at this field, about one tcf of natural gas was Venezuelan share. For Venezuela, it was stranded gas. If liquefied, this volume could translate to about 20 million tonnes of LNG at full recovery factor, or 16 million tonnes at 80 per cent recovery factor. At that time it was sufficient to meet about seven to nine years of Jamaican needs.

As the Venezuelan share of natural gas volume was small and stranded, from a Venezuelan perspective, this gas presented limited economic value. This field was fully developed and was exporting raw natural gas to the Atlantic LNG plant at Point Fortin for conversion into LNG, through a 48-inch pipeline.

Earlier, I had learnt from British Gas that at that time, the fourth LNG Train had not as yet attained its full rated capacity, which meant that Atlantic LNG had a potential capacity that could be brought on steam very quickly by de-bottlenecking the first three trains and fully utilising the fourth Train. This, indeed, was the premise under which the T&T government had originally signed a memorandum of understanding (MOU) in 2004 to supply LNG to Jamaica.

To me, the availability of one tcf at Dorado field presented an opportunity to utilise the natural gas that could be extracted within a very short time and deploy potential liquefaction capacity that could be accessed quickly to convert this gas into LNG for export to Jamaica. The challenge was how to marry the Venezuelan natural gas with Trinidadian liquefaction capacity to meet the market demand in Jamaica.

In the light of Jamaica's relationship with Venezuela and an MOU between Jamaica and Venezuela regarding access to Venezuelan natural gas, I believed that Jamaica could access this gas at attractive pricing arrangements (say, US$0.50-US$0.75 per million Btu) from Venezuela. Within the context of the MOU that was signed with T&T in 2004 and the potential liquefaction capacity that existed at ALNG, it was both technically and economically feasible to piggy-back this gas through the existing pipeline network to the onshore liquefaction facility at Point Fortin.

My analysis suggested that the resulting LNG, considering the current transport and liquefaction costs (on a toll basis), from Point Fortin would cost about US$2.00-US$2.50 per million Btu at the plant gate (fob). This would translate to a delivered gas in Jamaica at US$3.00-US$3.50 per million Btu.

This analysis did not take into account the potential recovery of natural gas liquids (NGLs or condensates) which could be worth US$0.05-US$0.15 per million Btu. The attractive feature of the proposed strategy was that the gas could become available to Jamaica as soon as the receiving facilities were in place and the volume could be increased to two million tonnes per annum (mtpa) rather than 1.125 mtpa (as contemplated in the T&T MOU).

This would be a win-win project for the three participating countries and an example of successful regional cooperation. It is worth noting that the introduction of natural gas into Jamaica's energy-supply mix could reduce the country's energy import bill by US$500 million-US$600 million per annum. Under this arrangement, Jamaica could have bought natural gas from Venezuela, liquefied it in T&T on a toll basis, and transported it to Jamaica at an attractive price.

Jamaica's task

The challenge for Jamaica was to mobilise political will both in Venezuela and T&T to make this tripartite arrangement a reality. I had suggested that the initiative should be taken at the highest political level to negotiate a deal to access Dorado Field Gas from Venezuela and a processing arrangement at Point Fortin.

When there was a change of government in Jamaica, I again repeated my suggestion to the new administration. I am not sure how far each administration reached with this proposal. However, the recent developments between T&T and Venezuela suggest that their start of negotiations to settle the border gas issues coincides with the strategy I had proposed in 2007. These two countries did embark on furthering negotiations on the bilateral aspect of a shared gas-utilisation strategy which came to a conclusion last week.

To improve electricity supply security and affordability, I believe that the recent bilateral deal has reopened the opportunity for Jamaica to buy natural gas from Venezuela and liquefy it in T&T. Jamaica has excellent relations with Venezuela, is a beneficiary of PetroCaribe, and should actively explore this option.

Let us not forget that T&T's United States LNG market is now minimal and T&T has been selling LNG to Far Eastern markets. The costs of transport to those destinations are generally high. The Government must give this opportunity another try and see if it could reduce the cost of electricity generation significantly. This initiative needs to be at the heads of state level.

Zia Mian, a retired senior World Bank official, is an international consultant on information technology and energy. Email feedback to columns@gleanerjm.com and mian_zia@hotmail.com.