THE Cabinet has approved the formation Jamaica Gas Trust (JGT) of the new company that will handle the purchase and sale of liquefied natural gas (LNG) in Jamaica.

According to documentation on the cabinet’s website, the Government will soon engage a placement agent to take point on raising the US$100-million ($8.7-billion) funding for the establishment of the JGT.

LNG infrastructure providers will have to submit their bids for the LNG receiving terminal by this evening, while the closure of the request for proposals (RFP) for LNG Supply will be targeted for closure by the end of June 2012.

The project also expects to issue the RFP for the natural gas pipeline network next month after the completion of a Front End Engineering Design Study by WorleyParsons, the project’s technical advisors.

Apart from buying the LNG from the supplier and selling the gas to end users, JGT is supposed to establish a subsidiary that will schedule LNG imports, inventory management, pipeline nominations and gas sales.

Importantly, in order to establish the credit-worthiness of the JGT to satisfy its obligations to the LNG seller and infrastructure provider, it will be capitalised by at least US$100 million of cash, in addition to standby letters of credit totalling another US$100 million from the end users.

Large customers already identified for the project include alumina refinery JAMALCO, JPS and independent power provider, Jamaica Energy Partners (JEP). JPS is currently planning to build a 360 megawatt (MW) power plant in Old Harbour and JEP currently operates two medium-speed diesel power barges in Old Harbour, operating on heavy fuel oil with a production capacity of 125 MW.

The three combined presently require the equivalent of 0.8 million tonnes of LNG per year. With the expansion of the bauxite/alumina sector and construction of new electricity generators, the base for LNG demand is expected to rise to approximately 2.5 million tonnes per year by 2025.

The Jamaica LNG Project has to date received six submissions with indicative pricing during the first stage of the Request for Proposal for LNG Supply in November 2011.

Marubeni Corporation, which has a 40 per cent stake in JPS, is among the six bidders to apply for the supply of LNG. Also up for consideration are Shell International Trading Middle East Ltd, Pace Global, Morgan Stanley and Spanish firms Gas Natural Aprovisionamientos, SDG, SA and Repsol Comercializadora de Gas, SA.