LNG supply secure, says energy ministry

Wednesday, June 30, 2010

ENERGY ministry officials yesterday sought to allay fears over energy security issues related to the reliability of natural gas supplies to Jamaica, as current conditions in the global gas market has created a window of opportunity for the country to make the shift from oil.

Joe Fossella of CH-IV — the consultant contracted to provide the engineering design for a floating storage and regasification unit in Old Harbour that will be used to convert liquefied natural gas (LNG) back to its original form and supply alumina companies and power generators with the fuel -- said Jamaica was moving towards locking in long-term supply of LNG.

"We have been talking to suppliers that have a large amount of reserves of LNG so that we don't get short by some contract where they can't support," he told the Business Observer at a forum held at Observer's head office in Kingston, yesterday. "Suppliers are very interested who are going to be handling their energy."

He said the project would target a 20-year supply contract.

Even then, Energy Minister James Robertson said that a specific agreement was not yet signed on as the project had only just advanced to that point.

"Nobody (no suppliers) speaks to anybody until at least they have a project at this stage," said the energy minister. "The interest is huge but they will not develop or put a contract in place until they know that you are serious. This misunderstanding of the supply must be put to bed."

Fossella's take is that "suppliers want to talk to us when they believe we are real, they need to see".

The decision to shift Jamaica's reliance from oil to natural gas stemmed from a 2004 agreement between the government of Trinidad and Tobago and Jamaica that assured the supply of the fuel from the twin-island republic. Trinidad's National Gas Company subsequently informed the Jamaican Government that it would not be able to supply the gas after all. as global LNG supply became extremely tight.

In October 2006, the Government approached several private LNG companies -- British Gas, British Petroleum, Repsol and Suez -- and even went to LNG-producing countries such as Algeria and Qatar, but none could accommodate as their supplies were already committed while ministry officials observed that several of the firms doubted the LNG project would come to fruition in Jamaica.

It's only since early 2009 that market conditions made LNG favourable again.

"Apart from the drop in demand caused by the global recession, gas supplies have increased rapidly due to the technological breakthroughs in the extraction of shale gas in the United States," said documents supplied to the Business Observer by the energy ministry. "This development caught the global gas industry, including the major companies, by surprise and almost overnight there was a doubling of the estimated recoverable gas reserves in the US as a result of the shale gas phenomenon."

The shift in the US gas market caused by shale has have forced suppliers to seek alternative markets while some "who previously were dismissive of Jamaica in the 2006 to 2008 period, (are) now demonstrating active interest in the supply of LNG to Jamaica".

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LNG supply secure, says energy ministry