LNG will always be cheaper for Jamaicans, says Colombian firm

LNG will always be cheaper for Jamaicans, says Colombian firm

STEVEN JACKSON Business Observer writer jacksons@jamaicaobserver.com

Wednesday, October 06, 2010

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BOGOTA, Colombia DESPITE liquefied natural gas (LNG) trading near two-year highs, Jamaicans will always get cheaper fuel through the proposed US$600-million LNG project because the market pegs oil above LNG, stated Promigas, a Colombian conglomerate poised to become a top investor in Jamaica.

Even if the price soars higher, the Jamaican government won't be locked in any purchase guarantees, it further stated Monday in an attempt to alay price fears voiced previously by the Jamaica Chamber of Commerce and the opposition People's National Party.

"You cannot look at the price of LNG alone. Whatever the price it is trading at, oil is more expensive -- so you save," stated a key negotiator in the deal who opted for anonymity due to respecting company media protocol. "That is because there is a gap in the trading with oil on top."

Promigas wants the Jamaica contract, which would represent at best eight per cent of its over 3,000 kilometres of pipe infrastracture. The project, which is currently in negotiations, has critics saying that uncertain pricing could contradict the very intent of transforming Jamaica's economy by slashing the high consumer and industry fuel bill.

"In the short term, it will bring energy costs down for mining, housing and other industry users. In the long term, it will bring other opportunities to develop other markets such as vehicular usage," Promigas' commerical vice- president and head of negotiations, Ricardo Fernandez told the Business Observer
on Monday at the Marriott Hotel in Bogota, Colombia.

Promigas wants Jamaica to use Colombia as a case study in which half the population has access to LNG, which they say has slashed energy costs.

For instance, in Colombia, despite LNG trading at two-year highs, having increased by 10 per cent, or from US$3.70 per Mbtu in 2008 to US$4.00 in 2010, it has trailed the increase across the entire energy sector. Specifically, in Colombia the average price for energy (LNG, oil, coal, renewables and so on) on the national exchange per kilowatt hour doubled in 2010 compared with 2008, that is from 89 pesos to
186 pesos. This data was found in Promigas' Natural Gas Sector Report 2009 released Monday.

Additionally, an energy sector axiom sees the oil price to gas price at 6:1 ratio.

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