C aribbean Governments

(excluding Trinidad & To-

bago) being net importers of

Petroleum fuels (subject to

price volatility in the international mar-

ket place) have been scrambling to find

cheaper fuels to run their economies.

Jamaica one of the largest importers of

petroleum fuels in the Caribbean for

over a decade has been

looking at the possible use

of Liquefied Natural Gas –

LNG as fuel to be used in

the Electricity and the Bauxite/Alumina

sectors. In this issue of the CEIS Petro-

leum Update we will provide a back-

ground to the how the project started

and a chronological update on happen-

ings with the Jamaican LNG

project.

2001

The plans for the inclusion of LNG as

part of Jamaica’s energy mix came

CARIBBEAN PETROLEUM UPDATE is a monthly Bulletin which highlights petroleum issues affecting or relevant to the

Caribbean, international developments that may affect the region’s way of life and movements in oil prices and retail prices for fuel regionally.

To access CEIS website

CONTACT US

Caribbean Energy Information System

Scientific Research Council

Hope Gardens, Kingston 6, Jamaica

1-876-927-1779 (Telephone)

1-876-977-1840 (Fax)

ceis@src-jamaica.org

www.ceis-caribenergy.org

continued on page 2/

CARIBBEAN ENERGY INFORMATION SYSTEM (CEIS)

OCTOBER 2012 ISSUE

Image source:http://megginson-associates.com/projects/jamaica-lng-project/

page 2 Call: 1-876-927-1779 | Caribbean Petroleum Update : October 2012

C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )

out of initiatives in 2001 by the then

People’s National Party Government

and Petroleum Corporation of Jamaica

to formulate a National Energy Policy.

This policy was to look at the diversifi-

cation of Jamaica’s energy mix to in-

clude LNG, Coal and Renewable En-

ergy. The proposal to include LNG

was with the expectation that this

cheaper more efficient fuel source

would aid in the reduction of electricity

cost by at least 30%.

The then Minister of Mining and En-

ergy Mr. Anthony Hylton was advised

by Mr. Ahmad Zia Mian, Director

General, Office of Utilities Regulation

(OUR) to consider Natural Gas as a

potential diversification fuel to gener-

ate electricity and steam for the Baux-

ite/Alumina sectors.

The specific recommendations were:

Erection of liquefied natural gas

(LNG) storage and re-gasification

terminal that would facilitate the

import of LNG.

The re-gasification of LNG was then

to be transmitted to the major users

in the bauxite/alumina and power

sectors through a natural gas pipe-

line distribution network.

2002-2003

The 2002 elections resulted in a change

of Minister of Energy to Minister Phil-

lip Paulwell who had a preference for

Coal as fuel of choice for electricity

generation (cheaper and more abun-

dantly available)

The then former Minister Anthony

Hylton was appointed by then Prime

Minister P.J. Patterson as special envoy

at Office of the Prime Minister (OPM)

and assigned to him the responsibility

for furthering the LNG project as well

as identifying the supply source. A ma-

jor emphasis was placed on Trinidad

and Tobago (T&T) as the source of

supplies. As such negotiations began

with Trinidad for supply of LNG dur-

ing the period.

2004

In 2004 Technical cooperation and

LNG supply agreements were con-

cluded between the T&T and Jamaican

governments (Hon. Patrick Manning &

Hon. P.J. Patterson) with the signing of

a Memorandum of Understanding

(MOU) in November of the same year.

The MOU provides for the supply of

approximately 1.1 million tonnes of

LNG per annum by Trinidad to Ja-

maica at agreed prices (Trinidad Do-

mestic Rates) for twenty years.

A Joint Development Team was estab-

lished to among other things refine the

technical and economic parameters of

the project, which include the construc-

tion of a re-gasification terminal in Ja-

maica.

2006

Resulting from the MOU in 2004 was a

Front End Engineering and Design

(FEED) study by Mustang Engineering

which was completed in 2006 for LNG

onshore, storage and re-gasification

terminal located in Port Esquivel St.

Catherine.

Following the completion of the study,

Jamaica was informed in late 2006 by

the Trinidad and Tobago government,

that the international marketing com-

pany that handles Trinidad's LNG

(National Gas Company of Trinidad

and Tobago Limited – NGC) had al-

ready committed its supply, leaving

nothing for Jamaica and that it would

not be able to supply Jamaica as early

as it had agreed. This resulted in a fall

through of the arrangement for LNG to

be supplied by Trinidad and Tobago

and the start of discussions with the

Venezuelan government to supply

Natural Gas although Venezuela did

not expect to complete their LNG pro-

ject until 2014/2015.

2007 - 2009

Up to 2007 and to date there are no

storage facilities to accommodate gas

from Trinidad or from any other coun-

try – neither has construction began in

Jamaica. There was and still remain

uncertainty regarding the timeline for

construction of storage and re-

gasification facilities which to some

extent hampered finalization of discus-

sions with Venezuela for the supply of

the much needed fuel.

In July 2007, the Office of Utilities

Regulations (OUR) was given respon-

sibility for the preparation of the least-

cost generation expansion plan, and

oversight of the procurement process

for the addition of new electricity-

generation capacity to the national grid.

In carrying out these activities, the

OUR used the Jamaican National En-

ergy Policy (then still in draft stage),

and the legal and regulatory framework

that were previously developed for the

Electricity sector as guides.

Background and Update on Jamaica’s LNG Project.............................................continued from page 1

Caribbean Petroleum Update : October 2012 | Call: 1-876-927-1779 page 3

C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )

A general election in the same year

resulted in a change in Government

which saw a new Minister - Clive

Mullings taking up responsibility for

the Energy portfolio. In the same year

the Petroleum Corporation of Jamaica

issued a worldwide invitation to pre-

Qualify for the provision of Floating

Storage Regasification Units (FSRU)

for Jamaica.

In 2009, after receipt of invitations, the

PCJ issued a Request for Proposals

(RFPs) for financing, development,

ownership and operation of a FSRU

LNG Terminal and Natural Gas Trans-

port System.

Following the RFP, two bids were re-

ceived. One of the bids was from EX-

MAR Consortium

2010

In 2010 the Jamaican Cabinet gave the

go ahead for negotiations to begin with

international oil and gas shipping com-

pany EXMAR and its consortium

(chosen as preferred bidder) for the

establishment of a LNG floating Re-

gasification Terminal and Natural Gas

Transportation System (LNG System)

in Jamaica.

In the same year the Office of Contrac-

tor General initiated investigations at

Petroleum Corporation of Jamaica and

the Ministry of Energy and Mining.

The enquiry was to look into the PCJ’s

LNG System tender and contract award

processes. This was following allega-

tions of impropriety and irregularity in

the selection of the EXMAR Consor-

tium as the ―preferred bidder‖ for the

LNG project.

It was alleged that then Chairman of

the Board of PCJ, used insider informa-

tion and was involved in bid rigging.

The PCJ Chairman was allegedly a di-

rector in Caribbean LNG Jamaica Lim-

ited a local partner to the EXMAR

Consortium that was selected. Details

of the investigation can be seen in the

Office of Contractor General’s - OCG

report.

http://www.japarliament.gov.jm/attachments/628_OCG LNG Special Investigation

Report Part 1.pdf

During the same period, the OUR is-

sued a request for proposal (RFP) in

December 2010 for the construction

480MW electricity generation plant.

The requirement was structured to pro-

cure 360MW of base-load generating

capacity for 2014, and 120MW for

2016, in accordance with the genera-

tion-expansion plan. The objective was

to replace 292MW of ageing and inef-

ficient generators with more cost-

effective and efficient generation solu-

tions, and to provide for demand

growth.

The then Prime Minister, Bruce Gold-

ing named two high-powered teams to

lead the country’s push towards the

introduction of Liquefied Natural Gas

(LNG) by December 2012:

A Ministerial Committee and a Steer-

ing Committee were established to

lead the effort – The Ministerial Com-

mittee was chaired by Prime Minister

Bruce Golding. Other members in-

cluded Energy and Mining Minister,

James Robertson, Finance Minister

Audley Shaw, Minister of Transport

and Works, Mike Henry, and State

Minister for Energy and Mining, Laur-

ence Broderick.

The Steering Committee was chaired

by Special Advisor to the Prime Minis-

ter, Christopher Zacca, with support

from a core technical team (unknown).

The Steering Committee reported to the

Ministerial Committee at least every

two weeks and had responsibility for

financial investment decisions, devel-

opment of a project value chain, project

commercial structure, and execution of

contracts, among other things.

An Engineering Consultant Company,

CH-IV International was also con-

tracted to advise Jamaica on the LNG

project. CH-IV suggested that financi-

ers would prefer open-market supply

contracts, based on Henry Hub pricing.

The Government also sought assistance

from World Bank Consultant to be part

of team advising the LNG project

2011

In February 2011 - Houston-based en-

ergy company, AEI, sold its majority

stake in the Colombian gas pipeline

operation, Promigas, the strongest fi-

nancial member of the consortium - led

by Belgium's EXMAR Corporation -

that was named as the government's

preferred bidder for a LNG storage and

re-gasification facility. This raised con-

cerns about EXMAR’s ability to under-

take the LNG project in Jamaica.

In April 2011, through collaboration

with Marubeni and Korea East-West

Power (EWP), Jamaica Public Service

Company Limited (JPSCo) submitted a

proposal for the construction of a new

generation plant using Liquefied Natu-

continued on page 4/

page 4 Call: 1-876-927-1779 | Caribbean Petroleum Update : October 2012

C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )

ral Gas (LNG). This

was the only response

to the OUR’s Request

for Proposals.

During the same year

the previous RFP proc-

ess for the supply of

LNG and construction

of the LNG facility

was aborted following

response to the review

of the tender process

undertaken by the Of-

fice of the Contractor

General (OCG). OCG

report published May

2011 following investigations PCJ &

MEM regarding the LNG tender award

system. The report sited breaches in the

bidding process that aided the selection

of the EXMAR Consortium. OCG rec-

ommended a new bidding process.

Subsequently the Jamaican Cabinet

approved the issuance of a new tender

for the LNG Infrastructure. The Cabi-

net also approved a separate and con-

current RFP for LNG Supply.

Following this decision, the Office of

the Cabinet conducted a solicitation for

the development of a Liquefied Natural

Gas (LNG) Project for Jamaica. The

procurement exercise for the project

was divided into two categories:

LNG Supplies - Tender documentation

for the acquisition of LNG Supplies for

the Jamaica LNG Project.

LNG Floating Storage & Regasifica-

tion Terminal - Tender documentation

for the acquisition of a LNG Floating

Storage and Regasification Terminal

(SRT) for the Jamaica LNG Project.

Submissions were received from three

companies (Samsung, EXMAR Marine

of Belgium and Sener Ingenieria y Sis-

ternas, SA of Spain). These submis-

sions were reviewed and Cabinet ap-

proved the recommendation of the Liq-

uefied Natural Gas (LNG) Project

Steering Committee that Samsung be

declared the preferred bidder for the

development and operation of the LNG

infrastructure. The Committee com-

menced negotiations with Samsung.

The consultants suggested to the Bruce

Golding administration that it should

put the LNG plan on hold until the

middle of the year while the Office of

Utilities Regulations (OUR) developed

a new framework for regulating the

industry.

Based on the document, the consultants

also recommended a project restart,

competitive tendering, and a front-end

engineering and design study before

pushing ahead with the project.

Following the decision by the cabinet

to initiate a new tender process, two

Requests for Proposals (RFP) were

issued in June 2011 by the Government

of the day:

One for the supply of approximately

830,000 tonnes per annum of LNG

with the first delivery scheduled for

late 2014 to coincide with the start-up

of the JPSCo’s new gas-fired 360 MW

power plant.

The second for the provision and op-

eration of an LNG Floating Storage

and Regasification Terminal

In late 2011, following General Elec-

tions, the Government changed to the

People’s National Party that had initi-

ated the LNG project.

After months of analysis, in December

2011, the OUR announced its approval

of the JPSCo shareholders’ proposal to

Source: www.cabinet.gov.jm/.../RFP%20for%20LNG%20Infrastructure.docx

Background and Update on Jamaica’s LNG Project.............................................continued from page 3

Caribbean Petroleum Update : October 2012 | Call: 1-876-927-1779 page 5

C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )

spend over US$620 Million to build

360 megawatts of new generating ca-

pacity using Combined Cycle technol-

ogy. The proposal indicated LNG as

the fuel source and projected a 2014

completion date for the first plant

which will see 292MW of old base

load generating capacity being replaced

with more fuel efficient technology.

2012

In 2012 rumours were uttered that the

LNG project would be scrapped by the

new Administration. However, in Feb-

ruary 2012, Minister Phillip Paulwell

announced that Jamaica would make

every effort to complete the country’s

LNG project by 2014.

The Chair of the LNG project steering

committee – Christopher Zacca was

replaced with Dr. Carlton Davis. New

consultants (Worley Parsons) to the

LNG project were contracted to under-

take the oversight of the bidding proc-

ess.

In March 2012, the Jamaican Cabinet

approved the formation of the Jamaica

Gas Trust (―JGT‖) and the engagement

of a placement agent to secure USD

100 million in funding for the estab-

lishment of the JGT. The Jamaica Gas

Trust will be a cornerstone of the com-

mercial structure for the Jamaica LNG

Project, which is integral to the energy

plan established by Government of Ja-

maica. (See chart above.)

In April Draft Gas Sales Agreement

was circulated to the foundation End-

Users.

In July it was officially announced that

Samsung won the bid for the establish-

ment Re-gasification LNG facility and

supply of LNG. It was highlighted that

in order for the project to be successful

there are three major components that

must be addressed:

1. The purchase of LNG by entering

into a contract with a supplier.

2. The contracting of floating storage

and regasification services from a

provider.

3. The construction of pipelines from

the regasification facility to the

power plant.

All of these three components were

said to be the responsibility of the Gov-

ernment and involves the coordination

of, and commitment from, multiple

stakeholders (fuel supplier, JPSCo,

floating storage and regasification unit

provider, etc.); each pursuing its own

interest.

In September media reports suggested

a possible halt of LNG Project by Gov-

ernment. Dr. Carlton Davis’s and other

advisers were saying the numbers don’t

add up. Other technocrats in the minis-

try were saying the

construction of the

bid lends itself to a

high price so the bid

is flawed and Govern-

ment was pulling out

due to lack of money

and as such JPSCo

will proceed with pro-

ject sourcing own fuel

(LNG) supply.

Following the media

reports in September

and after years of

planning and millions of dollars in ex-

penditure, the Government announced

that it just cannot afford the cost of set-

ting up the infrastructure and other re-

quirements for the introduction of LNG

and decided that such infrastructure

will be established by the private sec-

tor. It was indicated that the Govern-

ment will now focus on regulations

surrounding the LNG sector.

It was also announced that the JPSCo

who had won the bid for the establish-

ment of 360 MW electricity generation

facility is expected to proceed with

construction of 360MW generation

facility and will source and sell fuel

(LNG) to the alumina producers which

have long argued that the high price of

electricity in Jamaica makes production

uncompetitive.

In early October, the Government an-

nounced that the LNG project Steering

Committee was disbanded with imme-

diate effect. However, the Government

also reiterated that they will provide

full support for the project and indi-

cated that LNG will be in Jamaica

within the next three years (2015).

page 6 Call: 1-876-927-1779 | Caribbean Petroleum Update : October 2012

C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )

PP E T R O L E U ME T R O L E U M NN E W SE W S & H& H A P P E N I N G SA P P E N I N G S

PAAC to probe Gov’t’s Handling of Multi-Billion Dollar

LNG Project [...]..Read more

Could Paulwell’s Plan Light The Path To Recovery?

[...]...Read more

Latin America years away from shale production – Re-

gional[...]...Read more

CFE receives north-northwest pipeline bids -[...]...Read

more

Editorial – Chavez’s Victory and the LNG Project

[...]...Read more

Good going so far, Mrs Kelly Tomblin [...]...Read more

Oil Prices fall after Warning from World Bank

JPS Appoints Parish Managers [...]...Read more

JPS to become more personal with customers [...]...Read more

JPS gets personal with customers [...]...Read more

Private Sector wants transparency in LNG infrastructure [...]...Read more

Chavez gives Petrojam priority [...]...Read more

Mexico most energy secure nation – study – Regional [...]...Read more

Oil Rises slightly on Unrest in the Middle East [...]...Read more

Gov’t to adjust electricity rates for Private Sellers of Electricity [...]...Read more

Oil Prices fall after Warning from World Bank

[...]...Read more

Caribbean Petroleum Update : October 2012 | Call: 1-876-927-1779 page 7

C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )

REGULAR UNLEADED GASOLINE AVERAGE PRICES AT THE PUMP

October 2012

A comparative analysis of retail pump prices for Regular Unleaded Gasoline in sixteen Caribbean countries at the end of the

tenth month of 2012 (October) revealed that six countries had increases in prices (Barbados, Belize, BVI, Grenada, Dominica

and St. Lucia). These increases ranged between 1.2% and 9.1% over the period September to October 2012. One country—

Montserrat saw a slight decrease in price while the remaining eleven countries had fairly stable prices when compared to the

previous month. For most countries, retail prices seem to be on the increasing trend since the start of the year.

NOTE:

*US Gallon = 3.785 L *Imperial Gallon = 4.546 L

*As at November 1, 2009 MTBE was phased out from all gasoline blends in Jamaica and replaced with

10% Ethanol.

SEE CHART ON PAGE 8 >>

Regular Unleaded Gasoline Average Retail Price (US$/Litre) 2012

COUNTRIES JAN FEB MAR APR MAY JUN JUL AUG SEP OCT 10

Mths AVG

ANTIGUA/ BARBUDA 1.23 1.23 1.23 1.23 1.23 1.23 1.23 1.23 1.23 1.23 1.23

BAHAMAS [91 OCT] 1.33 1.35 1.44 1.46 1.47 1.46 1.39 1.41 1.52 1.52 1.43

BARBADOS 1.55 1.59 1.66 1.72 1.77 1.78 1.70 1.70 1.70 1.73 1.69

BELIZE [87 OCT] 1.41 1.45 1.51 1.54 1.55 1.49 1.47 1.58 1.58 1.61 1.51

B.V.I [87 OCT] 1.26 1.27 1.29 1.29 1.29 1.29 1.24 1.19 1.19 1.23 1.26

DOMINICA 1.12 1.14 1.19 1.25 1.30 1.33 1.22 1.17 1.16 1.28 1.20

GRENADA (95 OCT) 1.23 1.28 1.36 1.42 1.42 1.36 1.28 1.29 1.32 1.41 1.33

GUYANA 1.11 1.08 1.09 1.09 1.16 1.17 1.07 1.06 1.06 1.06 1.10

JAMAICA 87 Octane[E10] 1.23 1.30 1.32 1.37 1.32 1.27 1.26 1.28 1.33 1.30 1.30

MONTSERRAT 1.19 1.21 1.29 1.39 1.41 1.4 1.28 1.28 1.30 1.29 1.30

ST. KITTS/ NEVIS 1.20 1.19 1.32 1.29 1.28 1.24 1.22 1.25 1.25 1.25 1.25

ST. LUCIA 1.21 1.22 1.22 1.24 1.25 1.27 1.28 1.25 1.22 1.23 1.24

ST. VINCENT/ GRENA-DINES

1.19 1.16 1.13 1.17 1.21 1.17 1.21 1.19 1.18 1.18 1.18

SURINAME [95 OCT] 1.40 1.43 1.49 1.52 1.54 1.46 1.43 1.45 1.45 1.45 1.46

TRINIDAD/ TOBAGO [92 OCT]

0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42

TURKS/ CAICOS 1.58 1.58 1.61 1.70 1.78 1.68 1.60 1.54 1.51 1.51 1.62

page 8 Call: 1-876-927-1779 | Caribbean Petroleum Update : October 2012

C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )

CHART OF RETAIL PUMP PRICES FOR OCTOBER 2012

See prices for all products at See prices for all products at See prices for all products at www.cippet.orgwww.cippet.orgwww.cippet.org ...

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

US$

/Litr

e

16 Caribbean Countries

Comparative Retail Pump PricesRegular Unleaded Gasoline

OCTOBER Avg vs10 Mths Avg (Jan - October 2012)

OCT

AVG

Caribbean Petroleum Update : October 2012 | Call: 1-876-927-1779 page 9

C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )

Source: http://www.kentonline.co.uk/kentonline/news/2011/april/19/nu-venture_supports_charter.aspx?theme=print

SOME LNG FACTS (Internationally)

Reducing greenhouse gas emissions is a global problem requiring a global solution. LNG is a unique source of energy. It is less emissions intensive than all other fossil fuels and is able to contribute di-rectly to the global reduction of greenhouse gas emissions when it is used to replace more emissions intensive fuels, such as coal. For every tonne of carbon dioxide emitted in the production of LNG in Australia, at least four tonnes of carbon dioxide emissions in customer countries are avoided when LNG is used to displace coal-fired power generation. This is even greater in China, where the impact of displacing coal with LNG for power generation ranges between 5.5 tonnes and 9.5 tonnes.

Source: http://www.woodside.com.au

page 10 Call: 1-876-927-1779 | Caribbean Petroleum Update : October 2012

C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )

An assessment of International Crude Oil prices over

the three months period Sep—Oct 2012 saw prices in

October averaging at US$88.81/BBL. When com-

pared to the average prices seen in August and Sep-

tember, this average price was approximately 4.7%

and 6.1% lower respectively and seen as a welcome

change for net importers of the product. The highest

weekly average price seen in October was US$91.52/

BBL - seen in the second week of the month . Prices

seen from the third week in October were the lowest

seen over the three months period. An average of the

three month’s average prices reflected US$93.9/BBL.

Featured Offers:Featured Offers:Featured Offers:

Caribbean Energy Information System (CEIS)

primary report of historical annual petroleum energy

statistics provided for 18 Caribbean Countries.

Included are data on total energy production,

consumption, and trade; overviews of petroleum,

natural gas, electricity, as well as financial and

environmental indicators for over twenty years.

US$/B

BL

76.19

88.14

109.61

38

48

58

68

78

88

98

108

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr Avg

US$

/BBL

Period

Average Monthly World Crude Oil Prices (2009 - 2011)

2009 2010 2011

Subscriptions If you wish to subscribe (free of charge) or cancel your

subscription to the CARIBBEAN PETROLEUM UPDATE, send us an email at:

ceis@src-jamaica.org

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and Subscribe to our RSS Feed

96.22

97.56

91.59

95.4

80.0

82.0

84.0

86.0

88.0

90.0

92.0

94.0

96.0

98.0

100.0

WK 1 WK 2 WK 3 WK 4

US$

/BBL

Period

Average Weekly & MonthlyCrude Oil Prices

(August October 2012)

Aug Sep Oct Mth Avg