Saith:
Jamaica gas deal not feasible
The Trinidad
Guardian
Port
Spain
Petroleumworldtt.com
04 29 07
Dr
Lenny Saith, Minister of Public Administration
and Information and Minister of Energy and Energy
Industries, addressed the Senate on April 17, on
the controversy surrounding T&T’s inability
to honour the terms of a Memorandum of Understanding
(MOU) with Jamaica.
The
MOU, signed in November 2004, provided, among
other things, for T&T to supply 1.15 million
tonnes of LNG a year to Jamaica for 20 years beginning
in the year 2008.
Saith spoke in response to a motion by Leader
of Opposition Business in the Senate Wade Mark.
His motion called on the Government to break its
silence on the issue.
The
following is the full text of Saith’s
remarks:
This Government intends and has always intended
to comply with provisions of the MOU as agreed
between the Government and the Government of Jamaica.
In
this regard, in a press release in the Jamaica
Gleaner on March 20, and in the Daily Observer
on March 21, the Government publicly affirmed its
willingness to honour its obligations as outlined
in the MOU and to work with Jamaica to ensure a
steady and reliable supply of LNG in the future.
This is in addition to discussions between the
National Gas Company of T&T and the Petroleum
Company of Jamaica. This is a statement I have
made to the media and at a post-Cabinet press conference.
The facts of the matter are as follows:
In
November 2004, a MOU was executed between the
T&T Government and the Government of Jamaica,
as well as between the National Gas Company and
the Petroleum Company of Jamaica.
The MOU stated, subject to the economic feasibility—I
repeat—subject to economic feasibility, the
Government of T&T would supply 1.15 million
tonnes of LNG a year for the 20-year period commencing
2008.
Further, that the Government of T&T would be
willing to invest up to 40 per cent equity in the
project and the Government of Jamaica providing
the remaining equity, because to ship LNG to Jamaica
you need to build a re-gas plant in Jamaica. And
we agreed that we would be willing to invest up
to 40 per cent of the equity to the Jamaican government
60 per cent.
The MOU also acknowledged that the potential demand
might be greater than the volume offered and the
LNG might be required prior to the start-up of
a new LNG train in T&T. In this regard the
Government of T&T offered to work with the
Government of Jamaica to secure the necessary supplies
of LNG. Let me repeat that.
It indicated that it is quite possible that prior
to the start-up of a new train in T&T that
they may require it and we would work with them
to secure the necessary supply.
Subsequent to the execution of the MOU, these activities
were undertaken in 2005:
The award of a consultancy for an engineering study
of the re-gas terminal;
The appointment of a financial and investment adviser;
and
The appointment of a legal adviser.
In September 2006 the results of the engineering
study came up with a capital cost of US $400 million
for the terminal. This was considered as too high
and a search for economic alternatives was initiated.
Additionally,
given the delay in commencing the next LNG train,
the Government of Jamaica was informed
that the Government of T&T would be unable
to meet Jamaica’s timetable for LNG supply.
One, the new train had not come. Secondly, given
the price for the re-gas terminal it did not seem
to be feasible to ship LNG for the re-gas.
At
a bilateral discussion held in Jamaica with the
Prime Minister of T&T on February 5 and
6, the Prime Minister explained T&T’s
position that our natural gas reserve position
did not allow the country to pursue additional
liquefaction facilities at this time as:
60
per cent of the natural gas produced is utilised
by the local LNG producers who have prior contractual
supply commitments; exploration efforts have not
yet yielded additional supplies of natural gas
to justify the establishment
of the next LNG train; and the capital costs in
all areas of activity, including exploration
and establishment of the new LNG Train
have since increased considerably.
As a result, the cost parameters associated with
the supply of LNG to Jamaica may have to be revisited.
Those of us who are following what is happening
in the energy sector know that cost of exploration
is expanding at a tremendous rate and the capital
cost of these projects is now so large that you
have to review the whole economics of whether it
makes sense.
In the circumstances, having briefed Jamaica,
including the Prime Minister, Jamaica was advised
to approach Venezuela as an alternative energy
source. Also, because we knew that the course that
we are working on, of unitising, had enough gas
to feed a new LNG train.
The
Jamaican government successfully explored this
option with the Venezuelan government. Additionally,
the recent signing of the Framework Agreement between
T&T and Venezuela opens up the possibility
of new gas supplies and the establishment of an
LNG liquefaction plant, but 75 per cent of that
gas belongs to Venezuela, 25 per cent to us. Therefore,
the approach to the Venezuelan government was an
approach that should have been made if we had to
use that gas.
Pending
the determination of new gas supplies the Government
of T&T has initiated discussions
with local producers to divert some of their LNG
to meet the requirements of the Government and
Jamaica. These discussions are ongoing, but we
recognise that most of these producers do have
long-term contracts for their supply of the LNG.
Additionally, the National Gas Company and the
Petroleum Company of Jamaica are currently evaluating
technology and feasibility options for a re-gas
terminal.
We are still working on that re-gas terminal.
To
summarise the position, it is that T&T
has not reneged on its commitment under the MOU
with Jamaica and as indicated in my presentation,
subject to the economic feasibility, will honour
whatever obligations it has under the provisions
of that MOU.
I think the Senator could rest easy.
Trinidad
Guardian
Thursday 26th April, 2007
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©2007 Trinidad Guardian. All Rights Reserved.
