LNG not enough says bauxite companies

Jamaica's powerful bauxite/ alumina partners have warned that it would be a mistake for Government to rely solely on natural gas as an alternative fuel source, and is urging the Government to adopt a diversification strategy that includes coal, compressed gas and renewables.

Further diversification would mitigate fuel price fluctuations, according to executives at UC Rusal and Jamalco - two rivals who declared themselves '100 per cent' aligned on the issue at a Gleaner Editors' Forum on Tuesday.

The bauxite/alumina sector is the largest consumer of energy.

"Who can say in 10 years' time that gas will not be more expensive than coal and Jamaica would end up in the same situation as before," said UC Rusal country manager Igor Dorofeev. "So the obvious way is to diversify, use everything possible, wind, solar, hydro plants, coal, LNG, and then the price will go down."

Jamaica is sold on the need to add renewable fuels to its energy mix. But it has settled on liquefied natural gas as the chief alternative to oil in the generation of electricity.

The bauxite companies continue to raise coal as another alternative, with lukewarm reception from Dr Carlton Davis, who said coal was not affordable and that the financing required was 5:1 compared to LNG.

Jamaica is currently negotiating terms with preferred bidder Samsung on the development of LNG infrastructure.

The LNG project is meant to cut the price of electricity by 40 per cent, which would translate to a drop in price to consumers from US$0.40 per kilowatt-hour to US$0.25 cents.

Mirnyy Dmitry, UC Rusal's director of the processing department International Alumina Division, told the forum that compressed natural gas would offer additional saving as it currently sells for a fraction of the price of LNG, which requires more costly cooling processes to keep the fuel liquefied.

Davis, the current head of the LNG Steering Committee, responded that it was possible to transport LNG then convert it to CNG.

Jamaica previously reviewed a compressed natural gas proposal but choose LNG due to concerns about transporting the highly pressured gas over large distances, according to Chris Zacca, the president of the Private Sector Organisation of Jamaica and head of its energy committee. Zacca is also former head of the LNG Steering Committee.

This week, the Government will negotiate the purchase price of LNG with international bidders but the entire deal could fall through if major stakeholders, including Jamaica Public Service Company, set to build a major LNG plant, and alumina players reject the price, according to Davis.

"Crucial will depend on whether JPS can live with it, because it is going to be difficult for the alumina industry to buy into natural gas above a certain level," said Davis. "If the alumina sector can't live with it and JPS can't live with it, then it can't happen," said the LNG adviser.

Jerome Maxwell, managing director of Jamalco, argued that long-term LNG pricing was crucial.

"When you talking about converting to natural gas, we are in a global market ... and it's not just driven by demand and supply. I am not interested only in the price they will get today, but I am interested in the price over a 20-year period," he said.

Maxwell also told the forum that coal and biogas were options in addition to LNG, but he did not totally embrace coal, saying its carbon emissions are a complicating factor for parent Alcoa, and that not all systems at the Clarendon-based Jamalco plant run on coal - citing the calciners.

"If everybody in the world converts natural gas and no one uses fuel oil for then what happens is the price of fuel oil would probably drop to almost nothing. It's no different from investing in your own personal financing, you want a diversified portfolio. So you can survive through the good and the bad," said Maxwell.

Zacca agreed: "I believe there is room in the mix to include coal," he said.

business@gleanerjm.com