John Myers, Business Reporter

The parties at the signing of a letter of intent on the US$300 million Petcoke Congeneration Power Project are, from left, Winston Watson, managing director of Petrojam Limited, Clive Mullings, Minister of Energy, Damain Obiglio, president of Jamaica Public Service Company, and Ruth Potopsingh, group managing director of the Petroleum Corporation of Jamaica, at Knutsford Court Hotel, Tuesday. - Junior Dowie / Staff Photographer

Jamaica Public Service Company (JPS) and state-owned oil refinery Petrojam and its parent company, the Petroleum Corporation of Jamaica (PCJ) have signed off on a deal to construct a new US$300 million (J$21.6 billion) petcoke co-generation power plant in Kingston.

JPS president and CEO Damian Obiglio told Wednesday Business that the power company would have majority stake in the new 120 megawatt (MW) petcoke power plant on which construction begins in mid-2009.

The plant is to be built at Hunt's Bay and put into operation in 2012.

Obiglio said PCJ would also own a stake in the plant, which is to be operated much like an independent power producer (IPP) - selling the energy produced into the JPS controlled national grid under contract.

Insignificant

Petrojam will utilise 20 MW to power its newly expanded refinery that will produce the 280,000 metric tonnes of petcoke needed annually to fuel the co-generation plant, while the other 100 MW will go to JPS.

Although the light and power company is expecting to accrue savings in production costs, Obiglio said it would not be significant enough for any sizeable reduction in electricity rates, as the power plant will represent about one sixth of the country's total power generation capacity which now stands at some 817 MW.

"It is going to be reducing overall the electricity cost in Jamaica in real terms by (about) five per cent," he said after the signing at Knutsford Court Hotel in New Kingston.

"Because petcoke is a less expensive fuel than oil, the country will benefit significantly from the overall reduction in oil imports JPS customers also stand to benefit from the eventual reduction in fuel costs as a result of the use of Petcoke," he said at the signing.

Under construction

The petcoke co-generation plant is the single largest investment in new generation capacity in the last five years and will provide a "healthy" boost for JPS' reserve capacity.

"The generating capacity is welcomed, as, even with an installed reserve margin of close to 30 per cent, we have had challenges whenever unexpected problems develop on some generating units while others are out for planned maintenance," Obiglio said.

As for the Petrojam refinery, which is to expand processing capacity from 36,000 to 50,000 barrels of crude per day over the period that the petcoke plant is under construction, its managing director Winston Watson said the additional power along with the modernised processing facility will significantly boost efficiency and profits.

Increase production

As outlined in the letter of intent, Petrojam will produce the petcoke to fuel the power plant to be managed by JPS, which in turn, will supply the refinery with 20 MW of power, as well as, the steam generated during the production of electricity.

The proximity of the petcoke co-generation plant to the Petrojam refinery on the Kingston harbour will assist in pushing down the cost of fuel to JPS.

Petcoke is currently the cheapest form of fuel available, and is to be produced by Petrojam as a by-product of crude.

Neither Petrojam nor JPS has worked out the price at which electricity, petcoke and steam would be traded between them, the parties said.

john.myers@gleanerjm.com