The Petroleum Corporation of Jamaica headquarters in New Kingston. - File

Four foreign energy companies are now vying for the job to develop a floating natural gas platform for Jamaica, under an arrangement that requires the selected investor to 'build, own and operate' the system.

Jamaica has opted to develop an offshore platform - earmarked for Port Esquivel in St Catherine, saying it could be more than 40 per cent cheaper than a land-based facility - at US$400 million compared to US$700 million.

Joint venture partners Korea Gas Corporation and Samsung Corporation of Korea, Hoegh LNG and BW Gas both of Norway, as well as Belgian firm Exmar, are expected to submit proposals by the January 5, 2010 deadline to finance, construct and operate the LNG Floating Storage and Regasification Unit (FSRU) for the Jamaican Government.

"The limited tender process for identification of the infrastructure provider is already under way," Stephen Wedderburn, project coordinator for LNG at the state-owned Petroleum Corporation (PCJ), said via email to Wednesday Business.

A request for proposal was, he said, sent to nine companies on November 12, but five declined to participate.

The floating system, which will receive liquefied natural gas and reconvert it to gaseous form for piping onshore, is expected cut by close to a half, the construction time associated with a land-based facility.

"An FSRU-based system can be implemented in two to two-and-a-half years versus four years for a traditional onshore terminal," said Wedderburn.

A shorter time frame for registering costs benefits and improved chances of raising a lower financing cost amid current market conditions, is also numbered among the considerations that went into the decision.

"The total cost for an FSRU-based system is expected to be in the region of US$400 million as opposed to, in the region of US$700 million for an onshore terminal," Wedderburn told Wednesday Business.

Growing interest

The project coordinator said by PCJ's calculation, LNG will slash up to US$360 million from the country's energy import bill, which is running at an annual US$2 billion.

Floating LNG liquefaction operations has in recent years attracted growing interest from oil and gas firms seeking alternatives to expensive traditional onshore projects.

The growing interest is already having the effect of keeping supplies robust and maintaining the lid on the price of natural gas to end users, research by Wednesday Business has indicated.

But most offshore terminals around the world are in their infancy and international industry experts have pointed to technical challenges, including bad weather conditions.

Jamaica lies in the Caribbean hurricane belt and it is not clear if the Jamaican authorities have taken this into account, although proponents of the technology elsewhere have pointed to new devices to avert wind damage to platforms.

Deal with trinidad

Stephen Wedderburn, head of the LNG unit, Petroleum Corporation of Jamaica. - File

The decision to introduce LNG into the energy mix and to provide the platform for the cost-efficient expansion of the bauxite/alumina industry was first taken in the 1990s by the P.J. Patterson-led adminis-tration, which initially looked to Trinidad and Tobago for supplies.

In 2004, the two countries inked a supply agreement after a protracted public squabble over price. Under the accord, Port-of-Spain undertook to supply 1.1 million tonnes of LNG a year to Jamaica, starting in 2009.

The supplies were earmarked to fuel a US$1-billion plan to double the size of Jamalco's alumina refinery in Hayes, Clarendon.

But the Trinidadians have not been able to deliver and some time ago pulled out of the deal citing the unavailability of the product arising from existing contracts and a delay in reaching a deal for the development of a new gas field they share with Venezuela.

Search for new suppliers

Since taking office, the Bruce Golding-led administration has launched a search for new suppliers and held discussions with Qatar, Kuwait, Venezuela and other nations. Trinidad is also back in the mix, saying it can now supply the gas Jamaica needs and was prepared to make it a priority.

Jamaica's energy officials had announced that deals were imminent but no details have been forthcoming.

This week the PCJ's Wedderburn said the Jamaican government was yet to finalise a supply contract.

The country is also yet to develop the regulatory framework for the importation, distribution and use of natural gas.

mark.titus@gleanerjm.com