|Regional energy policy vital
Sunday, February 09, 2003
Following is an edited version of Ambassador Anthony Hylton's presentation to the Caribbean Business Intelligence conference on financing energy projects held in Miami January 30-31.
Although the largest English-speaking island in the Caribbean, Jamaica is a small island economy with a land area of 10,990 Km2 and a population of approximately 2.7 million. Our indigenous energy sources are limited to small hydropower, bagasse in the sugar industry and fuel wood/charcoal for household consumption.
Renewables such as solar energy are being encouraged by the Government, but their contribution so far has been largely limited. An oil and gas exploration programme has not, as yet, produced encouraging results. Only recently we have embarked on a 20 MW wind power project but its large-scale scope for energy is limited. Jamaica's industrial production is highly energy intensive.
We, therefore, depend on imported energy, mainly petroleum. In 2001, we imported about 26.2 million barrels of petroleum at an estimated cost of US$631 million. In 2002, while oil import volumes decreased, the import bill increased to about US$635 million.
Not only does the high cost of imported energy directly impact on the cost of manufactured goods, but the security of supply and volatility in prices make it difficult to achieve the objective of sustainable development.
Jamaica, not unlike the rest of the region and other developing countries, faces serious challenges posed by globalisation. With the high cost of production and increased global competition, our continued growth and sustainable development are at risk. The emergence of trading blocs within the hemisphere such as FTAA and globally such as the ACP/EU and within the WTO itself, makes it mandatory that our economy adjusts to new trading realities and increased competition within a very short time.
With the rapid pace of globalisation, a prerequisite for sustainable development is the creation of an enabling environment that facilitates increased domestic productive capacity and the production of goods and services at the most competitive costs.
Jamaica's new trade policy aims at, inter alia, diversifying exports and facilitating market penetration. The realisation of these objectives will depend on the cost of inputs and the competitiveness of Jamaican products in the international market.
The Government is, therefore, committed to taking steps to improve productive efficiency and to reduce the cost of inputs in order to enhance international competitiveness for Jamaican exports.
Within the Caribbean, the 15 countries forming the Caricom Single Market and Economy (CSME) have agreed under the Revised Treaty of Chaguaramas to implement a regional trade policy and to complete the process of economic integration by 2005 when the provisions in the treaty become fully operational.
For Jamaica to sustain its economic development and to benefit from the CSME and other regional and multilateral arrangements, it must reduce the cost of its production inputs. One key high-cost component in our productive process is imported energy as indicated earlier.
The Government of Jamaica is convinced that a complementary regional energy policy and strategy is critical if the objectives of the CSME are to be realised. In this context, the principle of national treatment in the pricing of goods and services is key to guaranteeing sustained competitiveness in Caricom member states and to avoid distortions in the single market.
In the context of the profound implications of globalisation and liberalisation, it is our view that a regional energy policy is not only vital for the Caribbean in achieving global competitiveness but must be addressed as a matter of urgency. Such a policy must necessarily be coherent with the existing regional trade policy. The issues of energy pricing, transport, investments and long-term contractual arrangements should be addressed within the context of such a regional strategy.
We also recognise that Jamaica's and the other importing Caricom countries' long-term development sustainability depends on their ability to obtain both security and diversity in energy supply sources at the least economic cost.
To achieve this objective, Jamaica has developed a sustainable National Energy Diversification Strategy (NEDS). Towards this end, we have commenced the implementation of an energy diversification programme that includes the introduction of wind power, enhancing the use of renewables such as solar biomass, establishing the economics of the refinery upgrade and introducing the use of imported natural gas into Jamaica.
Natural gas has become a fuel of choice for industrialised countries.
Countries like Japan and Korea are large-scale importers of natural gas and manufacture industrial products competitively. Natural gas is not only an efficient fuel; it is also an environmentally-friendly fuel.
With improvements in technology and reduction in plant and transportation costs, the market for LNG is on the rise. A number of countries are now producing, plan to expand production or intend to establish new LNG plants during the next four to six years. We believe that the potential for introducing LNG into Jamaica as the primary fuel for generation of electricity and bauxite/alumina production is a logical step towards evolving an energy diversification strategy.
The Government of Jamaica is preparing an LNG import project to initially meet the fuel demand of the power and bauxite/alumina sectors. The initial switch from oil to LNG is estimated at about 1.2 million tons per annum.
We have already completed a pre-feasibility study of this project, which has identified three potential mega sites for the erection of a terminal and regasification facilities. We will now proceed with the detailed engineering, technical economic evaluation of the project.
We intend to complete and commission the import terminal by 2006 and are in the process of meeting with potential suppliers to settle the terms and conditions for the supply of LNG into Jamaica. Prior to the completion of this project, Jamaica would establish the necessary regulatory and enabling environment to seek private sector participation in the LNG project.