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Mark Titus, Business
Reporter
The requirement for the Jamaican government to invite public tenders for new generating capacity is likely to mean a delay in its December 2012 deadline for the commissioning of an LNG storage and regasification facility and even undermine the ability of Exmar Corporation, the government's controversial preferred bidder on the project, to bring it to fruition.
According to Wednesday Business sources, with Exmar not yet knowing who will be customers for natural gas it hopes to supply on the Jamaican market — or even if there will be takers — it has been unable to enter serious negotiations with bankers for the financing of the more than US$600 million project.
The Exmar officials listed as spokesmen on the Jamaican project either could not be reached comment or declined to speak on the matter.
Snag
However, our sources say that the project, already entangled in a conflict-of-interest probe by Contractor General Greg Christie, is now being further snagged by the bidding issue.
Christie in June launched an investigation into whether an Exmar partner in the deal, Caribbean LNG Limited, in which a former chairman of the Petroleum Corporation of Jamaica, Ian Moore, is a shareholder, operated with insider information.
Christie's investigation, the Wednesday Business sources explained, were being further complicated by a requirement of the LNG project for Jamaica to build out 300-400 megawatts of new electricity generating capacity.
But under the rules of the electricity production and distribution sector, they say, any addition of more than 15 megawatts of power intended for the national grid has to be the subject of public bidding to ensure that it is delivered at the best price.
No request for proposal has yet been made and by the time one is made and responses received, it could well be beyond the November 15 deadline Exmar had set to return to proposed suppliers for a vessel to be used as a floating regasification unit.
"The OUR (Office of Utilities Regulation) is obligated to give at least 90 days for a response (to a request for proposal)," a knowledgeable source said. "After that, it will be another two months to do the analysis and to get therequisite approval."
Additionally, this source said, there could be request for additional time from bidders or even delays in analysing the bids.
"This could, therefore take up to six to nine months, possibly into September 2011," said the source, who, like others interviewed for this story, requested anonymity.
Ironically, such a delay would bring to naught the supposed gains from a decision earlier this year to deny two potential Korean bidders on the LNG project, Korean Gas and Samsung Ltd, additional time to complete their tenders.
They had wanted the bid to close to the end of April rather than mid February.
Risk
However, Stephen Wedderburn, the head of the project, convinced other officials that this would translate into the late delivery of the project - beyond 2012 deadline - and risk hurting Jamaica's reputation in the LNG market.
According to our sources, one option now being shopped around among government officials is to "instruct the OUR not to go forward based on a competitive bid, but to negotiate directly with Jamaica Public Service Company for the 300 megawatts".
"However, the prime minister and the Cabinet are not willing to go down that route because of the implications, and the flack expected from the private sector and the general public," said an official conversant with the issues.
The energy minister, James Robertson, could not be reached for comment and his special advisor Delano Severeight said it was a matter that only Robertson could handle.
The effect of these issues on Exmar's ability to move forward, according to Wednesday Business sources, is to prevent Exmar and its consortium partners on the project from establishing the special purpose vehicle they planned to use to source natural gas.
"One would not know until say June next year who the off-takers would be," said the source. "That is when you can form your SPV and that is when you can go after your supply."
Targeted Jamaican off-takers included JPS, other energy operations and the bauxite companies.
It was, however, not immediately clear how the plan for a special purpose vehicle squared with documents supplied to bankers by Caribbean LNG (Jamaica) Limited saying it intended to source and deliver LNG to Jamaica.
mark.titus@gleanerjm.com
http://www.jamaica-gleaner.com/glean...business1.html
Reporter
The requirement for the Jamaican government to invite public tenders for new generating capacity is likely to mean a delay in its December 2012 deadline for the commissioning of an LNG storage and regasification facility and even undermine the ability of Exmar Corporation, the government's controversial preferred bidder on the project, to bring it to fruition.
According to Wednesday Business sources, with Exmar not yet knowing who will be customers for natural gas it hopes to supply on the Jamaican market — or even if there will be takers — it has been unable to enter serious negotiations with bankers for the financing of the more than US$600 million project.
The Exmar officials listed as spokesmen on the Jamaican project either could not be reached comment or declined to speak on the matter.
Snag
However, our sources say that the project, already entangled in a conflict-of-interest probe by Contractor General Greg Christie, is now being further snagged by the bidding issue.
Christie in June launched an investigation into whether an Exmar partner in the deal, Caribbean LNG Limited, in which a former chairman of the Petroleum Corporation of Jamaica, Ian Moore, is a shareholder, operated with insider information.
Christie's investigation, the Wednesday Business sources explained, were being further complicated by a requirement of the LNG project for Jamaica to build out 300-400 megawatts of new electricity generating capacity.
But under the rules of the electricity production and distribution sector, they say, any addition of more than 15 megawatts of power intended for the national grid has to be the subject of public bidding to ensure that it is delivered at the best price.
No request for proposal has yet been made and by the time one is made and responses received, it could well be beyond the November 15 deadline Exmar had set to return to proposed suppliers for a vessel to be used as a floating regasification unit.
"The OUR (Office of Utilities Regulation) is obligated to give at least 90 days for a response (to a request for proposal)," a knowledgeable source said. "After that, it will be another two months to do the analysis and to get therequisite approval."
Additionally, this source said, there could be request for additional time from bidders or even delays in analysing the bids.
"This could, therefore take up to six to nine months, possibly into September 2011," said the source, who, like others interviewed for this story, requested anonymity.
Ironically, such a delay would bring to naught the supposed gains from a decision earlier this year to deny two potential Korean bidders on the LNG project, Korean Gas and Samsung Ltd, additional time to complete their tenders.
They had wanted the bid to close to the end of April rather than mid February.
Risk
However, Stephen Wedderburn, the head of the project, convinced other officials that this would translate into the late delivery of the project - beyond 2012 deadline - and risk hurting Jamaica's reputation in the LNG market.
According to our sources, one option now being shopped around among government officials is to "instruct the OUR not to go forward based on a competitive bid, but to negotiate directly with Jamaica Public Service Company for the 300 megawatts".
"However, the prime minister and the Cabinet are not willing to go down that route because of the implications, and the flack expected from the private sector and the general public," said an official conversant with the issues.
The energy minister, James Robertson, could not be reached for comment and his special advisor Delano Severeight said it was a matter that only Robertson could handle.
The effect of these issues on Exmar's ability to move forward, according to Wednesday Business sources, is to prevent Exmar and its consortium partners on the project from establishing the special purpose vehicle they planned to use to source natural gas.
"One would not know until say June next year who the off-takers would be," said the source. "That is when you can form your SPV and that is when you can go after your supply."
Targeted Jamaican off-takers included JPS, other energy operations and the bauxite companies.
It was, however, not immediately clear how the plan for a special purpose vehicle squared with documents supplied to bankers by Caribbean LNG (Jamaica) Limited saying it intended to source and deliver LNG to Jamaica.
mark.titus@gleanerjm.com
http://www.jamaica-gleaner.com/glean...business1.html