Jamaica has sought a legal opinion from the Caribbean Community (Caricom) Secretariat on whether Trinidad and Tobago is legally bound under terms of the Caribbean Single Market and Economy (CSME) to provide Jamaica with concessionary prices for LNG, as Jamaica insists.
This is the latest development in the clash between the two Caribbean nations over Jamaica's insistence that Trinidad and Tobago sell it LNG at terms less than the Henry Hub price Trinidad and Tobago wants to charge (OGJ Online, June 3, 2003).
'Price' war
Ambassador Anthony Hylton, adviser to the Jamaican government on energy matters, said he is confident that the legal opinion will support Jamaica's case that Trinidad and Tobago is obligated to sell LNG to Jamaica on the same terms as it does to domestic firms, or what it considers to be a "Caribbean" price.
"We welcome the development and the approach which has been adopted," Hylton said "We are satisfied that, while the opinion may not be decisive, it will be persuasive—in Jamaica's favor."
The two countries have been at odds over Trinidad and Tobago's natural gas pricing treatment since Hylton first unveiled the LNG initiative nearly 2 years ago when he was the minister responsible for mining and energy in the P.J. Patterson administration.
The Jamaican government is anxious to turn to natural gas and move away from the country's dependence on fuel oil for power.
Officials have argued that such a move would lead to long-term stability in electricity rates and would allow the country's manufacturers and bauxite-alumina plants to benefit from cheaper rates.
Hylton also is seeking the double benefit, over the long haul, of an environmentally cleaner source of energy, and an investment of up to $200 million in an LNG storage terminal and regasification facility.
Trinidad and Tobago is a substantial producer of natural gas, which has been mainly responsible for the twin-island state's emergence as Caricom's industrial powerhouse.
CSME issues
Jamaica argues that under the nondiscriminatory provisions of the Revised Treaty of Chaguaramas—the roadmap by which Caricom states are creating CSME—Trinidad and Tobago may not supply natural gas to domestic consumers at terms better than those offered to firms in other CSME countries.
That position, by extension, would apply to natural resources in all other CSME states, including bauxite in Jamaica.
Hylton argued that the principle of national treatment is critical to the CSME.
He told a recent Caricom meeting: "The argument that a Caricom national can only enjoy national treatment when present within the jurisdiction of any of the several states within Caricom is specious and does not require the creation of the CSME to confirm such a status. This position would totally undermine benefits and the objectives of the CSME."
Trinidad and Tobago, however, disagrees with Jamaica's interpretation of the treaty, insisting that national treatment applies to entities within national borders. It remains resolute that it will not sell LNG to Jamaica at preferential rates.
The country's Energy Minister Eric Williams said the Jamaican argument is flawed because Trinidad and Tobago exports all its LNG and sells only pipeline natural gas locally.
Williams added that, even so, there is a particular pricing regime in Trinidad and Tobago to which the producers have agreed.
"It is no secret that the producers agreed that natural gas would be sold to the local power companies at minimum rates to keep electricity prices low, while natural gas prices sold to other industrial users [such as] Atlantic, for example, are very high," he said.
Williams said the Dominican Republic, which is also in the Northern Caribbean, has a smaller market than Jamaica and is now the premium market for Trinidad and Tobago LNG, paying prices even higher than the US market pays.
He said the Trinidad and Tobago government has offered Jamaica the opportunity to speak with Trinidad and Tobago's National Gas Co. (NGC) on the matter, but the offer has not been accepted.
"How can you talk about special pricing in the way the Jamaicans have put it unless you want the LNG for free?" Williams asked.
New LNG train needed
NGC Pres. Frank Look Kin told OGJ that even if Jamaica wants LNG it would have to wait on the construction of another LNG train to be built.
He said that Jamaica had not met with NGC officials to say definitively that they wanted the LNG or indicated the amounts they want.
"They must know that this business has to be done in a particular way, and we are not going to wait on them," he said. "As it is, we have already just about sold, on long-term contract, our LNG for Train 4, and construction of the plant began less than a month ago, so they will have to wait on a new investment decision if they are to get any LNG from us."
Look Kin said there were several options available to Trinidad and Tobago, including simply raising the price of domestic electricity and then allowing the government to subsidize local consumers.
However both Look Kin and Hylton believe a Jamaican LNG project is viable.
"We think it is a most economically viable project," Hylton said.
"Investor interest has been extremely high on this project," he added, noting interest had come from Europe, Asia, North America, and the Middle East.
Hylton is hoping to have the LNG storage facility and regasification plant operational in 2006-07, handling over 1 million tonnes/year of LNG and displacing up to 62% of the 25 million bbl of oil that Jamaica imports annually.
He said final feasibility studies would begin shortly, to determine, among other things, which of three identified sites would be the best location for the facility.
Jamaica looks elsewhere
Notwithstanding the issues it raised about national treatment under CSME, Jamaica has begun to look for alternative sources for LNG, and would make a final decision based on price.
"We have started those negotiations," Hylton said. "We are talking to Qatar, Nigeria, and Algeria. But Trinidad would be our preferred source."
Qatar recently announced that it would take a share in the proposed Venezuelan LNG project.
