PRESIDENT and CEO of Jamaica Energy Partners Wayne McKenzie is calling for the Government to break up New Fortress Energy’s monopoly on supplying gas to the island as it seeks to secure the fuel to convert its own power plants to use gas to generate electricity.

McKenzie told the Jamaica Observer that his company is currently hoping to wrap up discussions around securing gas for the 124-megawatt Doctor Bird I & II power plants in Old Harbour, St Catherine, and the 66-megawatt West Kingston Power Partners plant in Kingston. Jamaica Energy Partners is Jamaica’s biggest producer of electricity, supplying 40 per cent of the power to the grid which it sells to the Jamaica Public Service Company (JPS). It produces electricity from four power plants, the three mentioned above and another plant in Rockfort, Kingston.

“We are in discussions with some gas suppliers to look at the conversion of our assets to burn gas and we are hoping that these suppliers will also be competitive enough to drive the price of gas down from where it currently is on the distributive side,” McKenzie said.

“We are looking at it aggressively now….and we are looking at 2025 to convert West Kingston Power Partners,” he added.

McKenzie said he is hoping that his company’s efforts to secure gas for its power plants at a cheaper cost than New Fortress Energy is offering, the JPS will “translate to a consideration on the JPS side where they can get cheaper gas than from New Fortress. We want to create a discussion for JPS to go back to New Fortress and say, we have alternates, and ask them to look on their pricing model.”

“We also believe it’s important just to kind of reduce the monopolistic agenda by introducing other players in the market where gas is concerned.”

New Fortress Energy is currently the only gas supplier to Jamaica. The Florida-based entity ships gas in liquid form – liquified natural gas (LNG) – to its floating storage regasification unit (FSRU) just off the coast of St Catherine where it is converted to gas again before it is fed into power plants to burn in the generation of electricity under a 20-year licence since 2016.

McKenzie, however, suggested that he believes the arrangement which effectively creates a monopoly supplier to the country, is not the best for consumers.

“We believe that if we seek an alternate gas supply, bring gas to the country, then the pricing strategies to JPS for gas from New Fortress will change,” he said. That he believes will help to bring prices down from the levels they are right now. He also believes that competition in the gas supply market will also benefit companies which left the grid to set up independent power plants for their operations.

Companies which have set up gas-fired power plants in recent times include the Wisynco Group, Red Stripe, Rainforest Caribbean and The University of the West Indies. They currently purchase gas from New Fortress Energy at the Henry Hub prices.

Henry Hub is a natural gas pipeline located in Erath, Louisiana, that serves as the official pricing point for natural gas futures on the New York Mercantile Exchange. Its price currently hovers at just over US$2 per metric million British thermal units (mmbtu) ­– a measure of heat content or energy value. Local purchasers of gas from New Fortress Energy add an extra US$10 as per their contract to cover the cost of operating the floating storage regasification unit and transporting the fuel to its final destination.

However, McKenzie believes the added cost can be lower with competition.

“If your external forces are showing that the difference in prices are very large or large enough for consideration then the government can come in and say, look, we need to take on something else,” he continued. McKenzie even suggested that New Fortress Energy could share the FSRU with its competitor for a fee that will help offset the operating cost.

“The FSRU could be a tolling gate for all gas coming into Jamaica, not just New Fortress gas,” McKenzie stated. He also said the country must push to have an onshore regasification storage unit rather than depending on FSRU that has been built offshore.

“We need to ensure that the gas supply, whatever we are looking at, represents an onshore supply and create some amount of stability to the fuel supply of the company,” he said

He however admits that the contract under which New Fortress operates is binding.

“Is New Fortress willing to unravel the contract,” he asked rhetorically. “I mean, there’s a guarantee business literally, guarantee gas.”

“Energy is about 65 per cent of a manufacturers production cost. If you can drive down the cost of energy, we can compete regionally and internationally.”

He also gave kudos to the Government for its push to expand the use of renewables in the energy mix alongside fossil-fuel power plants.

“It couldn’t come at a better time, because with OPEC+ cutting back on oil production, the cost of all fuel is going to go up,” he said in reference to the recent agreement among oil producing countries to cut production by 1.16 million barrels per day.

“We can expect an increase in our electricity bills [and to get more stability in the future]. The quicker we get through the rigours of the RFP (request for proposal), the quicker we can get to the construction of new plants.”

“Economies have to look at security where energy is concerned, and the only thing that we have [for energy security in] Jamaica is solar, wind and some amount of water. So, we have to kind of build our energy security around that. And then we also have emerging technologies where storage is concerned and those are becoming better and better and better. But as the technology is evolving, you need some base support on the turbines and that’s where we come in with our gas conversion strategy.”