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LNG, realism and regionalism
published: Sunday | March 25, 2007
Robert Buddan
Jamaica's plans to provide liquefied natural gas (LNG) to the bauxite, electricity, and manufacturing sectors to reduce energy costs and enable expansion of production have been consolidated with an agreement for Venezuela to supply natural gas.
Once again we have to thank Venezuela for discounting oil prices in a high price environment, providing additional oil at discount for our restructured Air Jamaica, making a favourable loan available for the St. Catherine to Ocho Rios Highway 2000 leg, and now breathing new life into the huge bauxite expansion project.
All of this shows how vital oil is to industrialisation and development generally. As long ago as 1945, Florizel Glasspole had said that it was widely rumoured in Jamaica that oil could be found here. The government of the day was creating a 10-year development plan, and Mr. Glasspole was angry that the plan had made no provision for geological surveys so that we could know the true potential of our mineral resources. It was not until 1951 that such surveys were factored into a revised 10-year plan.
Around that time, Noel Nethersole (PNP) insisted that power generation and islandwide electrification were vital to the new drive for industrialisation. The bauxite industry was just being developed in Jamaica, as was the oil industry in Trinidad. But Donald Sangster thought British Guiana, not Trinidad, was the linchpin of the federation, which the JLP and PNP had then just agreed to.
Heavy demand for oil
Sangster's reasoning was that Jamaica and Barbados had the population and British Guiana and British Honduras (now Belize) had the land resources to enable these economies to complement each other. There was little reference to Trinidad and its oil resources. Up to this point, the Jamaican administration thought that Jamaica's future lay in agriculture rather than in industry the latter was also being promoted. The first World Bank study of Jamaica in 1953 also came to this conclusion. There seemed no recognition of the heavy demand for oil that industrialisation would create.
The oil price bonanza of the past 30-odd years helped Trinidad to become the manufacturing centre of CARICOM. Trinidad's oil and gas make it the linchpin of industrialisation in CARICOM. However, Trinidad's oil and gas sector has failed to support the MoU on LNG for Jamaica, causing locals to criticise Trinidad for its Trinidad-first thinking. In an article on March 11, Edward Seaga went further than most to say, "This is the realistic nature of the Caribbean single market that P.J. Patterson and other idealists have plunged Jamaica. Yet, Federation, inclusive of a single market and economy, was a project that both the JLP and PNP had mutually agreed to in 1951."
Jamaica's first three prime ministers of Independence, Alexander Bustamante, Donald Sangster, and Hugh Shearer, were all members of the House of Representatives who agreed to the West Indies Federation while P. J. Patterson was still a schoolboy. I am not sure if the reference to other idealists includes those JLP leaders. But if idealism means an unrealistic expectation that common regional bonding would usually prevail over national interests, those leaders saw the relationship differently.
Both sides of the House argued that the major rationale for federation was economic; that the best interest of each territory lay in all the territories getting together; and that the logic of economy of scale meant that industrialisation would be more likely in a larger economic union, which would also be more attractive to foreign investors. The realism of that time remains largely true today.
NATIONAL AND REGIONAL INTERESTS
National interest does not negate regional cooperation any more than individual interests deny national interests. Disputes regularly arise between nations in the Free Trade Area of the Americas and the European Union. Regionalism means finding the common points on which the interests of members converge and making joint arrangements to pursue those interests. Sometimes sections of a nation might not be willing to do so.
In the case of the MoU between Trinidad and Jamaica, sectional interests in Trinidad had always been a constraint. Apparently, Trinidad's administration had feared that the political opposition would extract political mileage from an arrangement to sell LNG to Jamaica at Trinidad's domestic rate, under the single market. The two governments nonetheless agreed to pursue the single market anyway as the larger objective, agree on a concessional price for LNG in the interim, and accept that Jamaica would have the right to dispute the price in the Caribbean Court of Justice. Trinidad hoped that this route would take the issue out of its domestic politics.
Up to a few weeks ago, the MoU still seemed alive. But Trinidad is to have another election in 2007/8 and the margin between the two major parties is small. In 2001, they had tied with 18 seats. After a repeat election in 2002, the ruling party only holds a four-seat advantage. We are being told, however, that the international marketing company that handles Trinidad's LNG has already committed its supply, leaving nothing for Jamaica. Trinidad says that the MoU was not dead, only that it would not be able to supply Jamaica as early as it had agreed to.
It would indeed be idealistic if Jamaican governments had thought that all our eggs should be put into one regional basket. Jamaica has therefore maintained relations with a range of countries. After the oil crises of the 1970s, the Manley administration arranged concessionary oil purchases from Venezuela.
San Jose and Caracas Accords
Those agreements - the San Jose and Caracas Accords - have evolved into the PetroCaribe Agreement with Hugo Chavez. It is this kind of arrangement that Michael Manley and P.J. Patterson fashioned that has now come to our rescue. Even the MoU with Trinidad would not have satisfied all our LNG requirements and the government had been in discussion with Venezuela for additional supplies. Even that agreement is not a complete one.
A Gleaner editorial spoke of the option of compressed natural gas - a cheaper and more reliable source of natural gas but demanding a different kind of technology. Jamaica should not discard the MoU with Trinidad, and it can explore the CNG option even while pursuing the MoU with Venezuela. After all, Venezuela is not going to supply us with liquefied natural gas, just natural gas, and Trinidad would still have a role to play in processing this into LNG for Jamaica.
Open diplomacy means keeping our options open with all countries. Our interests are extended through CARICOM but CARICOM has its limits. It is limited by the nature of its economies, and inevitably, national and sectional interests. CARICOM, for instance, does not buy our bauxite. Should we be asked to sell our bauxite at some lesser rate to CARICOM members under the SME, or oil and gas, should we discover any, or give the same hotel discounts to CARICOM nationals that we give to Jamaicans, we will find that we might think selfishly too.
Yet, if we are to help each other to develop, CARICOM must find a formula through its Council on Trade and Economic Development to share our natural resources, probably by stockpiling and reserving a portion of our stock for the region.
Robert Buddan lectures in the Department of Government, Mona, UWI. Email: [email protected]
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published: Sunday | March 25, 2007
Robert Buddan
Jamaica's plans to provide liquefied natural gas (LNG) to the bauxite, electricity, and manufacturing sectors to reduce energy costs and enable expansion of production have been consolidated with an agreement for Venezuela to supply natural gas.
Once again we have to thank Venezuela for discounting oil prices in a high price environment, providing additional oil at discount for our restructured Air Jamaica, making a favourable loan available for the St. Catherine to Ocho Rios Highway 2000 leg, and now breathing new life into the huge bauxite expansion project.
All of this shows how vital oil is to industrialisation and development generally. As long ago as 1945, Florizel Glasspole had said that it was widely rumoured in Jamaica that oil could be found here. The government of the day was creating a 10-year development plan, and Mr. Glasspole was angry that the plan had made no provision for geological surveys so that we could know the true potential of our mineral resources. It was not until 1951 that such surveys were factored into a revised 10-year plan.
Around that time, Noel Nethersole (PNP) insisted that power generation and islandwide electrification were vital to the new drive for industrialisation. The bauxite industry was just being developed in Jamaica, as was the oil industry in Trinidad. But Donald Sangster thought British Guiana, not Trinidad, was the linchpin of the federation, which the JLP and PNP had then just agreed to.
Heavy demand for oil
Sangster's reasoning was that Jamaica and Barbados had the population and British Guiana and British Honduras (now Belize) had the land resources to enable these economies to complement each other. There was little reference to Trinidad and its oil resources. Up to this point, the Jamaican administration thought that Jamaica's future lay in agriculture rather than in industry the latter was also being promoted. The first World Bank study of Jamaica in 1953 also came to this conclusion. There seemed no recognition of the heavy demand for oil that industrialisation would create.
The oil price bonanza of the past 30-odd years helped Trinidad to become the manufacturing centre of CARICOM. Trinidad's oil and gas make it the linchpin of industrialisation in CARICOM. However, Trinidad's oil and gas sector has failed to support the MoU on LNG for Jamaica, causing locals to criticise Trinidad for its Trinidad-first thinking. In an article on March 11, Edward Seaga went further than most to say, "This is the realistic nature of the Caribbean single market that P.J. Patterson and other idealists have plunged Jamaica. Yet, Federation, inclusive of a single market and economy, was a project that both the JLP and PNP had mutually agreed to in 1951."
Jamaica's first three prime ministers of Independence, Alexander Bustamante, Donald Sangster, and Hugh Shearer, were all members of the House of Representatives who agreed to the West Indies Federation while P. J. Patterson was still a schoolboy. I am not sure if the reference to other idealists includes those JLP leaders. But if idealism means an unrealistic expectation that common regional bonding would usually prevail over national interests, those leaders saw the relationship differently.
Both sides of the House argued that the major rationale for federation was economic; that the best interest of each territory lay in all the territories getting together; and that the logic of economy of scale meant that industrialisation would be more likely in a larger economic union, which would also be more attractive to foreign investors. The realism of that time remains largely true today.
NATIONAL AND REGIONAL INTERESTS
National interest does not negate regional cooperation any more than individual interests deny national interests. Disputes regularly arise between nations in the Free Trade Area of the Americas and the European Union. Regionalism means finding the common points on which the interests of members converge and making joint arrangements to pursue those interests. Sometimes sections of a nation might not be willing to do so.
In the case of the MoU between Trinidad and Jamaica, sectional interests in Trinidad had always been a constraint. Apparently, Trinidad's administration had feared that the political opposition would extract political mileage from an arrangement to sell LNG to Jamaica at Trinidad's domestic rate, under the single market. The two governments nonetheless agreed to pursue the single market anyway as the larger objective, agree on a concessional price for LNG in the interim, and accept that Jamaica would have the right to dispute the price in the Caribbean Court of Justice. Trinidad hoped that this route would take the issue out of its domestic politics.
Up to a few weeks ago, the MoU still seemed alive. But Trinidad is to have another election in 2007/8 and the margin between the two major parties is small. In 2001, they had tied with 18 seats. After a repeat election in 2002, the ruling party only holds a four-seat advantage. We are being told, however, that the international marketing company that handles Trinidad's LNG has already committed its supply, leaving nothing for Jamaica. Trinidad says that the MoU was not dead, only that it would not be able to supply Jamaica as early as it had agreed to.
It would indeed be idealistic if Jamaican governments had thought that all our eggs should be put into one regional basket. Jamaica has therefore maintained relations with a range of countries. After the oil crises of the 1970s, the Manley administration arranged concessionary oil purchases from Venezuela.
San Jose and Caracas Accords
Those agreements - the San Jose and Caracas Accords - have evolved into the PetroCaribe Agreement with Hugo Chavez. It is this kind of arrangement that Michael Manley and P.J. Patterson fashioned that has now come to our rescue. Even the MoU with Trinidad would not have satisfied all our LNG requirements and the government had been in discussion with Venezuela for additional supplies. Even that agreement is not a complete one.
A Gleaner editorial spoke of the option of compressed natural gas - a cheaper and more reliable source of natural gas but demanding a different kind of technology. Jamaica should not discard the MoU with Trinidad, and it can explore the CNG option even while pursuing the MoU with Venezuela. After all, Venezuela is not going to supply us with liquefied natural gas, just natural gas, and Trinidad would still have a role to play in processing this into LNG for Jamaica.
Open diplomacy means keeping our options open with all countries. Our interests are extended through CARICOM but CARICOM has its limits. It is limited by the nature of its economies, and inevitably, national and sectional interests. CARICOM, for instance, does not buy our bauxite. Should we be asked to sell our bauxite at some lesser rate to CARICOM members under the SME, or oil and gas, should we discover any, or give the same hotel discounts to CARICOM nationals that we give to Jamaicans, we will find that we might think selfishly too.
Yet, if we are to help each other to develop, CARICOM must find a formula through its Council on Trade and Economic Development to share our natural resources, probably by stockpiling and reserving a portion of our stock for the region.
Robert Buddan lectures in the Department of Government, Mona, UWI. Email: [email protected]
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