Saturday, February 24, 2018

Could Trinidad be shut out of the Caribbean LNG market?


Bruce Golding

(BI) Feedloader User

Trinidad and Tobago is in grave danger of finding itself locked out of the newly-emerging Caribbean market in small liquefied natural gas (LNG) cargoes if the Ministry of Energy and Energy affairs (MEEA) does not start moving to seriously consider how it can preserve what should be this country's captive region for LNG sales.

So far, Trinidad and Tobago has done very well in the LNG business, which it gate-crashed only as recently as 1999, and still holds the position of largest single LNG supplier to the US and sole provider of LNG to the only two Caribbean markets which are equipped to receive it Puerto Rico and the Dominican Republic.

But these are large trades, with the vessels involved carrying around 160,000 cubic metres, (one cubic metre of LNG equals 20,631 cubic feet of gas), on each voyage, with appropriate storage capacity at the receiving end.

Jamaica, too, will fall into this category if, and when, it sorts out its current imbroglio over the proposed floating re-gasification and natural gas transportation project for which the joint venture of Belgium's Exmar Shipping group and local company, Caribbean LNG (Jamaica), has been chosen as preferred bidder.

The country's independent contractor general has halted progress on the investment on the grounds that there may have been "bid rigging" and "insider trading" in relation to the award.

Prime Minister Bruce Golding has himself taken over responsibility for the matter from his energy and mining minister, James Robertson. Jamaica's initial requirement for LNG is expected to be around 158 mmcfd or 1.1 million tonnes a year.

But a move is now afoot and I have mentioned it briefly in 'Energy Insider' before to create a whole new market for LNG in the Caribbean on a much smaller scale as befits the demands of mini-economies.

This is actually being led at the consumer end, by Finland's Wartsila, the biggest supplier of power stations to the Caribbean (1,946MW of power to 27 countries) which has sensed that the utility owners, usually governments, want to convert to cleaner-burning natural gas as the power station fuel of choice and hopes to assist them in so doing.

Apparently, it would be an easy matter to add a gas-firing capacity to these plants, while retaining diesel or fuel oil capability as a back-up, just like the 77MW power station Wartsila recently installed at the Cove Eco-industrial and business park in Tobago, which is awaiting natural gas from the state-owned National Gas Co (NGC).

Wartsila, of course, is not in the LNG supply and transportation business, which opens up a unique opportunity for others.

Rodney George, vice president, power plants for Wartsila Caribbean Inc, points out exclusively to 'Energy Insider' that "there are a number of full-service suppliers, who will source the LNG, transport it and even build the storage infrastructure at the power station site, all for one price".

This column is aware of one such potential provider a company calling itself Carib Energy Group Ltd, which says it sees an "urgent need" to respond to the gas requirements of "smaller power plants in the Caribbean" whose customers are "paying a cost for electricity (generated by diesel or fuel oil) that they can not afford".

The implication is that this situation will only get worse, as oil prices continue to rise.

Mr George himself points out that, converted to one million British thermal units, "there is a spread of US$8 per mmbtu in favour of natural gas", a huge saving for any utility that ditches one in favour of the other.

How "small" is this small gas trade that could be emerging? Wartsila's Rodney George notes that a 50MW plant, such as the one in Curacao, for instance, "would need only 8.9 million cubic metres of gas every 30 days which would require a ship of 15,000 cubic metres running a shuttle service from the gas source."

And that, of course, is where Trinidad and Tobago comes in.

We are the only place in the Caribbean with the facilities for turning gas into the liquid form which enables it to be transported by ship and it is therefore to Trinidad and Tobago that "full service providers" like the Carib Energy Group will turn for the LNG they need to ship to their clients.

True, most of the LNG now produced by Atlantic at Point Fortin is committed to specific markets in the US and elsewhere but there are excess cargoes sold on a spot basis which might be used in the Caribbean LNG trade.

But the dedicated shuttle service of which George speaks would almost certainly be the best way of satisfying the needs of regional utilities and provides the ideal opportunity for NGC itself to corner this new trade developing in its own backyard. As an equity holder in two of the Atlantic trains, NGC would have a share in the "de-bottlenecking" planned for the Atlantic complex, which will see, at least, an additional 200 mmcfd of gas being converted to LNG and it might well wish to allocate its quota to the smaller Caribbean markets.

But some urgent decision-making on this matter by the supervising ministry is essential. MEEA can not wait until new gas reserves are identified in any of the blocks allocated under the recent shallow and average water bid round; that will take years and such gas will be devoted to the larger LNG trades anyhow.

The gas requirements of the smaller LNG trades could well be accommodated within existing possible and probable reserves, so modest are they likely to be.

But why is speed necessary?

Simply because our single biggest LNG market, the US, is rapidly gearing up to be our biggest competitor for LNG in the Caribbean Basin now that the shale gas revolution has reduced US gas prices so dramatically.

MEEA should take no comfort from the fact that the only existing US exporter of LNG, the ConocoPhillips/Marathon owned 1.3 million tonne a year Kenai plant in Alaska, has announced it is going out of exporting after over four decades.

Kenai would never have been a competitor for the small Caribbean trade in any case but the US Gulf Coast importer, Cheniere Energy Inc, now converting to LNG exporting, most certainly will be.

While MEEA appears to be sitting on its hands, Cheniere has signed a non-binding agreement to sell 600,000 tonnes a year of LNG to two electricity companies in the Dominican Republic from 2015 onwards.

As much as seven million tonnes a year of LNG exporting capacity could be added in the years ahead at Cheniere's Sabine Pass, Louisiana, terminal.

That could shut Trinidad and Tobago completely out of the small regional LNG market if we just twiddled our thumbs and did nothing.

David Renwick was awarded the Hummingbird Medal (Gold) in 2008 for the development of energy journalism in Trinidad and Tobago.