ENERGY Caribbean newsletter (April 2014 • Issue no. 72)
The final edition of the ENERGY Caribbean newsletter
The final edition of the ENERGY Caribbean newsletter
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CARIBBEAN NATURAL GAS MARKET <strong>•</strong> CARIBBEAN NATURAL GAS MARKET <strong>•</strong> CARIBBEAN NATUR<br />
The IDB’s natural gas study<br />
Inter-American Development Bank experts Jed Bailey<br />
and Nils Janson have produced the most comprehensive<br />
analysis so far of the <strong>Caribbean</strong> natural gas trade – “A<br />
Pre-Feasibility Study of the Potential Market for Natural<br />
Gas as a Fuel for Power Generation in the <strong>Caribbean</strong>”.<br />
This formed the reference document for a meeting of<br />
<strong>Caribbean</strong> energy ministers held under the Bank’s auspices<br />
in Washington in early December 2013. The study focuses<br />
on 13 possible recipients of natural gas, including the<br />
Dominican Republic but excluding the French <strong>Caribbean</strong><br />
territories of Martinique and Guadeloupe, which are<br />
expected to buy natural gas for the power turbines they<br />
are installing, probably from the small LNG plant the<br />
UK’s Gasfin Development intends to build at La Brea<br />
in Trinidad. The strengths and weaknesses of the three<br />
methods of gas delivery are outlined in the study.<br />
CNG can’t compete<br />
with LNG<br />
Shipping costs make all the difference<br />
The IDB study has bad news for the UK’s Centrica<br />
Energy, which has been trying to put together a deal to<br />
export its gas from blocks 22 and NCMA 4 in Trinidad and<br />
Tobago to Puerto Rico in compressed natural gas (CNG)<br />
form, and for other promoters thinking along similar lines<br />
for other <strong>Caribbean</strong> markets. It rules out marine CNG as a<br />
commercial proposition for the region.<br />
“Seaborne CNG does <strong>no</strong>t appear to provide a large<br />
e<strong>no</strong>ugh cost reduction [compared with fuel oil] to justify the<br />
added risk of using an unproven tech<strong>no</strong>logy,” it says firmly.<br />
Since the whole point of <strong>Caribbean</strong> utilities switching to<br />
natural gas is to dramatically lower their fuel costs, this<br />
conclusion seems to make sense.<br />
For example, the final delivered price of CNG from<br />
Trinidad and Tobago to Barbados, as calculated by the<br />
study’s authors, is expected to be US$8.71 per mmbtu,<br />
while that for LNG is US$8.65. The disparity is even<br />
greater in the case of gas supplied to Antigua (US$11.48<br />
per mmbtu for CNG, US$9.06 for LNG).<br />
The difference in price, for the same fuel costing the<br />
same at the point of export but delivered by different<br />
methods, seems to lie in the cost of shipping. The IDB study<br />
concludes that “shipping CNG is likely to be much more<br />
expensive. CNG ships are essentially floating platforms<br />
for high pressure pipelines which require thick, high-grade<br />
steel that is heavy and expensive ... each CNG ship will<br />
likely cost more than a typical LNG ship, particularly the<br />
first generation of ships, and will be able to carry much<br />
less natural gas.”<br />
Because of the transportation cost, “shipping distance<br />
has a large impact on the final delivered cost.” CNG<br />
shipping costs will “likely come down as the tech<strong>no</strong>logy<br />
matures, but much additional investment and development<br />
is required before seaborne CNG will be as readily available<br />
as LNG.”<br />
Examples of round-trip shipping costs for CNG and LNG<br />
vessels out of Point Fortin in Trinidad (in US$ per mmbtu)<br />
are:<br />
CNG<br />
LNG<br />
Grenada 6.90 0.19<br />
Dominica 11.70 0.39<br />
St Vincent 7.21 0.21<br />
Part of the higher CNG cost is attributed to unloading<br />
times in port. “Indeed, loading and unloading each<br />
shipment accounts for more days than the actual shipping<br />
transit in almost all cases considered.”<br />
The bottom line, according to the IDB, is that long-run<br />
marginal cost savings by <strong>Caribbean</strong> power utilities from<br />
adopting gas delivered as CNG from Point Fortin would be<br />
a minuscule 5% in Grenada and 4% in St Vincent.<br />
All CNG deliveries from Trinidad and Tobago would<br />
realise some savings, though very small for some recipients,<br />
while “smaller markets and those further away would see<br />
a substantial cost increase if they were to switch to CNG<br />
– some by more than 50%” in the case of deliveries from<br />
other sources.<br />
Pipeline gas even costlier<br />
Though extra clients could bring prices down<br />
Probably to the surprise of many,<br />
the IDB study says a pipeline<br />
would be the most expensive way of<br />
getting gas to Barbados from Tobago,<br />
as the Eastern <strong>Caribbean</strong> Gas Pipeline<br />
Company (ECGPC) is attempting to<br />
do. It puts the cost at US$11.42 per<br />
mmbtu for the 30 million mmcfd that<br />
is initially expected to be piped there,<br />
compared with US$8.65 for LNG<br />
US$8.71 for CNG.<br />
Most of the pipeline cost is incu<br />
in transportation, which would<br />
US$7.12 per mmbtu in Barbad<br />
case. This largely has to do with<br />
cost of building the undersea pipe<br />
which the IDB study calculate<br />
US$3 million a mile for a line w<br />
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