Power to the islands
The article below appeared in The Analyst column in the 26 July issue of Natural Gas Daily, a daily outlook on the gas and LNG markets by Interfax Global Energy. Peter Stewart spoke at the London Centre of International Law Practice on the Caribbean region’s oil and gas potential.
Small Island Developing States in the Caribbean are transitioning from legacy energy supplies based on refined products to renewable sources including solar, wind and biofuels. The region also has significant oil and gas potential, but unresolved border issues have discouraged its exploitation.
Whereas gas is being hailed by IOCs as the fuel of the future because it can support growth in renewables by reducing intermittency problems, the high cost of delivering gas to the islands makes it unviable in economic terms in the Caribbean.
So far, only three LNG terminals have been installed on the Caribbean islands. Jamaica installed the Golar Arctic FSU at Montego Bay under a two-year contract in 2016, adding to the land-based regas facilities at Penuelas in Puerto Rico (2000) and Punta Caucedo in the Dominican Republic (2003).
One of the challenges faced by the islands is the small scale of their LNG shipments. Typically, the three terminals take less than one cargo per month, which makes delivered costs high. Shipments of containerised LNG from the United States to Barbados in 2017, for example, have been priced at more than $10/MMBtu on a delivered basis – nearly double the average LNG spot price to Latin America, which is around $5.50/MMBtu.
LNG can be supplied from the 15 mtpa plant at Point Fortin in Trinidad and Tobago, operated by Atlantic LNG, but delivered costs are often dollars higher than prevailing wholesale prices because of the scale and logistics of deliveries.
Trinidad is already having difficulty meeting the growing demand for gas from local industry, which includes methanol and ammonia plants, while at the same time servicing its LNG export commitments. The country is exploring new gas-prone acreage, but only one project is due to start up soon: Juniper, owned by BP (70%) and Repsol (30%), in H2 2017. The project involves development of the Corallita and Lantana gas fields in the Columbus Basin to the southeast of Trinidad. Several hydrocarbon reservoirs off Trinidad are close to the marine border with Venezuela. Recent finds in the highly prospective waters offshore Suriname and Guyana are also close to Venezuelan waters.
The London Centre for International Law Practice seminar on hydrocarbons in the Caribbean, held on 21 July, heard that the lack of demarcation of marine boundaries between the islands and between them and countries such as Venezuela and Guyana has been a disincentive to developing the region’s substantial oil and gas resources.
Climate change targets
The Caribbean countries have extensive plans to mitigate the impacts of climate change in the Intended Nationally Determined Contributions made under the Paris agreement. Oil price volatility has also been a problem for the region, so focusing on renewables in the energy mix provides economic security as well as having environmental benefits.
The Caribbean Community Energy Policy (CEP) provides a regional framework for the implementation of national plans. The Caribbean Sustainable Energy Roadmap and Strategy was developed under the CEP to provide a coherent strategy for transitioning to sustainable energy. Targets include reducing energy intensity by 33% by 2027 and carbon dioxide emissions by 22% by 2022 and 36% by 2027. Building up renewables in power generation is crucial for these targets to be met: the CEP envisages renewables contributing 28% of power by 2022 and 47% by 2027.
A September 2015 study by the International Monetary Fund recommended that the Caribbean countries reduce their exposure to oil price volatility by diversifying the power supply mix and improving energy efficiency through energy-saving technologies on the demand side.