The news could not have come at a better time for Caribbean LNG, the midscale plant to liquefy more of Trinidad and Tobago’s gas that will be sited at the Labidco industrial estate in La Brea, southwest Trinidad, which is that the abandonment of potentially competitive LNG plants will leave it in a dominant position in its chosen marketplace in the region.
Lower gas prices, around US$2.72 per million British thermal units (mmbtu) in the United States in mid-July, have forced the cancellation of “the vast majority of the nearly 30 liquefaction projects currently proposed for the United States, the 18 in western Canada and the four in eastern Canada,” according to a new report by Moody’s Investors Service, the U.S. rating agency.
Tumbling oil prices, which have also pulled down gas prices, make gas-related investments such as LNG less attractive.
As Moody’s points out, “While some companies like ExxonMobil can afford to be patient and wait several years until markets are more favourable, most LNG sponsors have far less wherewithal.”
It stresses, however, that “projects already under construction will continue” which only adds to the dilemma of those companies that had planned to enter the LNG industry, since this is expected to lead to “excess liquefaction capacity over the rest of this decade,” which itself only puts further downward pressure on prices.
Australia alone will be adding 25 percent more capacity to the world LNG industry by 2017, and Cheniere Energy’s LNG project in Sabine Pass, Louisiana, one of the few to survive the gas price plunge, will start exporting by the end of this year.
Cheniere will also likely continue with its Corpus Christi, Texas, LNG investment.
The latter is noteworthy, since it is the vehicle through which Cheniere may attempt to access the Caribbean market, primarily the northwestern Caribbean (Dominican Republic, Puerto Rico, Jamaica, Haiti), rather than the southeastern Caribbean, where Caribbean LNG will be seeking its customers.
Caribbean LNG has virtually sewn up the French departments of Martinique and Guadeloupe as its first customers and will be actively seeking others.
Energy and Energy Affairs Minister Kevin Ramnarine has said that Guyana is a potential market for Caribbean LNG.
“We have had a lot of requests coming out of Guyana for LNG,” he told EnergyNow. “This is because the gold price has fallen and the gold mining industry there has become very marginal. The profit margins have shrunk. The companies are looking for ways of reducing costs, of which one-third is energy. They can do this by converting to gas.”
He said Guyana, where CARICOM’s Secretariat is located, “could be a market for small packages of LNG,” which is exactly what Caribbean LNG will be in a position to supply.
Caribbean LNG, which is sponsored by Roland Fisher’s Gasfin Development SA, registered in Luxembourg and Martin Houston’s Parallax, is now in the “project development agreement” (PDA) stage and should be ready to proceed with a firm “project agreement” by year’s end.
Mr. Fisher has long advocated the sale of more of Trinidad and Tobago’s LNG within its own neighbourhood, where larger-scale LNG producer Atlantic has been active down at Point Fortin, rather than relying almost exclusively on exports to other parts of the world.
It is somewhat interesting that Fisher’s first customers are the two French-speaking territories rather than any English-speaking CARICOM state, but the territories were first off the block to make the switch from oil to gas.
Some facts about Caribbean LNG:
Initial capacity: 500,000 tonnes a year, from one train
Plans to add one or two additional trains as business expands
Cost (in 2012 dollars): US$400 million
Gas supply is to come from a 5km spur off the cross island pipeline (CIP) between Galeota and Point Fortin
Two state companies, NGC and National Energy, are closely involved in the project and one may become a shareholder