Page 6 - NorthAmOil Week 39
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NorthAmOil COMMENTARY NorthAmOil
Targeting Caribbean markets
Eagle LNG hopes to take advantage of growing demand in the region via its Jacksonville LNG project
PROJECTS & COMPANIES
WHAT:
The US government has given a green light to the Jacksonville LNG project.
WHY:
Jacksonville LNG aims to sell its production to Caribbean countries, where demand is growing.
WHAT NEXT:
US companies have
the advantage of geographical proximity to the Caribbean, but they will face competition from up-and-coming South American LNG producers.
EARLIER this week, the US Federal Energy Reg- ulatory Commission (FERC) gave a green light to the construction of Jacksonville LNG, a new gas liquefaction plant and LNG export terminal off the coast of Florida.
More specifically, it issued an order authoris- ing Eagle LNG Partners to build a floating LNG (FLNG) complex in Jacksonville, Florida. The order clears the way for Eagle LNG to establish a facility that will be able to produce and export around 1mn tonnes per year (tpy) of LNG. The company has said it hopes to begin production in 2021.
The project is notable for the fact that Eagle LNG is not targeting major export markets such as Europe and Asia, which can only be served economically via long-haul, large-scale tanker shipments. Instead, it is looking much closer to home. That is, it aims to supply markets in the Caribbean Sea region, which is close enough and small enough to justify the use of smaller vessels transporting smaller volumes.
Closer to home
Sean Lalani, the president of Eagle LNG, stressed this point, saying that Jacksonville LNG would be “the only project [focused on] provision- ing small-scale LNG projects in the Caribbean Basin.” He did not say exactly where the facility intended to sell its output, but he did state that LNG offered significant benefits for Caribbean countries.
“Numerous independent studies have shown that sourcing LNG for power generation allows Caribbean island nations the ability to substan- tially reduce power costs and simultaneously reduce CO2 emissions by 30-40% compared to fuel oil and coal,” he was quoted as saying in a company statement.
When it comes on stream in 2021, Jackson- ville LNG will not be the only US facility offering fuel to Caribbean buyers. Lalani acknowledged this, noting that his own company had been active in the area for some time. “Exports in small volumes from our existing Maxville LNG facility are already providing low-cost, domesti- cally produced US natural gas as an early, stable fuel source for the Caribbean,” he said.
Meanwhile, Eagle LNG is not the only company eyeing these markets. For example, JAX LNG, a 1mn tpy facility built by Pivotal LNG and NorthStar Midstream, has delivered numerous small cargoes to Puerto Rico and to other Caribbean states since its launch in 2015. (It has also supplied LNG for ship bun- kering in the south-eastern US, setting an
example that Eagle LNG hopes to emulate.)
Competition
Other US operators are likely to follow suit, espe- cially since opportunities for exports to high- er-volume markets are limited. Europe is already awash with gas from Russia, Qatar and other suppliers, while the outlook for the Asia-Pacific region is constrained by economic uncertainty and trade disputes between the US and China.
On the other hand, Africa and South America are also showing more interest in gas, which is a relatively clean fuel for the residential, business and power-generating sectors. Nevertheless, Afri- can and South American gas consumers might do better to promote the development of domestic gas reserves or look to regional suppliers – including existing producers such as Nigeria and Argentina or future producers such as Mozambique and Brazil.
The Caribbean market, by contrast, has remained relatively underserved, despite its growing demand for energy and dwindling interest in traditional fuels such as heavy fuel oil and other petroleum products. As such, it represents an opportunity for US gas operators – especially those willing to take advantage of new delivery options such as floating storage and regasification (FSRU) vessels and containerised LNG shipments.
This opportunity is not boundless, however. The US is not the only gas producer in close prox- imity to the Caribbean. Trinidad and Tobago, which lies off the coast of Venezuela, is already an exporter of LNG, while Brazil hopes eventually to extract enough gas from its offshore fields to jus- tify LNG exports. Argentina, for its part, became a small-scale LNG exporter earlier this year and is looking to build additional export facilities that will process gas from the onshore Vaca Muerta Basin.
In short, Eagle LNG and other US companies that target the Caribbean market should expect to face competition from South American pro- ducers, even though the latter are still some years away from being able to export LNG on anything approaching the US scale. They could gain an edge, though, by doing more than just offering up their production for sale. If they offer to con- tribute to the building of the infrastructure that Caribbean states will need to import more LNG – regasification terminals, including FSRU ves- sels; container ports; onshore transport and dis- tribution pipelines, and storage facilities – they may be able to strike deals with a larger number of potential customers.
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w w w . N E W S B A S E . c o m Week 39 01•October•2019
