By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A newly-approved project to supply Grand Bahama Power Company (GBPC) with natural gas will not be initiated immediately because low global oil prices mean the economics do not now make sense, Tribune Business was told yesterday.

Emera, GBPC’s 80.4 per cent majority shareholder, which on Monday obtained US federal regulatory approval for its compressed natural gas (CNG) facility at the Port of Palm Beach, said the fuel switch was currently “not in the best interest” of Grand Bahamian customers.

An Emera spokesman, responding to Tribune Business’s questions, nevertheless said the Department of Energy approval was “a wonderful step forward” to diversification and altering GBPC’s fuel mix once the timing was right.

“The use of compressed natural gas (CNG) for Grand Bahama Power makes the most sense when it can displace the cost of oil that we use for generating electricity,” the spokesperson said.

“ With the current price of heavy fuel oil, conversion to compressed natural gas is not in the best interest of our customers. With this approval in place, the fact that we now have the flexibility to act and include natural gas in our generation mix at the right time is a wonderful step forward, and we’re excited by the opportunity.”

The rapid slump in global oil prices since Emera first applied for US regulatory permission in November 2013 means that Grand Bahama Power will not realise any significant savings if it switches to CNG now.

Global oil prices fell again yesterday, with US crude down $1.09, or 2.4 per cent, at $45.20 a barrel. It hit a three-week low of $44.86 earlier in the day.

The global oil benchmark, Brent LCOc1, was down 86 cents, or 1.8 per cent, at $47.85 a barrel, after hitting an early October low of $47.50.

Tribune Business revealed on Wednesday how the US Department of Energy had approved plans by Emera to ship CNG from the Port of Palm Beach to Freeport.

The Canadian-based energy company now has the go-ahead, when it chooses, to construct a natural gas compression and loading facility at the Port of Palm Beach, with the ability to produce up to 2.92 billion cubic feet of CNG per year.

The finished product will be exported some 75 miles by sea to Freeport, where it will be unloaded from roll-on/roll-off carriers arriving at a decompression facility on the Bahamian island.

The decompressed gas will then be transported to Grand Bahama Power Company’s generation plants and used tor produce electricity.

The project effectively represents the first utility-scale effort in the Bahamas to both reduce energy costs, diverse fuel supply and sources, and employ a more environmentally friendly, clean burning and sustainable power source.

“Emera’s strategy in Grand Bahama, as everywhere else, is to reduce our dependence on high carbon fuels,” the spokesperson said. “While we will continue to closely monitor the fuel markets, work has already begun in other areas, including biofuels and solar.

“Grand Bahama Power is making progress towards its goals to decrease its dependence on high carbon fuels, and ultimately to secure long-term price stability. The most important thing is to ensure that customers get the best value from any decision we make on the use of fuels.”

K P Turnquest, the Opposition’s finance spokesman and a Grand Bahama MP, was among those who yesterday questioned whether Emera would pursue the CNG project given the relatively low global oil prices.

Expressing hope that the CNG could ultimately be supplied to the Bahamas Electricity Corporation (BEC), too, Mr Turnquest told Tribune Business: “I think that the Grand Bahama Power Company appears to be doing a reasonably good job in containing the cost and bringing some stability to the situation.

“It’s helped by the fact global oil prices have dropped, but there is room for ongoing reductions, and there are projects that GBPC has. Hopefully, going forward, they will bear fruit.

“We would like to have reductions comparable with south Florida, but know that will not happen overnight. Yet if there are opportunities for further reductions in rates, we’d like to see them taken advantage of.”

Mr Turnquest urged Grand Bahama Power to bring down prices to an “irreducible minimum”, adding that he had met with the utility monopoly to gain an insight into its rate structure and plans for rebalancing.

“It’s fair to say they’ve made tremendous advances in securing stable rates, and it’s my understanding that the industrial sector is satisfied with what is happening to-date,” Mr Turnquest said.

“Together with the rate structure, and to the extent they [the industrials] are comfortable and the Power Company can continue to force down costs to the average consumer through using natural gas, solar, biodiesel and wind, or a combination of those, I think they are going to be on the right path.”

This week’s federal approval thus gives Emera and the Grand Bahama Power Company options, and gives a hint of ‘what could be’ when it comes to fuel mixes and diversification for power generation, to both Bahamian consumers and the latter’s BISX-listed shareholders in ICD Utilities.

“The primary purpose of the project is to fuel power generation facilities owned by an Emera affiliate, Grand Bahama Power Company (GBPC), located on the island of Grand Bahama,” the US Department of Energy’s order said.

“Emera expects that it will enter into a long-term contract to supply natural gas to GBPC, and that under the terms of such agreement, CNG from the facility will be transported approximately 75 nautical miles from the Port of Palm Beach to an unloading and decompression facility in Freeport, Grand Bahama.”

The Department’s order noted that Grand Bahama Power Company’s installed generation capacity was pegged at 102 Megawatts (MW), and Emera had pledged that there “will be an opportunity for other companies operating in Freeport in close proximity to the pipeline to utilise the exported natural gas.”

The order added: “Emera states that its proposed exports will enable electric generation facilities in the Bahamas, and potentially elsewhere in the Caribbean, to switch from using heavy fuel oil and diesel to natural gas.

“Emera asserts that, in addition to stabilising electricity rates in the area, imports of CNG to Grand Bahama would have significant positive environmental benefits through the reduction of emissions at fuel oil and diesel-burning electric generators.

“Emera states that the Bahamas and the Grand Bahama Power Company (GBPC), in particular, are currently importing 100 per cent of their fuel, which consists of heavy fuel oil and diesel,” the Department of Energy added.

“Emera anticipates that, in the case of GBPC, over 250,000 barrels of foreign-sourced heavy fuel oil per year currently used in electric generators would be displaced by domestic natural gas supplied pursuant to its application.