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AES's Bahamas LNG Project May Be Close to Getting Green Light

May 9, 2005
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It appears likely that the government of the Bahamas will soon grant final approval to Virginia-based AES Corp.'s proposed liquefied natural gas (LNG) import project on the man-made industrial island of Ocean Cay. "Had the prime minister not taken ill, it probably would have been done this week," Leslie Miller, Minister of Trade and Industry for the Bahamas, told NGI in an interview last week.

Meanwhile, a rival LNG import project planned by Suez Energy North America, FPL Group and El Paso Corp. faces new regulatory hurdles after the Bahamas Environment Science and Technology (Best) Commission of the Ministry of Health and Environment in March decided not to approve a Freeport location for the terminal. The sponsors have another location selected but the commission requested significant additional information on the other potential site at South Riding Point and basically suggested an entirely new terminal location on Grand Bahama. While not a rejection, the decision was seen as a regulatory setback.

The Best commission approved the AES terminal on Ocean Cay last year. AES also has U.S. federal and state approvals for its proposed 842 MMcf/d pipeline from Ocean Cay to a proposed connection for Florida Gas Transmission in South Florida (see NGI, Jan. 23, 2004).

Suez's proposed pipeline to Florida also has been approved by U.S. and Florida officials, while an alternative pipeline proposed by El Paso is still under regulatory review. El Paso agreed in December to combine its LNG terminal and pipeline project with the one proposed by Suez. And FPL Group has an option to buy the El Paso project (see NGI, Dec. 20, 2004). The companies intend to combine the best parts of their projects once they're completely approved and then move forward with commercial development.

Miller said the government of the Bahamas is not going to close the door on the combined project proposed by Suez, FPL and El Paso. "The question is really whether or not there's a need for two terminals. One of the representatives from [Suez] indicated last week that there was no need for two, that it was not economically viable to have two terminals because by year six AES would increase their throughput capacity from the Bahamas to Florida.

"As the minister responsible for these projects, I think if we're not going to get any additional income from having two projects and one can expand and give us the same income I don't really see the need for two. Two would probably split the same market in Florida. That's my concern."

Miller said over the 25-year life of the AES project the Bahamas is expecting to receive more than $1 billion in fees and throughput charges. Throughput charges alone are expected to begin at about $15 million/year in year one and grow to $45 million/year by the sixth or seventh year.

He said it probably will take Suez, FPL and El Paso at least another 18 months to gain approval from the Bahamas if the new location is viable. Miller noted that both of the proposed projects have encountered significant opposition. "The government is considering all sides and all viewpoints, including those of the environmentalists. A decision will be made on scientific facts not conjecture, not emotions, which is mainly what you have from the opposition to these terminals," he said.

However, the AES site, said Miller, is a "perfect site for a regasification terminal," because it is remote and has already been used as an industrial location. In comparison, the new South Riding Point location suggested by the government for the Suez/FPL/El Paso project is in closer proximity to populated areas and a crude oil terminal. "One of the problems with it is that it is so near to an oil terminal that there are concerns about that," said Miller. "It's not a heavily populated area, but certainly Grand Bahama island is growing."

Suez Energy North America spokeswoman Paula Rockstroh said the company is "still optimistic that a positive decision will be reached because we are engaged in an ongoing dialogue with the government." She said Suez sees its project still neck and neck in the race with the AES terminal. Suez is hoping that it won't have to go back to "square one" in the regulatory process because an alternative site has been suggested.

"We've been hearing for months now that they were going to approve the AES project," said Rockstroh. "The approval process there is not quite as clear cut or defined as the FERC approval process in the U.S. It's difficult for us to predict when decisions will be made."

Regardless of the regulatory outcome, she noted, any Bahamas LNG terminal could live or die depending on a final decision next month by FPL Group subsidiary Florida Power & Light (FP&L), which is currently deliberating on the results of a recent request for proposals (RFP) for LNG supply.

FP&L, which is affiliated with the Suez/FPL/El Paso LNG project, is soliciting proposals for a minimum of 400,000 MMBtu/d of regasified LNG and a maximum of 600,000 MMBtu/d for a minimum of 15 and a maximum of 25 years, to be delivered, beginning at any time between Jan. 1, 2007 and Dec. 31, 2010. FP&L will be the anchor customer for any LNG project. Power demand in the state is driving substantial gas demand growth, and FP&L is the largest power company in the state.

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