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FP&L Calls Off LNG Bidding, Potentially Stalling Proposed Bahamas Terminals

June 6, 2005
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In a surprising move that could stall several proposed liquefied natural gas (LNG) import projects in the Bahamas, FPL Group subsidiary Florida Power & Light Co. said last Wednesday that it has called off its request for proposals (RFP) for 15-25-year agreements for LNG supply to serve its Florida utility operations.

FP&L, which serves more than 4.2 million customer accounts in Florida, was 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. But the cost apparently was too high.

The utility company was expected to be the anchor customer for the winning LNG project out of three proposed terminals and pipelines. Power demand in the state is driving substantial gas demand growth, and FP&L is the largest power company in the state.

AES Corp., Suez Energy and El Paso Corp. all have planned separate LNG import terminals in the Bahamas with pipelines to the Florida peninsula. AES' Ocean Express Pipeline and Suez's Calypso pipeline to the Bahamas have FERC certificates. El Paso's Seafarer Pipeline is on file at the Commission but has not yet received a certificate. Meanwhile, none of the associated LNG import terminals have been approved by the Bahamas, although AES' proposed terminal on the man-made island of Ocean Cay is expected to be approved soon (see NGI, May 9; May 16).

Late last year, Suez, El Paso and FPL Group, which bought an option to purchase 100% of the El Paso LNG/pipeline project, announced an agreement to combine the best parts of each of their proposed Bahamas LNG projects (see NGI, Dec. 20, 2004). However, FP&L's decision clearly throws a monkey wrench in their plans. Parent company FPL Group also has already lined up LNG supply through an arrangement with ExxonMobil and Qatar Petroleum (see NGI, April 19, 2004).

FP&L said that it discontinued the RFP, which was issued in August of 2004, for long-term LNG supply after determining that none of the LNG proposals met all of its requirements. The utility company said that none of the LNG proposals "presented sufficiently compelling reasons for FPL to proceed." The company cited a "lack of benefit" to its customers.

"Through this competitive bidding process, we had hoped to help accelerate existing industry efforts to bring an additional source of natural gas to Florida," said Terry Morrison, vice president of FPL's energy marketing and trading organization. "Unfortunately, there appears to be limited opportunity in accessing this gas supply at this time and we need to be focused on other potentially more viable options to meet FPL's increasing requirements."

FPL said it remains interested in obtaining natural gas supply diversity from LNG proposals in the future and will continue to monitor the progress of the marketplace. "We remain interested in LNG, but we have to know our customers will benefit before we will enter into any long term transaction," said Morrison.

"We are very surprised by the utility's action today," said Suez Energy spokeswoman Paula Rockstroh. "We are now evaluating what our next steps will be and we'll need to discuss them with our partners. Obviously this was a major piece and a major driver for developing a project in the Bahamas."

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