CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : JULY 2014 PAGE 1

CARIBBEAN Petroleum UpdateA Publication of the Caribbean Energy Information System (CEIS)

JULY 2014 ISSUE

To access CEIS website

1-876-927-1779 (Tel) 1-876-977-1840 (Fax) ceis@src-jamaica.org www.ceis-caribenergy.org

Electricity, one of the most vital energy source in the Caribbean is produced primarily from imported petroleum energy sources (Diesel and Heavy Fuel Oil). This current dependence on imported fossil fuels has led to high electricity generation costs and con-sequently higher electricity prices in most Caribbean Countries except Trinidad & Tobago which produces approximately 99% electricity from Natural Gas (Diesel accounting for less than 1%). At present, expan-sion plans are being pursued by Caribbean governments at all opera-tions including the Electricity sector and the Bauxite sector which burns expensive Fuel Oil for Alumina production. There is strong optimism

for the future regarding the introduc-tion of Natural Gas as a cheaper and cleaner fuel to power Electricity and Bauxite plants. The introduction of natural gas would decrease both the cost of generation and price of electricity to the consumer. In this issue of the Petroleum Update, we seek to highlight possible factors that could impact the viability of Natural Gas as an alternative fuel source in the Caribbean states.

The current situation in most Carib-bean countries is that they import fuel oil and diesel to generate electricity. Any increase in fuel costs incurred by utility companies would mean higher electricity rates for consumers as the increase in the cost of producing

electricity is passed on to custom-ers in the tariffs. In addition to this fact, utility companies in the Carib-bean mostly utilize diesel red plants despite the inclusion of renewable energy technology. Jamaica is one of the largest importers of petroleum fuels in the Caribbean and for over a decade has been looking at the possible use of Lique ed Natural Gas LNG as fuel to be used in the Electricity and the Bauxite/Alumina sectors.

Since the current price of natural gas is lower than the price of fuel oil, the introduction of natural gas would

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Factors that may impact the Viable Use of Natural Gas in the Caribbean

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F a c t o r s t h a t m a y i m p a c t t h e V i a b l e U s e o f N a t u r a l G a s i n t h e C a r i b b e a n

continued from page 1/seek to decrease both the cost and price of electricity. The cost of generating electricity is high, not only for the consum-ers but the utility companies as well. Fuel costs in 2013 for the Jamaica Public Service (JPSCo), Jamaicas sole utility company stood at three quar-ters of operating expenses. In 2013, fuel costs at Barbados Light and Power accounted for 73% of total operating expenses while in Dominica, fuel costs in 2013 totaled EC$43.4 million and account-ed for 52% of all direct expenses in that year. Countries in the Caribbean that use fuel oil for electricity generation have higher tariffs relative to countries that utilize natural gas in the electricity sector. The average retail tariff for domestic customers in 2013 in countries like Dominica, St. Lucia and Jamaica were US$0.42/Kwh, US$0.36/Kwh and US$0.38/Kwh respectively while for Trinidad and Tobago the aver-age retail tariff for a domestic customer was US$0.05/Kwh.

With this continued crisis, natural gas may prove to be a viable fuel alternative to lessen the pressures on both suppli-ers and consumers of energy in all sectors of the economy, but this is easier said than done as both internal and external factors could impact the possible outcomes. Among these factors are; market struc-ture disparities, infrastructure development to store, trans-port and utilize Natural Gas, the cost and time involved in establishing and upgrading the infrastructure, and last but de nitely not least, utility

Gas pipeline from Tobago to Barbados, and then to the rest of the Eastern Caribbean, is the most environmentally friendly option for island nations seeking to reduce the cost of electricity for their citizens. Image source: http://news.co.tt/

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CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : JULY 2014 PAGE 3

IMF urges higher energy taxes to ght climate change [...]...Read more

Exmar Floating Liquefaction Regasi cation and Storage Unit [...]...Read more

August 31 Deadline Agreed For Path To Bec Restructure [...]...Read more

Depressed Rare Earth Market Puts Jamaicas Project On Hold [...]...Read more

Colombia, Panama Presidents Hold Talks [...]...Read more

Martelly sets up Trinidad for oil exploration rights in Haiti [...]...Read more

Panel warns of Central Americas increasing dependence on Petrocaribe [...]...Read more

PDVSA o ers to buy four 500,000 barrel cargoes of heavy naphtha [...]...Read more

Maya Leaders Alliance still waiting for oil consultation [...]...Read more

PETROLEUM NEWS & HAPPENINGS

Caribbean Energy Trinidadian oil exploration heats up [...]... Read more

Power bid winner to be announced [...]...Read more

Law to be changed to allow only certi ed electricians [...]...Read more

Trinidad & Tobago production declining but crude oil exports increasing [...]...Read more

Latin America plays take on added importance [...]...Read more

Drilling equipment lands on Temash National Park [...]...Read more

New Thermal Plant to increase LNG Demand in Brazil [...]...Read more

Rusal Exploring Ethane For Alpart Plant [...]...Read more

Education Ministry Puts Limit On Electricity Bills For Public Schools [...]...Read more

Lights For MoBays Elegant Corridor [...]...Read more

Electricity Enterprise Team Moving Full Speed Ahead [...]...Read more

Babcock & Wilcox wins boiler contract for Dominican coal plant [...]...Read more

Leni Oil & Gas to acquire Trinidad oil eld [...]...Read more

Oil Prices Rise as US Stockpiles Drop [...]...Read more

Petrotrin blames US shale gas revolution for reduced re nery runs [...]...Read more

Rubis Absolutely Con dent 30,000 Gallon Gas Leak Cured [...]...Read more

Massy Eyes Jamaican Energy Segment For Investment [...]...Read more

continued on page 4/

PAGE 4 CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : JULY 2014

NYMEX crude oil drops below $100/bbl on higher Libyan production [...]...Read more

US should be ready if Petro Caribe tightens credit terms, study says [...]...Read more

Another Company To Prospect For Rare Metals Jampro Weighing US$500m Proposal Nippon-JBI Pilot Report To Be Released In Parliament [...]...Read more

World Bank backs $300M oating natural gas plant in Colombia [...]...Read more

Jamaica: Agreement signed to stop electricity theft [...]...Read more

Putin revives old Cuban ame and eyes Latin American minerals [...]...Read more

JPS Still Targeting LNG For Replacement Capacity [...]...Read more

Govt, JPS Agree To Change Licence [...]...Read more

Cabinet takes charge of power generation procurement [...]...Read more

Major Oil Discovery in Trinidad [...]..Read more

PETROLEUM NEWS & HAPPENINGS continued from page 3/

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CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : JULY 2014 PAGE 5

companies may still need to utilize diesel and gas red plants (realisti-cally it would be dif cult to convert all plants to accommodate natural gas in one go).

In July 2012 it was officially announced in Jamaica that a LNG regasification facility was to be established to facilitate the introduc-tion of LNG to the energy mix. It was also highlighted that in order for the project to be successful there were three major components that must be addressed: the purchase of LNG by entering into a contract with a supplier, the contracting of oating storage and regasi cation services from a provider and the running of pipelines from the regasi cation facil-ity to the power plant. All of these three components were said to be the responsibility of the Government and involves the coordination of, and com-mitment from, multiple stakeholders (fuel supplier, JPSCo, oating storage and regasi cation unit provider, etc.); each pursuing its own interest. These did not materialize and as such Jamai-ca is still exploring the feasibility of natural gas utilization. Apart from Trinidad and Tobago, Cuba utilizes an estimated 91% of its natural gas for electricity generation. Barbados produces small quantities of natural gas locally, but not enough for power generation. It imports LNG by barge and based on reports, aims to bene t from a new gas pipeline from Tobago that should be completed by late 2015. The pipeline offers a less expen-sive and better option than deliveries by barge and may be extended to other Caribbean islands such as St Lucia and Dominica. It cannot be overem-phasized enough that if all countries in the region are to bene t from natural gas as the fuel choice for power gen-eration, all governments would have to be fully onboard.

Despite reasonable renewable energy resources such as solar power, hydropower, geothermal energy,

and wind in the Caribbean, the limited hydrocarbon resourc-es in most countries force them to import fuel oil and diesel for power generation. The high prices for these products significantly affect the competitiveness of the regions rms and adversely in uence private sector development as a whole.

The recent Shale Gas revolution in the United States, have greatly reduced its cost of producing natural gas. With such rapid growth in the shale resource, natural gas prices are at its lowest. If the Caribbean states were to put in place the necessary infrastructure and grab unto the opportunity of importing low cost natural gas, this would de nitely reduce the need for petroleum imports thus reducing electricity generation costs and in turn fuelling economic growth. Natural gas not only has the potential of reducing generation costs and electricity rates, it has the potential to transform theses small states economies to function at opti-mal levels.

However, separate and apart from the infrastructural de ciencies of Caribbean countries where natural gas is concerned, Caribbean govern-ments must pay special attention to additional variables that may inhibit the utilization of natural gas. These include the availability of natural gas supply and the status of export supporting infrastructure (natural gas liquefaction and compression facilities or pipelines), the possible access points of natural gas to enter the Caribbean and how each point will be bene cial to the individual markets in the Caribbean basin, the cost of delivery and last but not least the possible sources of natural gas.

The current dependence on fuel oil in the countries in the Caribbean has led to high electricity generation costs and high electricity tariffs. Introduc-ing natural gas would decrease both

the cost and price of electricity. Additionally, natural gas plants emit less carbon dioxide (CO2) per ton than fuel oil plants. Therefore, the net bene ts of natural gas would be seen in lower nancial and economic (environmental) costs.

It is important to note that even if Caribbean states were to successfully establish the necessary infrastructure for natural gas, not all renewable energy (RE) and energy ef ciency (EE) technologies that are viable now may still be viable. The viability is also attributed to the lower price of natural gas relative to fuel oil, but while one can speculate and hope, there is no guarantee that this will always be the case. Furthermore, Caribbean govern-ments must pay keen attention to the factors that may affect the viability of introducing natural gas in the Carib-bean before plans go into full force.

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F a c t o r s t h a t m a y i m p a c t t h e V i a b l e U s e o f N a t u r a l G a s i n t h e C a r i b b e a n

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Prices at the Pump

See prices for all products at www.cippet.org

Retail prices for Regular Unleaded Gasoline in the thirteen Caribbean countries reviewed at the end of July 2014 showed increases in prices for Barbados, Belize, Dominica and Grenada between 0.8% and 6.1%. Dominica experienced the highest increase of 6.1% while Jamaica had a decrease in price of 0.8%. The other countries remained stable.The average retail price at the end of July 2014 was 1.1% higher than the average of the previ-ous month.

J U LY 2014

NOTE: *US Gallon = 3.785 L *Imperial Gallon = 4.546 L *As at November 1, 2009 MTBE was phased out from all gasoline blends in Jamaica and replaced with 10% Ethanol.

Regular Unleaded Gasoline: Average Retail Price (US$/Litre) 2014COUNTRIES JAN FEB MAR APR MAY JUN JUL AVG

ANTIGUA/ BARBUDA 1.23 1.23 1.23 1.23 1.23 1.23 1.23 1.23BAHAMAS [91 OCT] 1.36 1.36 1.38 1.38 1.43 1.43 1.43 1.39

BARBADOS 1.54 1.57 1.59 1.66 1.76 1.76 1.81 1.67

BELIZE [87 OCT] 1.41 1.43 1.47 1.49 1.51 1.48 1.54 1.48B.V.I. [87 OCT] 1.21 1.21 1.21 1.21 1.21 1.21 1.21 1.21DOMINICA 1.15 1.16 1.18 1.19 1.19 1.22 1.30 1.20GRENADA (95 OCT) 1.26 1.26 1.28 1.31 1.31 1.31 1.32 1.29JAMAICA 87 Octane[E10] 1.23 1.24 1.26 1.28 1.26 1.28 1.27 1.26ST. LUCIA 1.32 1.31 1.31 1.31 1.31 1.31 1.31 1.31

ST. VINCENT/ GRENADINES 1.08 1.07 1.09 1.09 1.09 1.09 1.09 1.08

SURINAME [95 OCT] 1.39 1.39 1.43 1.43 1.46 1.46 1.46 1.43TRINIDAD/ TOBAGO [92 OCT] 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42TURKS/ CAICOS 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

US$/

Litre

13 Caribbean Countries

Comparative Retail Pump PricesRegular Unleaded Gasoline

JULY Avg vs7 Mths Avg (Jan - July 2014)

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InternationalOIL PRICES

FEATURED OFFERS:PE TSTATS - the Caribbean Energy I nformation System (CEIS) primary report of historical annual petroleum energy statistics provided for 18 Caribbean Countries. Included are data on total energy production, consumption, and trade; overviews of petroleum, natural gas, electricity, as well as nancial and environmental indicators for over twenty years.

103.82

107.23105.52

96.00

98.00

100.00

102.00

104.00

106.00

108.00

WK1 WK2 WK3 WK4 MTH AVG

US$/

BBL

Period

Average Weekly & MonthlyCrude Oil Prices

(May July 2014)

May Jun Jul

Analysis of the International Crude Oil Prices for the period May to July 2014 ended with an average price per bbl of US$103.87. This reflected a 1.8% decrease in price from the previous month, but a 2.2% increase in average prices when compared to May 2014. The highest weekly price seen in July for the commodity was US$105.52/bbl-re ected in week one while week three accounted for the lowest price of US$102.37/bbl. The overall lowest and highest prices for the three months period respectively were US$100.29 seen in May 2014 and US$107.23 seen in week three of June 2014. The overall average price for the period was US$103.76.

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