The Bahamas should say yes to LNG

First Published: 2008-07-25

THE PROPOSED LNG PLANTS ON OCEAN CAY, 35 MILES SOUTH OF BIMINI, AND IN FREEPORT. AND THE FINANCAIL CRISIS LOOMING WITH BEC FUEL SURCHARGE INCREASING BY 73% PER ANNUM IN MAY AND GAS AT THE PUMP BY A SIMILAR AMOUNT.

If ever the Bahamas has an opportunity to secure for its citizens an income stream that will be the envy of the region for very little effort this is it.

Did Saudi Arabia refuse to let their oil be drilled and processed and sold world wide because it was too risky to the environment? Did the Cayman Islands turn down the oil transhipment terminal in Little Cayman that gave them a large income for many years?

Why would the Bahamas turn down such a golden opportunity, or put off the proposal at a time like this when the country so badly needs new industries to feed its families. If opportunity knocks why miss the boat. Technology is changing the world so fast, that this opportunity may not continue or be available in ten years time. Events could overtake it. So now the decision needs to be taken. The offer is on the table. If the offer is withdrawn we may never see it again.

The facts

The BEST Commission has been set up by the Government to consider the environmental risks of building transshipment plants on Ocean Cay and in Freeport for holding and transshipping via pipe line LNG gas to Florida. In the case of Ocean Cay, the existing Island will be more than doubled in size by dredging and enlarging the existing harbor and the entrance channel to permit tankers with 16 meter draft to unload the LNG gas.

The BEST Commission is staffed by well qualified Bahamians who have the job of reviewing the environmental impact studies performed by AES, the proposed LNG plant operating company, one of the largest such corporations in the world. The Government has employed ICF Consulting to act as Project Manager. ICF has raised over 200 questions on the proposal and these have all been answered. In some cases recommendations have been made to satisfy certain concerns. These include setting up appropriate control mechanisms to ensure the project is properly monitored at all times. Training of Bahamians will be included in any such plans. If Bahamians can succeed as North Sea Divers in the oil industry, where the dangers are much more acute, then surely they can be trained to handle a plant of this nature. Safety is always a big issue, and this has received specialized attention.

All of these concerns have been addressed in the 8 volume report submitted by BEST to the Minister of Trade and Industry, and made public. If you have had the opportunity to read this report, you will be impressed at the detail and the care taken by AES and BEST to cover every conceivable aspect of the proposed dredging operation and the building of the LNG conversion plant, the docks, an airstrip, and other buildings, as well as the pipeline that will take the gas to Florida through Bahamian waters.

For example the run off of the dredged sand material will be carefully controlled. The noise made by the compacting machine has been measured and its effect on the nearest inhabitants 8 miles away carefully considered. The effect on the marine habitats, the breeding grounds for crawfish, conch and grouper all carefully reviewed and found to be minimal.

As to safety, there is a complete misunderstanding by many of the dangers of such a plant. Ask any fireman, and he will tell you that the possibility of fire, and the seriousness of the fire are far less for an LNG plant than an oil or practically any other industrial chemical plant. LNG has a short fire ball, and a low fire rating.

It is difficult to ignite unlike petroleum or diesel products. If LNG escapes it evaporates in the air, being lighter than air.

The recent explosion in Liberia was at one of the oldest LNG plants in the world at an industrial complex with many different production units. Lack of adequate maintenance and replacement of old parts which had been urgently requested for many years by the engineers was never carried out by the Government who owned the plant.

The transport of LNG gas by tankers, and the building of plants, is progressing in the USA, England and Europe in order to meet the demands of the power supply industry. One such plant is planned for the Thames estuary in England.

Our good Caribbean neighbours Trinidad, have profited immensely from the oil industry. It is gas from their oil and gas fields that is available to be shipped to the USA via the Bahamas. Both Trinidad and ourselves will profit immensely from this trade.

Economic Advantages for the Bahamas

As Consultants to the Government, ICF must have been asked to advise the Government on the comparative fees or royalties that would normally apply to such a plant operating on foreign soil. Based on the expected through put figures have been mentioned in the press of around USD$25 million a year. But nobody has asked the Minister of Trade and Industry what this figure is or might be. Twenty five million dollars is approximately $84 per head of population, or say five times that or $420.00 for each wage earner. Or if the real contract revenue should be three times that at $1,260.00 per person per year. And now the additional savings from the BEC conversion to LNG proposal.

The figure for the thru put charge may be a closely guarded secret. But our US friends should be able to confirm that the figure five years ago was more realistically US$75 million per annum. It should be a lot more than that in today’s market. In the event that the Government needs to replace certain customs duties to meet the proposed EPA requirements, such additional income for the country would go some way to cover say one fifth of the present customs duties.

In addition there will be additional income from the jobs created by the project. Not only during the construction phase, the operations phase, and the general maintenance and supplies business. There will be work permit fees for the foreign staff and consultants. There will be much new business created for the people of Bimini and Freeport, as these workers will spend money on their days off in recreation and supplying their daily needs. Boatmen and light aircraft pilots and owners will be in constant demand.

So the additional economic benefits for one plant will be considerable, for two plants, significant, and for thee such plants, truly amazing. Any economist should be able to assess the advantages to the Bahamas of such a new Industry that has fallen into the laps of Bahamians just because of our geographical situation, at the edge of deep water. Both at Ocean Cay and in Freeport, the same factors are in our favor. Small risks to any large populations of any dangerous effluent, and ease of access by large tankers. The risks are minimal.

Another possible economic benefit should be considered. That is the possibility of converting the existing Electricity Power generating plants in Nassau and Freeport, as well as in smaller communities like Bimini, from the bunker C fuel power plants that exude black smoke into our atmosphere into clean gas fueled power plants. The present oil shipments must add to the risk of pollution, as has been seen at Clifton Pier recently. As part of the LNG contract, consideration must be given to supplying Nassau and elsewhere in the Bahamas with this alternative fuel supply, hopefully at much less cost that the present gasoline supply. The UK supplied Natural Gas to millions of households by pipelines all over the UK from the North Sea Oil fields.

On the 7th July 2008, AES proposes to complete a pipeline direct to BEC’s plant in Nassau, saving as much as $210 million dollars a year in fuel costs. In this advertisement they do not reveal the other fees and benefits accruing as stated above.

The residents of the Albany Project must be aware of the terrible pollution caused at present by the BEC plants. Golfers playing golf on the Blue Shark golf course can often see the black smoke pouring out, and if the wind is in the wrong direction some of this obnoxious dust will alight on their expensive real estate homes. So tourism and the real estate market will suffer if this continues.

As for the environmentalist activists, they are trying to ensure the best for the Bahamas. But we could all be swimming in debt if such technology does not improve our lives. And why did they make so little noise on the Disney Island project in the Berry Islands where a new dock was built in shore? What happened to the craw fish dislocated there? Why do we not re-cycle waste? Why do the cruise ships belch black smoke in Nassau harbour and no one complains?

One last thought. The LNG project could be so immensely profitable for the Government, that thoughts should be given to a partial public offering at some time in the future. This could be written into the agreement now. It happened with Cable Bahamas, who dug up our roads and caused all sorts of environmental damage too! There are still holes or ruts in the roads caused by their trenching.

The views expressed are those of the author, and not necessarily those of the Nassau Institute (which has no corporate view), or its Advisers or Directors.

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