Jul 2013 Financial News

Beowulf: Gas pipeline is environments’s best option

Jul 04, 2013

A 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, Beowulf Energy LLC executive vice president Andrew Lindholm said during an interview on June 28 at the Hyatt Regency Trinidad hotel in Port-of-Spain.

With a 60 per cent shareholding, Beowulf holds the controlling stake in the Eastern Caribbean Gas Pipeline Company Ltd (ECGPC). The other shareholders are Guardian Holdings Ltd (GHL) with 15 per cent; the T&T Unit Trust Corporation (UTC) with another 15 per cent; and the state-owned National Gas Company of T&T Ltd (NGC) with ten per cent.

ECGPC is developing a subsea natural gas pipeline system capable of delivering natural gas from T&T to up to seven other islands in the Eastern Caribbean: Barbados; St Lucia; Dominica; Martinique; Guadeloupe; St Vincent; and Grenada. In the June 27 Business Guardian, regional council president Serge Letchimy, the political head of Martinique, said the French overseas department had not yet decided if it supports the construction of the gas pipeline citing economic and environmental concerns.

Lindholm said: “There’s lots of misinformation and disinformation about the project, given its long gestation period, but we, Beowulf Energy, came into the project in January 2012 because we were evaluating the project for almost three years. We are the owners of Trinity Power in Point Lisas, and the pipeline seemed to us to be one of those rare projects that works for all stakeholders, and provides a very attractive rate of return for the financiers.”

He said: “The economics work on an arm’s length basis without any government subsidies and provides electricity at 20-25 per cent discount to the current cost of electricity generation and fuel that’s being used in the Eastern Caribbean islands, and all the islands that are going to connect to the pipeline.

“It provides significant environmental benefits to the Eastern Caribbean by displacing environmentally harmful heavy fuel oils that are burned. It provides significant development impact for the entire Eastern Caribbean region because by reducing electricity generation costs in the region—which are among the highest in the entire world—those extra dollars translate into an increased balance of trade of payments between T&T and its Eastern Caribbean sister nations and the impact of that can’t be underestimated.”

He cited and forwarded to the Business Guardian two studies, one by the World Bank and another by Nexant, a New York-based management and technology consulting services firm that serves governments, electric and gas utilities, energy producers, oil and gas companies, and energy end-users.

Independent studies

In 2010 and 2011, the World Bank and Nexant conducted independent studies evaluating the technical and economic feasibility of regional and sub-regional energy solutions for power generation in the Caribbean.

Both studies compared pipeline gas delivered through the Eastern Caribbean gas pipeline against a broad range of alternatives, including compressed natural gas (CNG), liquefied natural gas (LNG), renewable power generation, and electrical interconnections, and concluded that gas delivered through the Eastern Caribbean Gas Pipeline will be the “most economic fuel for each destination island,” as it will provide “predictable transportation costs; low incremental cost of expansion through compression; operating expenses not tied to commodity prices; established and proven off-the-shelf technology.”

The studies said the pipeline will be “operationally more reliable.” There will be “fewer moving parts” and it will be “hurricane tolerant.” It will be “environmentally more friendly” with “lower emissions per delivered unit of gas; no offshore visual impact,” and a “minimal on-shore footprint, for example, no onshore storage.”

Asked what impact the pipeline would have on marine life, he said: “Very little, very little. I mean the International Finance Corporation—a member of the World Bank Group—will ensure that this pipeline has the minimal impact on the environment. It’s designed to be the most environmentally friendly.”

He said: “Think about it, all of the emissions that are created by boats, and all of that stuff that goes off the stacks, the pipeline doesn’t have that,” he said.

“Think about the reef damage that happens when all of that LNG infrastructure goes off the coral reefs of Barbados or Martinique and Guadeloupe. Think how devastating that (would be) on tourism-based economies like Martinique and Guadeloupe. I mean Guadeloupe is an eco-paradise. They’re not interested in the environmental issues that are presented by all of that infrastructure necessary for LNG or CNG.”

He said far less infrastructure would be required for the gas pipeline. Pointing to two tables in the Hyatt lobby, he said: “The infrastructure for the commencement for the pipeline goes from that table to this table, smaller than the room. What does Point Fortin look like? Jetties, massive ships, loading arms, stuff that’s going into the water. I mean it’s a disaster environmentally.”

The depths

Describing the ten-inch-diameter pipeline, he said: “It’s deep enough so that, just simply, the currents and the pressure of the ocean keeps it to the ocean floor. I mean there are thousands of miles of pipeline around the world. There are 2.1 million miles of pipeline installed as of 2007; 5,800 miles of offshore pipeline planned to be constructed by 2017 alone.”

He said the pipeline, built from steel, will be much smaller than the pipelines seen on roadsides. He said the pipeline will be earthquake-proof and capable of withstanding hurricanes.

The pipeline will be constructed in two phases. Phase I involves a pipeline from Tobago to Barbados. Phase II involves the delivery of gas from Barbados to up to six of the other islands. ECGPC has developed Phase I of the pipeline system to an advanced technical, commercial, and legal stage and expects to bring Phase I to construction financial close by Q3 2014; with first gas expected to reach Barbados in 2016.

The pipeline will stretch approximately 480 miles in total and its maximum capacity will be 150 million standard cubic feet per day (mmscf/d).

ECGPC intends to serve its major markets sequentially, allowing telescoping of pipeline sizes, at ten inches in diameter from Tobago to Barbados (188 miles); then ten inches to Martinique (120 miles); and eight inches to Guadeloupe (172 miles).

The base case capital cost of the pipeline is projected to be US$326.8 million. The pipeline is expected to reduce the cost of fuel in Barbados by at least 20-25 per cent. “The impact of potential changes in the project’s capital costs is insignificant relative to the potential savings afforded by the project,” Lindholm said.

The cost

Taking the pipeline in phase II to Martinique and Guadeloupe, total capital costs are estimated to be US$690 million (US$396 million from Barbados to Martinique and US$294 million from Martinique to Guadeloupe). The phase II expansion is expected to yield economies of scale translating to an incremental savings of nearly 15 per cent for Barbados.

“Phase I will result in substantial economic and environmental benefits to Barbados,” Lindholm said. “Based on Barbados Light and Power’s reported 2011 financial performance, a 25 to 40 per cent reduction in fuel costs would imply an annual cost savings of US$51-US$82 million. This represents 1.5 to 2.5 per cent of Barbados 2011 GDP or approximately US$200-US$300 per year on a per capita basis.”

He said the World Bank Group estimates that the pipeline system could save Barbados net present value (NPV) US$906 million through to 2028.

Relative to oil, natural gas combustion reduces CO2 emissions by 30 per cent, NOx emissions by 80 per cent, SO2 emissions by 99.9 per cent, particulate matter emissions by 92 per cent, and mercury emissions by 100 per cent.

“Phase II will yield a comparable level of economic, environmental, and social benefit to the countries connected to the pipeline and further reduce delivered fuel costs in Barbados,” he said. BHP Billiton’s Angostura field is expected to supply the pipeline with gas from a compression platform off the east coast of Trinidad.

About Beowulf

Headquartered in New York, Beowulf is a private independent power and energy infrastructure company wholly owned by Paul Prager.

Beowulf currently operates approximately 760 megawatt of power generating capacity and provides operation and management services for over 900 MW of generation. Beowulf owns Trinity Power Lyd, a 225 MW power generating facility located at Point Lisas.


Source:
ALEEM KHAN
Trinidad Guardian
Thursday July 4, 2013

http://www.guardian.co.tt/business-guardian/2013-07-04/beowulf-gas-pipeline-environments%E2%80%99s-best-option