CEIS Petroleum Update August 2011

Caribbean Energy Information System (CEIS) August 2011 the question, what makes T&T different from other Caribbean nations? The answer is very simple, T&T enjoys the benefits of having 99% of its electricity being generated from Natural Gas and as such they can boast the lowest electricity rates in the Caribbean. Reports from an audit conducted in December 2010 by Houston-based consultant Ryder Scott says natural gas reserves in T&T were 13.4 trillion cubic feet which indicates that there is no short term need for T&T to import fuel for electricity generation.

What is Natural Gas? Natural gas as you might already know is considered to be the world’s cleanest burning fuel and it has emerged as the environmentally preferred petroleum fuel of choice. Natural gas is a combustible mixture of hydrocarbon gases with the primary component being methane. Natural gas is often associated with oil deposits and is found in reservoirs far beneath the earth.

Air view of Atlantic LNG, Trinidad & Tobago Source: www.lngpedia.com

T

he optimal utilization of our energy resources to generate long-term sustainable growth and development of our economies and the creation of a better quality of life for our citizens is dependent on several factors.

One of the main factors is the availability of these energy resources. Another important factor is the price at which these resources are acquired and how efficiently they are utilized. This brings us to the question as to whether the Caribbean region is optimally utilizing their energy resources for electricity generation. Electricity can be considered the most vital transformed energy resource within a country since all sectors of the economy relies heavily on the availability of this form of energy.

With the exception of Trinidad and Tobago (T&T), all Caribbean countries over the past decades have been battling with some of the highest electricity rates seen in the world. This leads us to ask

To access CEIS website CARIBBEAN PETROLEUM UPDATE

Typical Composition of Natural Gas Methane Ethane Propane Butane Carbon Dioxide Oxygen Nitrogen Hydrogen sulphide Rare gases

CH4 C2H6 C3H8 C4H10 CO2 O2 N2 H2S A, He, Ne, Xe

70-90% 0-20% 0-8% 0-0.2% 0-5% 0-5% trace

Source: www.naturalgas.org continued on page 2/

CONTACT US Caribbean Energy Information System Scientific Research Council Hope Gardens, Kingston 6, Jamaica 1-876-927-1779 (Telephone) 1-876-977-1840 (Fax) ceis@src-jamaica.org www.ceis-caribenergy.org

is a monthly Bulletin which highlights petroleum issues affecting or relevant to the Caribbean, international developments that may affect the region’s way of life and movements in oil prices and retail prices for fuel regionally.

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Call: 1-876-927-1779 | Caribbean Petroleum Update : August 2011

Is Natural Gas a solution to high electricity prices in the Caribbean? continued from page 1/ Some advantages in using Natural Gas  It is inexpensive  It is natural and is an energy source that has much lower air emissions than other fossil fuels, such as oil or coal  It is odorless, colorless, non-corrosive and non-toxic  Most homes use it so it is quite popular  Was not affected much by the second Gulf War so its better value then ever  Weight is less than one-half that of water.  Proven to be reliable and safe process and it has been in use since 1944.

Some disadvantages in using Natural Gas  It is highly flammable  It is toxic if inhaled in large amounts.  It's a Non-Renewable resource  It is creating cavities in the earth.

Transportation of Natural Gas In its gaseous state, natural gas is difficult to transport. As such, it is super-cooled to minus 260 degrees Fahrenheit (minus 162 degrees Celsius). At that temperature, natural gas condenses into a liquid and is referred to as Liquefied

Petroleum News & Happenings Oil rises>> 31/8/2011 OUR, JPS and questionable electricity bills>> 30/8/2011 Fuel costs are pushing up the price of flying>> 22/8/2011 Fuel prices rise again>> 17/8/2011 OPEC sees growing world oil demand >> 10/8/2011 Gas prices down $4 tomorrow>> 10/8/2011 LNG pipe dream? Experts warn of impending world shortage of the precious oil alternative>> 7/8/2011 Gasolene down 50 cents tomorrow>> 3/8/2011

Natural Gas – LNG. As LNG it takes up to 600 times less space than in its gaseous state, which makes it feasible or easier to transport over long distances thereby facilitating shipping from the parts of the world where it is abundant to where it is in demand.

With many Caribbean countries depending on Diesel and Heavy Fuel Source: www.sempralng.com Oil – HFO for electricity generation, and with diesel and international oil prices fluctuating more rapidly than the rate at which electricity is generated, alternative fuel sources for electricity generation is becoming a necessity for the regions sustainability. Coupled with this dilemma are the efficiency ratings and age of the region’s electricity generating plants some of which uses combined cycle technology.

Many of these plants are operating far below optimal standards thereby placing a greater burden on the pockets of the region’s consumers who would like to enjoy lower electricity rates.

With the exception of hydro and wind plants, electricity generating plants in the Caribbean are predominantly Gas, Diesel/HFO, Steam or Combined Cycle Plants. These plants operate at efficiencies ranging between 25% and 55% with a Combined Cycle plant having the highest efficiency. The combined cycle plants in the Caribbean are few in numbers.

New generating plants would have to be built in most countries to replace existing Diesel and HFO plants in order to facilitate the use of LNG. If this is done regional consumers could envisage approximately 30% reduction in their electricity bills. However, such reductions would not be seen in the short-term as construction of a LNG power plant is not a cheap or quick venture. The Jamaica Public Service through a competitive bidding process has been granted approval to construct a 360MW combined cycle/dual fuel electricity generating plant in Jamaica between April 2012 and January 2016. This is however contingent on the finalization of plans to have LNG as a source of fuel in Jamaica.

These plans are well on the way with the sending out of two request for proposals (RFPs), one for LNG Supply and the other for the Infrastructure required for the receiving, storage and re-gasification of the LNG.

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Chevron completes sale of fuel businesses in French Caribbean territories >> 1/8/2011

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Observe speed Though all vehicles have optimal fuel efficiency at different speeds its good to note that speeds over 60 miles per hour decreases the vehicles gas mileage drastically.

Is Natural Gas a solution to high electricity prices in the Caribbean? continued from page 2/ The current fuel surcharge on electricity bills within the Caribbean ranges between US$0.20/Kwh and US$0.40/Kwh. Trinidad & Tobago does not have a fuel surcharge component as part of their electricity tariffs and electricity is provided to consumers at an average rate of approximately US$0.05/Kwh using natural gas as the main source of generation fuel. The existing generating plants in the Caribbean utilizes between 0.0014 Barrels and 0.0035 Barrels of fuel per Kilowatt Hour. The rate of fuel use varies in the range depending on whether the plant is Gas, Steam, Diesel/HFO or Combined Cycle.

In a natural gas powered electricity generation plant approximately 0.003412 MMBTU is used to generate 1 Kwh of electricity. Prices for natural gas on the international market are within the range of US$3 and US$4.5 per MMBTU. Below is a table indicating possible approximate cost of generation fuel per kilowatt hour at assumed per barrel prices for oil on the international market versus assumed prices per MMBTU of Natural Gas (see table below).

Extra Weight Removal Ensure there is no unnecessary weight added to the vehicle. Extra weight in the vehicle can decrease your fuel efficiency while driving.

Idling Too Much Avoid idling as much as possible. When your idling, your car is not getting you anywhere and is burning gas.

Cruise Control Option Cruise control can help save gas by keeping your speed of the vehicle constant. When your driving and you let go of the gas and then press the gas (changing speeds) your causing your vehicles rpm to spike unnecessarily. Using this in the city is a stretch considering how often you have to stop for stop signs, traffic lights, pedestrians, etc, but on the highway this tip is the most effective.

Maintenance On Your Vehicle: Check your air filters to ensure you do not have a clogged air filter. Also keeping your tires properly inflated is one of the most important tips in fuel saving as well as your safety on the road. Also, driving with the windows down also will reduce fuel mileage as wind that goes into the vehicle will create drag.

Can you imagine if all countries in the region could enjoy the benefits of using natural gas for electricity generation? This would create an almost level playing field for all Caribbean countries as it relates to the cost of manufacturing; bearing in mind that T&T not having to purchase electricity fuel would Source: www.wiinjamod.com still have a competitive edge. However, more avenues for increased productivity and increased foreign investments in many countries would still be created as the region’s highest POSSIBLE ELECTRICITY FUEL COST WITH VARYING PRICES OF OIL AND NATURAL GAS manufacturing overhead cost (electricity) would be at a Price of Oil US$/BBL 70 80 90 100 110 120 130 more cost effective level to Fuel Cost Low Range (US$/ 0.10 0.11 0.13 0.14 0.15 0.17 0.18 allow competitiveness. We Kwh) must be cognizant of the fact Fuel Cost High Range (US$/ 0.25 0.28 0.32 0.35 0.39 0.42 0.46 however, that demand and Kwh) supply determine prices and improved energy security and Natural Gas Prices US$/MMBTU 3 3.2 3.4 3.6 3.8 3.9 4 competitiveness in this inNatural Gas Cost (US$/Kwh) 0.010 0.011 0.012 0.012 0.013 0.013 0.014 stance would only be sustained if prices for natural gas Variance in Fuel Cost (Oil Vs Natural Gas) US$/Kwh remain stable over the long Fuel Cost Low Range (US$/Kwh) 0.09 0.10 0.11 0.13 0.14 0.15 0.17 term. Fuel Cost High Range (US$/Kwh)

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0.23

0.27

N F O R M A T I O N

0.30

S

0.34

Y S T E M

0.37

0.41

(CEIS)

0.44

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Call: 1-876-927-1779 | Caribbean Petroleum Update : August 2011

REGULAR UNLEADED GASOLINE AVERAGE PRICES AT THE PUMP January - August 2011 Retail prices for refined petroleum products remained relatively high in comparison to prices seen at the beginning of the year when crude oil prices were approximately US$90/BBL. Of the sixteen countries reviewed at the end of August, retail prices for regular unleaded gasoline in three Caribbean countries had shown increases when compared to the previous month while eight countries showed slight declines and the other four remained relatively stable.

Table 2: Regular Unleaded Gasoline Average Retail Price (US$/Litre)

NOTE:

2011 COUNTRIES

JAN FEB

MAY

JUN

ANTIGUA/ BARBUDA

1.00

1.00

MAR APR 1.07

1.15

1.25

1.33

JUL AUG AVG 1.30

1.30

1.18

BAHAMAS [91 OCT]

1.24

1.25

1.30

1.46

1.47

1.47

1.45

1.43

1.39

BARBADOS

1.47

1.48

1.49

1.59

1.59

1.59

1.59

1.66

1.56

BELIZE [87 OCT]

1.33

1.34

1.48

1.50

1.54

1.51

1.49

1.51

1.46

B.V.I [87 OCT]

1.12

1.13

1.20

1.26

1.26

1.27

1.25

1.22

1.21

DOMINICA

1.01

1.05

1.06

1.11

1.21

1.24

1.22

1.20

1.14

GRENADA (95 OCT)

1.05

1.06

1.17

1.23

1.29

1.32

1.29

1.28

1.21

GUYANA

0.99

0.99

1.06

1.08

1.08

1.12

1.15

1.14

1.08

JAMAICA 87 Octane[E10]

1.17

1.18

1.25

1.28

1.29

1.29

1.31

1.29

1.26

MONTSERRAT

1.13

1.14

1.18

1.27

1.38

1.42

1.35

1.32

1.27

ST. KITTS/ NEVIS

1.04

1.07

1.20

1.13

1.14

1.23

1.27

1.28

1.17

ST. LUCIA

1.14

1.14

1.16

1.22

1.27

1.28

1.28

1.27

1.22

ST. VINCENT/GRENADINES 0.99

0.98

1.00

1.06

1.10

1.10

1.10

1.10

1.05

SURINAME [95 OCT]

1.21

1.32

1.34

1.47

1.55

1.51

1.48

1.48

1.42

TRINIDAD/[92 OCT]

0.42

0.42

0.42

0.42

0.42

0.42

0.42

0.42

0.42

TURKS/ CAICOS

1.36

1.36

1.42

1.42

1.45

1.55

1.61

1.61

1.47

*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.

CHART 1

Comparative Retail Pump Prices Regular Unleaded Gasoline August Avg vs 8 Mths Avg (Jan - Aug 2011) 1.80 Aug Avg

1.60

8 Mth s Avg

US$/Litre

1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00

16 Caribbean Countries

See prices for other products at www.ceis www.ceis--caribenergy.org .

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Caribbean Petroleum Update : August 2011 | Call: 1-876-927-1779

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Average Weekly & Monthly Crude Oil Prices (Jun - Aug 2011)

With prices remaining above the US$100 mark, productivity in the Caribbean is on the decline as the already fragile economies are faced with high energy cost and the harsh ongoing impact of the global recession.ď‚Ą

115

114.41

113.5

2011-Jun

113.87

2011-Jul

110

2011-Aug

105 100

102.34

95 WK1

WK2

WK3

WK4

Mth Avg

Period

US$/BBL

International oil prices over the period June to August 2011, remained above the US$100/BBL mark with the highest price seen in the first week of August (US$114). The lowest weekly price seen in August for the product was US$102.34/BBL - reflected at the end of the 2nd week. This price was approximately 30% below the highest price seen during the record oil price year of 2008. With the exception of first week, prices seen in August when compared to the other two months (Jun & Jul) were lower.

US$/BBL US$/BBL

120

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