The LNG Controversy

By John Farmer

In May of last year I wrote a letter to the editors of the two main dailies regarding LNG. As this is back in the news, I thought it would be relevant to revisit the subject:

I would first like to make a specific point to my fellow Bahamians, which I have not heard made so far in this public debate. Sometime in this year or next, world oil production will peak and start to decline. This, coupled with the rise of China as an economic power with its insatiable appetite for oil, is going to result in an increasing demand for a shrinking supply of oil. If you think the cost of gas and electricity is high now, you ain’t seen nuttin’ yet.

So what is the fuel of the future? You guessed it - natural gas. It is this simple dynamic that is behind the attempts to develop a natural gas supply to Florida, which remains one of the fastest growing states in the USA, and whose demand for energy increases unabated.

It is for these two fundamental reasons that companies are looking to establish LNG terminals in the Bahamas.

While I do appreciate and support the efforts of the environmental lobby, in this case I find myself unable to agree with some of their views of the proposed LNG terminals in general. But let us focus on the facility proposed for Ocean Cay, as that is the option being promoted by the government.

The first objection appears to be environmental - how could we consider putting a facility such as this in our pristine Bahamaland? The facility is proposed for Ocean Cay, which is a MAN-MADE (i.e. artificial) cay on the edge of the Florida Straits that has been used for mining aragonite for as long as I can remember. We are not talking about placing the facility in the middle of the Exuma Cays (to which I would vociferously object); we are placing it in a remote, artificial, pre-existing industrial facility.

The second objection appears to be the risks associated with the facility - it might blow up, we don’t know how to regulate it, it might be the target for terrorists etc. etc. There are risks associated with all forms of energy. We have managed oil trans-shipment facilities and oil refineries in Freeport, LPG (low propane gas) and gasoline facilities all over the place, and we have been able to manage these facilities without an attendant rash of explosions. So why should we assume that we are incompetent or unable to manage an LNG facility? I am sure our many competent Bahamian professionals find the implication insulting.

As to the terrorist angle, I consider the current hysteria regarding the threat of terrorism to be a byproduct of the domestic political agenda of the United States, and any ‘terrorist’ threat to the Bahamas to be somewhere between minimal and non-existent. If there were to be an attack, let’s face it - they are not going to attack some remote cay that no-one ever heard of which the press cannot easily cover, they are going to go after a high profile target. If you want to worry about terrorism, worry about the impact on our tourism industry from another attack in the USA; this is an infinitely more likely scenario.

This is not to say that I do not have concerns regarding the facility, but they are not environmental, nor are they based on the risk assessment. Rather, they are financial and economic.

First, the financial benefits appear to be inadequate at $20M per year. With annual revenues of almost $1,000M per year, $20M is a relatively insignificant amount to the Public Treasury. At this rate it would take 50 years of operation to provide one year’s worth of revenue to the Treasury. Given basic economics, surely the volumes will afford a larger income to the Bahamas? What I would like to see is a breakdown of the revenue generated by the gas, and what percentage we are expected to receive. Without knowing the facts, it appears to this observer that we a selling ourselves seriously short.

Secondly, I see no mention in the proposal for the Bahamas to receive any of the benefit of LNG other than cash; i.e., why can’t we get some of this natural gas for our own uses? Given the looming energy crisis outlined at the beginning of this letter, it would appear to this observer that our primary objective in this project would be to guarantee future supplies of energy to guard against the decline of existing energy sources. This aspect appears to have been completely overlooked; at least I can find no mention of it in any of the multiplicity of information put out by both sides. If we are going to allow this facility in our country the least we can do is to ensure we benefit fully from it.

I trust our politicians will not be so distracted by environmental and risk issues that they fail to take into consideration the real benefits that we could gain from this project. It would be unfortunate in ten years time to find ourselves sending millions of dollars in gas to Florida, while we are unable to fulfill our own energy needs at affordable prices.

I can assure you this is going to have more of an impact on our tourism industry than any environmental fallout from this proposed project.