The Financial Oversight and Management Board for Puerto Rico announced in a statament last week that its members approved with a condition the proposed contract between the Puerto Rico Electric Power Authority (PREPA) and the Puerto Rico Public-Private Partnership Authority, and NF Energia LLC (NFE) to supply LNG to the San Juan and Palo Seco power generation units, as well as to other units as they become operational on natural gas.
According to the Oversight Board, the proposed contract requires NFE to enter into an agreement with a third-party supplier in case NFE is unable to supply LNG or declares force majeure.
The Oversight Board’s approval of the proposed contract is conditioned upon the government revising the current LNG tolling term sheet for clarity, it said.
Further, the approval is on the basis that the government will undertake a “prompt and a thorough assessment” of the lease agreement executed between the Puerto Rico Ports Authority and NFE and applicable law to develop competitive open port access to the generation facilities in San Juan as an alternative to an entry point under exclusive supplier control.
The critical issue for Puerto Rico’s vital supply of fuel necessary to generate electricity is access to the San Juan port terminal equipped for LNG delivery.
“Given the ports lease agreement with NFE and the failed attempts to identify alternative LNG suppliers, a rejection of the proposed contract from the Oversight Board would leave the island with no LNG supply, and consequently, less available generation,” it said.
“The Oversight Board evaluated and determined to conditionally approve the proposed
contract in recognition of these circumstances and the adequate resolution of previously disclosed contract deficiencies,” the Oversight Board said.
Altamira LNG volumes
In September, NFE reached an agreement on contract terms with the Third-Party Procurement Office and PREPA for the long-term supply of LNG to Puerto Rico.
The gas supply agreement (GSA) will provide supply of natural gas to Puerto Rico’s power system for a term of seven years.
According to NFE, up to 75 TBtu of natural gas per year can be supplied through the GSA, with minimum annual take-or-pay volumes of 40 TBtu, increasing to up to 50 TBtu if certain conditions are met.
Pricing of the volumes supplied through the GSA is set at a blend of 115 percent of Henry Hub plus $7.95/MMBtu, excluding natural gas supplied to the units at San Juan 5 & 6 (which has historically consumed ~20 TBtu per year), the firm said.
Instead, these volumes are priced at 115 percent of Henry Hub plus $6.50/MMBtu.
The volumes under the GSA are expected to be supplied by LNG produced from NFE’s 1.4 mtpa Fast LNG facility located offshore Altamira, Mexico.
