By Markus Hector, General Manager, Market Development, Shell LNG Marketing and Trading
We are living in a crisis of uncertainty. In just a few months, we have seen the world go into lockdown mode in the face of an historic pandemic, causing serious impact to the global economy and upturning each of our lives. And as Bahamians know too well, this has happened less than a year since Hurricane Dorian, the Bahamas’ worst natural disaster ever, destroyed the beautiful islands of Abaco and Grand Bahama.
In times like these we face many obstacles, which we never imagined just a few months ago. But we need to make the best of it and use this as an opportunity to reflect on our priorities.
At Shell, we believe our priorities are closely aligned with those of The Bahamas. Our shared vision includes providing reliable, affordable, cleaner and sustainable electricity to the residents and businesses on the island of New Providence. This will play an important role in the Government’s endeavors to modernize the energy sector, which is critical for national economic development. Looking at the challenges and opportunities in a post-Covid world, our power project may now be of even greater importance.
As a global energy company, Shell is using technology and innovation to help build a sustainable energy future. Shell’s purpose is to power progress together by providing more and cleaner energy solutions to the world. Our natural gas-to-power project in The Bahamas fits within this strategy as a transformative investment in the island’s energy infrastructure. Our ability to invest in the construction of an affordable liquefied natural gas (LNG) terminal, and our purchase of the new power plants, remains dependent on the timely closure of current negotiations with BPL and the Government.
As currently designed using industry standards, this project will produce the majority of power generation for the entire island of New Providence for decades to come. It will be made up of two joint ventures – the “Terminal Company” to operate the LNG terminal, receiving, storing, and re-gasifying the LNG, and the “Power Company” to generate electricity, which will be sold to Bahamas Power and Light (BPL) for transmission and distribution. Both Power Co. and Terminal Co. are expected to be majority owned by Shell; current plans include the balance of the former held by BPL and the latter by other Bahamian investors.
Direct foreign investment will likely be key to the islands’ economic recovery and this includes infrastructure projects like ours. A world-class LNG power plant will also help provide fuel price stability for the private sector’s long-term planning. Businesses like the important hospitality sector need predictability and not volatility as they compete in the tourism industry. These leaders of economic growth in The Bahamas are dependent on an energy system that reliably provides electricity to keep hotel rooms cool, casinos well-lit and marinas berthing cruise ships.
If this project is sanctioned, Shell aims to develop and hire Bahamian staff for the power plant and terminal, and we’ll work with our local partners to set up appropriate training and recruitment programs. In fact, the Government and Shell are discussing provisions around local hiring as part of the Heads of Agreement, with a target of 80% Bahamian staff after construction. The project also aims to purchase goods and services from local suppliers during construction and operations, helping to stimulate the local economy.
We can expect that a modernized energy infrastructure will benefit Bahamians who live on New Providence by providing reliable and affordable power to their homes. Our state-of-the-art plant will run efficiently. It will also be designed to be resilient. For example, we have included additional equipment in its design, to ensure it can withstand the brute force of natural disasters like Dorian: the backbone infrastructure of the terminal and power plant is being designed and would be built to withstand a Category 5 hurricane.
We applaud BPL’s recent fuel hedging strategy for electricity generation over the next 18 months. The LNG-to-power project would provide a highly competitive LNG price as compared to the current hedged fuel price, resulting in an overall attractive “all-in” power price to BPL.
At Shell, we strongly support the goals of the Paris Agreement to limit the rise in the average global temperature well below 2° Celsius. A key part of our strategy is to thrive during the “energy transition,” and we see natural gas playing an important role during the transition to a lower carbon world. Seen from this environmental perspective, it’s important to note that LNG used to generate electricity in The Bahamas will produce lower CO2 emissions compared to the heavy fuel oil and diesel used in today’s generation; it will also improve local air quality by emitting fewer particulates.
Given The Bahamas’ geographical location, energy from renewables like the sun or wind is an opportunity – especially in the Family Islands – to contribute to global efforts to reduce CO2 emissions. And natural gas is an excellent partner with renewables. Texas is an example of where natural gas complements solar and wind to provide reliable power around the clock. Shell invests in both onshore and offshore wind projects across the US. In the state of Texas, Shell’s Brazos wind farm can provide enough energy to power around 48,000 homes. In May 2020, we acquired a fast-start, natural gas power plant in Houston, which complements the intermittent energy generated from wind and solar plants, in a cost-effective way.
Looking forward, I am confident this project will help Bahamians meet key priorities; it can bring significant benefits to the national economy and reliability to energy customers along with environmental advantages.
Much has changed since we first signed the “Memorandum of Understanding” for this project in late 2018, especially in the last few months. But our priorities have not. We remain committed to working side by side with Bahamians to build this shared vision together, even in these times of uncertainty.
Markus Hector is the General Manager for Market Development in Shell Energy, developing and operating Natural Gas, Power and Environmental Products businesses in Shell. He has been involved in the Bahamas LNG-to-power project since its beginnings in 2018. He strongly believes in the benefits cleaner-burning natural gas for power generation brings to people, business, and society at large, playing an important role in the Energy Transition to a lower carbon world.