Parliament reacts sceptically to Canadian Global’s LNG proposal

Parliament reacts sceptically to  Canadian Global’s LNG proposal

Currently, Port St. Maarten only bunkers low-sulphur diesel and heavy fuel to the shipping industry.

 

PHILIPSBURG--In the same way that GEBE no longer produces water, but purchases it from Seven Seas, GEBE could leave power generation and the investment therein to another company and then buy electricity for distribution to households, Canadian Global Investment Ltd explained to Parliament on Tuesday.

  Canadian Global Investment Ltd met with scepticism from members of parliament who said they understand “the sales pitch”, the part of wanting to do business with St. Maarten, but do not comprehend the financial benefits for the island.

  The management company from Ontario, Canada, proposed in 2020 that the government of St. Maarten utilise natural gas to achieve lower energy cost for the island while guaranteeing clean production without the risk of oil spills. An additional liquified natural gas (LNG) fuelling station in Port St. Maarten would serve cruise lines and aid the shipping industry in continuing on the path to decarbonisation.

  The plan requires zero investment from the St. Maarten government, stated Canadian Global Investment, which would be looking for third-party investment on the basis of a power purchase agreement (PPA) with utility company GEBE NV.

  The PPA defines all of the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under-delivery, payment terms, and termination.

  “A PPA is the principal agreement that defines the revenue and credit quality of a generating project and is thus a key instrument of project finance,” said Canadian Global Investment President Stephen Cooper. “Rather than a solvency guarantee from the government, the PPA provides a better way of doing business, because when we start supplying electricity, we will get paid for it, and the people that are financing the project will get paid by us.”

  Several Members of Parliament (MPs) questioned the use of a PPA. MP Rolando Brison fears it would limit Government in doing business with other parties in the future due to binding obligations in the contract, referred to by Brison as “bottlenecks”.

  According to MP Claudius Buncamper, this is the case.

  “Bottom line is that all failed previous ventures were tied to that power purchase agreement. A PPA, there is a clause in it: take and pay. Like we now have with the water purchase also, it means that if you don’t take their electricity, you are still going to have to pay for it. So, if you have a calamity and you can’t distribute electricity, you will still be paying for it if you don’t have that properly regulated,” Buncamper said. He said this is “one of the big killers” contained in the PPA.

  Cooper reassured that a PPA contains a base rate that represents the break-even point of the production company, the revenues required to meet the financial obligations to the investors of the project.

  “As for financial viability, that is the issue: is the country going to pay for it?” said Cooper. “If you would find an oil field, like Guyana did, then you could put out public tenders to companies from China, Russia, the [United – Ed.] States, and have them bid against each other for you to pick the best one. But you don’t have that luxury here in St. Maarten, so you are looking at a third-party entity coming in financing the project, who is also the one proposing the project, which is us.”

  The PPA often sits alongside or is combined with a build-operate-transfer (BOT) or concession agreement: in addition to obligations relating to the sale and purchase of the power generated, the project company is also required to design, construct, operate and maintain the power plant in accordance with agreed specifications.

  In the case of LNG power generation, the production would take place on an offshore platform located in Cay Bay across from GEBE NV. The power generation system would be designed and built by Siemens Energy and operated by Crowley Maritime Corporation, supplier of LNG from Puerto Rico. Crowley builds and operates LNG bunkering barges and would deliver LNG to the proposed fuelling station for cruise ships in Port St. Maarten.

  MP Christophe Emmanuel noted that GEBE NV already has a concession for the supply of LNG. “GEBE can do that on their own,” Emmanuel said. “Are you aware, Canadian Global, that our harbour has a concession to sell fuel to cruise ships?” He did not explain why this sale has not happened to date, why GEBE and Port St. Maarten Group do not seize the opportunity of multi-million contracts with cruise lines for LNG fuelling of cruise ships that are obligated to switch to cleaner burning fuels in the coming years.

  Following the example of Cozumel, Mexico, the first port in the Caribbean with an LNG fuelling station for cruise ships, and LNG fuelling in the container transhipment port in Jamaica, PortMiami, Florida, has also recently started to provide LNG accommodations.  Competition from these and other cruise ports prompted a warning from Port St. Maarten Chief Executive Officer Alexander Gumbs that the island needs to start offering alternative fuels to stay ahead of developments in the region.

  The maritime industry, under growing pressure to reduce shipping’s carbon emissions, is coming to a growing consensus that LNG will provide an intermediate solution toward finding cleaner fuel to power ships.

  Two of the world’s biggest container lines have ordered vessels that will operate with LNG. Some of the world’s most widely recognised cruise ship brands took the lead several years ago, with Cozumel, Mexico, as the bunkering port for LNG in the Caribbean.

  The focus on new fuel sources marks the biggest change in ship power since the sector switched from coal to oil more than 100 years ago.

  “Right now, we only bunker low-sulphur diesel and heavy fuel to the industry,” Gumbs said. “More and more vessels are changing fuel, becoming more environmentally friendly, changing to LNG.”

  In reaction to MPs questioning the company’s intentions, Canadian Global Investment said they were not giving a pitch to Parliament. “It is not a pitch, it is actually a way of taking the problems that currently exist with the electricity supply to the island, meeting the goals in the 2014 National Energy Policy of St. Maarten moving forward.”

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