Regional profile: Central America [Gas In Transition]
The 1.9mn metric ton/year AES Andres LNG terminal in the Dominican Republic started up in 2003 and was the first LNG regasification facility sited in the Caribbean and Central American area.
The Penuelas LNG import terminal in Puerto Rico came on-stream in 2012 and Barbados, which is a natural gas producer, has been an importer of LNG since 2015 via ISO-containers at the small-scale Woodbourne regasification facility.
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These facilities were joined by the 3mn mt/yr Cartagena LNG on Colombia’s Caribbean coast in 2016, AES Colon’s 1.5mn mt/yr Costa Norte import terminal in Panama in 2018, Jamaica’s 3.6mn mt Old Harbour LNG in 2019 and a New Fortress Energy (NFE) facility in Puerto Rico in 2020. The newest Central American entrant to the LNG market is El Salvador, which received its first shipment in April.
Fractured markets
Caribbean and Central American markets are characterised by a lack of transmission and distribution infrastructure for gas and small-sized electricity markets with small and scattered industrial demand. They are predominantly served by a combination of hydro power and diesel and fuel oil generation, the latter contributing to high electricity costs.
Owing to a lack of refining capacity, many countries in the area are wholly dependent on imports for oil products, creating a significant drain on their balance of payments.
The development of SIEPAC, the Central American Electrical Interconnection System, connected the electricity grids of Panama, Costa Rica, Honduras, Nicaragua, El Salvador and Guatemala. This has raised the prospects for LNG-to-power projects being able to export power as well as meet domestic demand from the countries in which they are located. The new Floating Storage and Regasification Unit (FSRU) in El Salvador, for example, comes with a €46mn connection to SIEPAC.
Central America is also ideally placed to receive short haul LNG cargoes from the ever-growing LNG export capacity sited in the US’s Gulf Coast. In addition, since 2018, small-scale LNG exports from the US are no longer subject to public interest reviews by the Department of Energy.
Panama first across the line
Although relatively small in size, the Costa Norte LNG import terminal, Central America’s first, plays a pivotal role in Panama’s energy strategy and – today’s high prices notwithstanding – is proving something of a model for Central America.
Panama’s National Energy Plan, formulated in 2015, sees LNG powering 15% of the country’s generation capacity by 2035, expanding in line with renewable energy. Panama’s electricity system depends heavily on hydropower, which provides 1,796 MW of capacity. The country has 270 MW of wind, 198 MW of solar photovoltaics and 33 MW bioenergy.
US company AES Corp. has a 100% interest in Costa Norte and an adjacent 381-MW gas-fired power plant. It increased its stake in the assets from 51.1% in September 2021, buying out local partner Inversiones Bahia. South Korea’s Posco built both the terminal and power plant. Full operations commenced in October 2019 with the completion of the terminal’s 180,000 m3 storage tank.
At the inauguration of the storage tank, AES said that about 80% of the terminal’s capacity was reserved for use by industrial and commercial companies in Panama and Central America. This reflects the company’s ‘hub and spoke’ concept for expanding the reach of LNG within Panama and to neighbouring countries.
The terminal can reload LNG onto smaller scale carriers for regional transportation and on to trucks, allowing LNG to access would-be small-scale LNG users across the region.
Onward journeys
A good example is cooperation between Island Power and AES.
The former is an electricity generation company with about 28 MW of capacity serving 18 isolated systems in remote areas of Panama. Its main generation points are at Santa Fe and Torti in the east of the country. Island Power has installed two small-scale satellite regasification plants which receive LNG by tanker from Costa Norte. The LNG replaces fuel oil and diesel, reducing both greenhouse gas emissions and local air pollution.
AES has also formed a partnership with local firms and France’s Total to deliver LNG by truck to Costa Rica. The first contract to distribute LNG to Costa Rica was signed between Colon LNG Marketing and Tropigas Natural in 2020, bringing to life AES’s hub-and-spoke model of LNG distribution.
El Salvador
El Salvador is Central America’s second entrant to the LNG market. On 1 April, the FSRU BW Tatiana completed its first ship-to-ship transfer of LNG for the Energia del Pacifico LNG-to-power project developed by US company Invenergy. The FSRU received about 125,000 m3 of LNG from the LNG tanker Bilbao Knutsen. The BW Tatiana, which was delivered in November last year, has regasification capacity of about 1.7mn mt/yr and storage capacity of 137,000 m3.
Energia del Pacifico LNG is sited at the port of Acajutla. It consists of a marine terminal where the FSRU is permanently moored about 1.2 km offshore. A new gas pipeline and riser run from the FSRU to a 378-MW CCGT plant, which is served by a 44 km, 230kV transmission line to connect with El Salvador’s electricity grid and to SIEPAC. The total project cost is $850mn, according to co-financier IDB Invest. The FSRU is expected to receive about six shipments of LNG a year.
The power plant replaces generation from heavy fuel oil-fired generators and is expected to meet about 30% of the country’s power demand. The project is the country’s largest ever foreign investment.
At 378 MW, the addition of the gas-fired power plant provides a major boost to the country’s growing power requirements. El Salvador has 204 MW of geothermal capacity, 299 MW of bioenergy, 429 MW of solar PV and 574 MW of hydropower. The country saw its first onshore wind farm, with a capacity of 54 MW, come online in July last year.
Nicaragua
Nicaragua could well be next on the list of Central American LNG importers. NFE last year announced plans to launch a $700mn LNG-to-power project. The regasification facility will import 419,000 mt/yr of LNG to power a 300-MW power plant located at Puerto Sandino in western Nicaragua. The company has a 2,233 GWh/yr power purchase agreement with state-owned power distribution companies Disnorte and Dissur.
The regasification terminal is expected to be an FSRU. NFE acquired a fleet of six FSRUs in addition to LNG and power assets in Brazil as a result of two acquisitions completed in April 2021. However, the timeline for Puerto Sandino has been put back several times and was not provided in the company’s latest form 10-Q filing to the US Securities and Exchange Commission made in April this year.
As in Panama and El Salvador, LNG in Nicaragua will displace fuel oil and diesel generation, complimenting the country’s renewable energy generation. Nicaragua has 153 MW of geothermal capacity, 218 MW of bioenergy, 16 MW of solar PV, 186 MW of wind and relatively little hydro capacity – 157 MW.
Overall, the growth of multiple mid-sized LNG import points, provided by FSRUs, is creating the infrastructure for onward small-scale shipment either by sea or road to an expanding variety of consumers, formerly limited to expensive oil products. Moreover, the interregional electricity connectivity created by SIEPAC allows LNG-to-power projects to act as foundation customers for LNG imports, underpinning the initial major investments needed to access what remain relatively small national markets in their own right.