LOOKING AHEAD: Question mark hovers over Caribbean energy projects
| Published date | 01 November 2017 |
| DOI | http://doi.org/10.1111/oet.12539 |
| Date | 01 November 2017 |
LOOKING AHEAD
Question mark hovers over Caribbean energy projects
Following the damage inicted by this year’s unusually
strong hurricanes, the Car ibbean faces further, more
long-term problems over the decline in interest on the
part of some of its traditional investors from t he US
and Venezuela in new oil and gas projects. While new
investors from elsewhere have begun to arr ive in the
region, progress in nalizing new energy deals remains
slow. e Caribbean and the nearby Bahama Islands act
asaswingreningandstorageregionfortheUSand
parts of Latin America, acting as the home for some large
merchant reneries and over 100 mn bbl of storage.
Battling hurricanes
is year’s hurricane season was particularly severe in
terms of the number of downst ream oil installations that
were aected across the Caribbean and the Bahamas, all
of which has served to showhow vulnerable the region’s
oil infrastructure is. e closure of US Gulf ports by the
two largest weather systems, Harvey and Irma, meant
that both crude oil and rened products could not be
exported as normal to islands in the Caribbean.
e inability of Redomsa’s Haina renery in the
DominicanRepublictoobtaincrudeoilledtothetem-
porary closure of the 34,000 bpd plant and fuel rationing
acrossthecountry.eUShasbecomeincreasingly
important as a supplier of crude to Caribbean reneries
in the last year owing to a fall in exports from Venezuela
and Mexico. e Gulf port closures also aected the
export of rened products to the islands; and even aer
the ports reopened there were not sucient products to
meet demand in the Caribbean as many US Gulf Coast
reneries remained shut following damage as the hurri-
canes made landfall there.
Puerto Rican woes
One of the worst places to be aect was Puerto Rico.
e island has had no renery since 2009, when the last
of its ve reneries was closed. Puerto Rico was hit by
a number of hurricanes during 2017, which led to the
closure of its import terminals, followed by fuel short-
ages and rationing. Product consumption is estimated
at 155,000 bpd, mainly gasoline and heavy fuel oil, all of
which has to be imported (see Tab l e S) .
Puerto Rico has no proven reserves of its own and no
production. ere is some potential for discoveries in
formations in the Muertos Trough to the south of the
island, which the US Geological Survey estimates may
hold 19 mn bbl of oil and 6 mn bbl of natural gas liquids
(NGL). e prospect of these being developed econom-
ically is exceedingly remote. All of Puerto Rico’s oil is
Table S
Puerto Rico: Oil Prole, 2016
Reserves 19 mn bbl∗
(th bpd)
Production zero
Consumption
Gasoline 70
Middle Distillate 30
Heavy Fuel Oil 50
Other 5
Total 155
Net Imports 155
∗US Geological Survey’s estimate of undiscovered, technically recover-
able oil, 2013 [1]
Source: OET calculation based on EIA gures for 2013-2015
imported, mainly from the Caribbean, Latin America,
and Europe.
e damage from this year’s hurricanes serves to illus-
trate the vulnerability of the island’s energy economy in
general. e energy balance is dominated by oil, with
smaller amounts of coal andliquid natural gas (LNG) for
power generation, although about half is still generated
by oil. e high cost of importing the oi l makes Puerto
Rico’s electricity costs high. During the era of high oil
prices before 2015, the island’s power prices were up to
three-times those of the US.
eelectricityinfrastructureisalsoinadequate,lead-
ing to power-cuts. e island’s utility, Puerto Rico Elec-
tric Power Authority (PREPA) lacks the money to move
away from oil and modernize its infrastructure, and in
July was forced tole for bankruptcy following its failure
to agree the restructuring of a loan facility worth nearly
$9 bn, all of which makes it hard for PREPA to attract
outside investment.
Money and oil shortages
Puerto Rico has already lost some promised outside
investment in its energy industries, which will delay
plans to reduce the use of oil there. Elsewhere in the
Caribbean, a number of reners have struggled to nd
US and other investors to help nance much-needed
modernization.
One investor that has been forced to reduce its activi-
ties across the Caribbean is Venezuela’s national oil rm,
Petroleos de Venezuela (PDVSA). e company is no
longer able to nance its investments in the region on
anywhere near its former lavish scale. PDVSA was used
by the government to carry out its policy of buying
inuence in the Caribbean and Central America, using
the country’s oil revenues. Falling oil prices and heavy
© 2017 John Wiley& Sons Ltd
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