AN IMF working paper, released in March, 2016, noted that about 25 per cent of Bahamian companies identified energy costs as a major impediment to business.
Due largely to inefficiencies in power and dependence on expensive imported petroleum products, the high cost of doing business has “undercut growth in many Caribbean economies”, the IMF reported. Using 2012 data, the IMF ranked The Bahamas’ electricity costs as the region’s fifth highest at $0.39 per kilowatt hour.”
In early 2016, the Christie government entered into a five year management agreement with Power/Secure, a US based company, with the object of turning Bahamas Power and Light (BPL) around. The purpose was to reduce costs and improve the efficiency of the corporation. The partnership was a colossal failure.
When the FNM became the government last year three junior employees, who had been discovered in a $2m fraud at BPL, were fired and the accounting firm of Ernst and Young was engaged to do an audit. By September 18, last year Power Secure and BPL had “amicably” severed its business relationship. During that period BPL had spent $9,198,738.66 with Power Secure.
Whitney Heastie, an engineer, who had worked for more than 20 years in the US where he had been involved in design, operations and enhancement of industrial facilities, was appointed BPL’s new CEO. The new board determined that BPL’s fuel costs had to be reduced and the aged equipment replaced with more fuel efficient engines. It was also decided that the Aggreko rental units at the Blue Hills power station were far too expensive and not cost effective.
In the meantime, Shell North America, which for two years had been trying to talk with the PLP government about its idea to introduce cleaner fuel to the Bahamas, eventually got an appointment with the new government through the American Embassy.
On October 11 last year, the initial meeting between Shell NA LLC and BPL took place in Public Works Minister Desmond Bannister’s office when Shell presented its concept of a gas to power project for The Bahamas.
Whereas Power Secure’s business plan had called for more costly 140MW heavy fuel oil, Shell NA’s proposal offered the more cost effective and cleaner Liquified Natural Gas (LNG).
In October last year, BPL published its tender for generation recommendations, which was issued to 63 companies. The tender process closed on November 10 with 19 companies submitting proposals.
Shell won the tender with government granting a short term generation agreement with Aggreko ADO Rentals to maintain generation for a period of 18 months to give Shell time to get established.
There are many exciting advantages for The Bahamas being in business with Shell North America – not only will the oceans increase revenue by opening these islands to the world, but if an agreement can also be established with the US to charge aircraft crossing our air space, then — as the old Bing Crosby song goes - “every time it rains, it rains pennies from heaven” - only this time it will be every time an aircraft flies through, the Bahamas Treasury stands to gain. And if Shell establishes its bunkering plant, whenever a boat steams into our waters and refuels, our Treasury also stands to benefit, and by extension also will the Bahamas and its people. If given the go ahead Shell’s plant should be in operation by October, 2020.
Other than reduced costs and clean fuel - it means a reliable power supply and the lowering of each and every Bahamians’ electricity bill. However, its principal attraction is its bunkering operation.
The International Maritime Organisation has mandated that by 2020 all cruise ships must be fueled by LNG. Also by that year all merchant vessels travelling within 299 miles of the territorial United States and Canada, must use bunker oil containing less than 0.5% sulphur.
More than 200 cruises pass near Clifton Pier each year as they voyage through the Caribbean. These ships consume millions of gallons of LNG fuel. Shell’s regasification plant will have the capacity for bunker or heavy fuel oil. This storage capacity can be used to provide acceptable grades of bunker oil to merchant vessels.
If Clifton Pier can be transformed into an international bunkering hub it has the potential of producing hundreds of millions for the Bahamas. It is understood that BPL’s board intends to allow Bahamians to purchase shares in the bunkering aspect of the business.
On April 9, Cabinet approved BPL Board’s recommendation to award Shell NA the contract to build an LNG fueled power plant. The next step is to negotiate and sign a Memorandum of Understanding so that Shell NA and The Bahamas can be ready by October 2020 to open an international bunkering hub at Clifton and service all ships entering our waters.
In the meantime, there are the typical Bahamian “me-first” sideshows going on with even URCA putting up a spurious argument to thwart the Cabinet decision. Meanwhile Shell NA waits on the sidelines for the final approval to get started.
We agree with those who say that an international bunkering hub should be established at Clifton Pier. It is also important that it be owned by Government and the Bahamian people, who have suffered for too many years from high electricity costs and inferior service. It is projected that this new industry has the potential of surpassing revenues produced by our dying tourism industry and the Bahamas’ slowing investment sector.
Already too much time has been wasted. It is now time to move forward.