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Kent Moors

Kent Moors

Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk management, emerging market economic development, and market risk assessment. His…

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Can The Caribbean Avoid An Energy Crisis?

This week I’m writing to you from the balmy Bahamas where I’ve come to provide energy briefings to local bankers, investment houses, and government officials.

I’m already learning that the primary interest from people over here is how their region will internalize what is happening elsewhere.

And this is a recurring refrain that I’m picking up worldwide.

Not too long ago, it was the norm for places with smaller populations – and in large part undiversified economies – to seek direction from larger national partners.

But not anymore…

While some of these considerations are still there, I have been watching a tidal wave of localization when it comes to energy policies.

Several of my contacts in the Bahamas have been even more direct.

“Given the games being played these days in Washington,” one recently commented to me just before my flight, “we can no longer rely on an American interest that extends further than fueling their own partisan interests. If we do not address our energy problems on our own, they are not going to be addressed period.”

Having spent a fair amount of the last several decades in the Bahamas and witnessing firsthand how energy shortcomings have a direct impact on lives, I can certainly understand the frustration.

But addressing Bahamian energy problems is easier said than done…

From Oil to Renewables

Electricity generation is becoming a serious problem in the Caribbean.

Nearly all of the oil and gasoline needed to fuel the Caribbean is imported – making it highly vulnerable to supply shortages a price shocks.

As a result, gasoline prices vary greatly from island to island.

For example, in Trinidad, gasoline prices average about $1.45 a gallon, while prices in Barbados can reach up to $7.25.

The same goes for the Bahamas. Nassau averages about $4.20, as does Grand Cayman.

Current estimates put Bahamian energy demand increasing by 30% by 2030, which is why reducing the island’s dependence on foreign imports has become a critical point for local government.

The local government is now looking toward utilizing renewable energy to meet the growing energy demand through its Natural Energy Policy.

According to Kenred Dorsett, Minister of the Environment and Housing, “the Bahamas has appointed a renewable energy resource focal point. We are also in the process of establishing a unit solely dedicated to the sustainable exploitation of our natural resources and the deployment of renewable energy technology across our country.”

In other words, they want to utilize the natural power of the islands.

On the Bahama Islands of New Providence, there are multiple initiatives in place to phase in solar power.

In fact, the Bahamian Prime Minister, Dr. Hubert Minnis, recently announced the administration’s commitment to this renewable energy source.

“The Bahamas is ideal for solar energy. We are blessed with the sun. Our transformation to renewable energy is both a moral and an economic imperative. It is an imperative that will truly help to advance our economy and to help us to achieve world-status in the use of renewable energy.”

But solar isn’t the only renewable avenue the Bahamian government is looking into…

Grand Cayman, the largest of three Cayman Islands, is considering a biomass option in the plans of a new centralized waste management system.

But once again, the prospects to do that are not so good….

The Bahamas’ Unique Problems

First, there is the problem of population.

There are only about 250,000 residents in the Bahamas, unevenly spread across 30 inhabited islands. The Cayman Islands have a much smaller population, barely 62,000. Related: Why Natural Gas Prices Just Tanked

While tourists add to the people moving through, it’s not a stable influx upon which to base long-term energy projections.

A hurricane or any other major event dissuading travelers can change prospects overnight.

Case in point: the local economy around Freeport and neighboring Port Lucaya still had not recovered from 9/11 more than a decade later.

All of this makes genuine forecasts hazardous and the ability to raise necessary working capital exceptionally difficult – even if the ongoing local political, patron/client, and under the table transactions were not as bad as they really are.

Now, there are some geological indications that crude oil may exist in shallow shelf areas in the Bahamas.

But that also comes with its own issues…

The Dilemma of Local vs. International

Drilling for oil locally puts energy demand against the nation’s environmental concerns.

Added to the mix is sourcing the significant capital investment that would be necessary to exploit such resources even if other concerns were not an issue.

Once again, I have some personal experience in all of this.

In 2006-2007, I advised the then-Bahamian Prime Minister Perry Christie on what was a contentious energy matter.

Florida Power & Light (FP&L) had proposed liquefied natural gas (LNG) terminals for both Grand Bahama and Bimini with connecting pipelines to the mainland.

The prospects of investment and employment were major inducements. But environmental protection emerged as a major problem.

In one heated government meeting, I suggested that, without adequate safeguards, the Bahamas could either have LNG or their fabled power beaches.

Related: Goldman: Oil To Top $80 Within Six Months

Later, I recommended that FP&L consider introducing the environmental safeguards presented in the Adriatic LNG Terminal project off Venice, Italy. Venice is subject to some of the most serious environmental challenges anywhere.

The government in Nassau approved.

FP&L never responded to the idea, but they did drop the project.

For places like the Bahamas and Cayman Islands, being able to merge local energy priorities with the reality of geographic position is a continuing dilemma.

By Dr. Kent Moors

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