Analyst sees limited potential in Caribbean LNG market for local gas producers

Monday, June 20, 2011

The Caribbean LNG market is unlikely to offer significant export opportunities for Colombian gas producers despite Canadian firm Pacific Rubiales' (TSX: PRE) recently announced plans to begin shipments next year, RBC Capital Markets oil analyst Nathan Piper told BNamericas.

"It's not a massive opportunity. Shell or BG aren't going to go in there and try and develop the LNG market. It just happens to be that Pacific has a gas field to the north of Colombia, close to these markets, and has unutilized gas. They have a nice set of circumstances," Piper said.

The Toronto-based firm last month announced plans to begin small-scale LNG exports to the Caribbean from the La Creciente gas field on the SSJN-7 license in Colombia by the end of 2012.

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The new export project would be Colombia's first, and the firm's CEO Ronald Pantin insists that it has government support for the scheme. Authorities have previously been hostile to the idea of exporting LNG due to frequent natural gas shortages.

A pipeline is under construction to link La Creciente output to the port of Coveñas. Pacific aims to sell gas at prices between US$4.50/MBTU and US$5/MBTU and has signed a contract with LNG transport company Exmar to handle the exports.

Piper believes that the opportunity could still prove lucrative to Pacific despite the relatively small markets involved in the Caribbean.

"If you are prepared to do the hard work then there is an opportunity there. Typically there are one or two key consumers on each of those islands, and given that their alternative is liquid fuel then you can really compete quite easily with gas and get quite a nice price."