U.S. energy infrastructure player New Fortress Energy (NFE) has ironed out the terms of a long-term gas supply contract with the government of Puerto Rico, which will enable it to provide liquefied natural gas (LNG) to the Caribbean nation.
New Fortress Energy’s gas supply agreement (GSA), for which contract terms were agreed with the Third-Party Procurement Office (3PPO) and the Puerto Rico Public-Private Partnerships Authority (P3A), is currently under review for approval by the Financial Oversight and Management Board of Puerto Rico (FOMB).
Commenting on this deal for which discussions started in April, Wes Edens , Chairman and CEO of New Fortress Energy, emphasized: “This is a milestone agreement for NFE and the government of Puerto Rico. Puerto Ricans pay far too much for electricity today and this long-term agreement provides cheaper and cleaner fuel for existing power plants for years to come.”
This deal, which is expected to provide a reliable and affordable supply of natural gas to Puerto Rico’s power system for seven years, will support the island’s efforts to replace higher-emission liquid fuels with cleaner natural gas, in NFE’s view, as it believes gas will deliver significant savings to Puerto Rican ratepayers.
Chris Guinta , CFO of New Fortress Energy, highlighted: “Matching our LNG production with long term offtake has always been our goal. This locks in sustainable long-term margins for NFE and provides a foundation of financial stability for our company.”
According to the U.S. player, up to 75 trillion British thermal units (Btu) of natural gas per year can be supplied through the GSA, with minimum annual take-or-pay volumes of 40 trillion Btu, increasing to up to 50 trillion Btu if certain conditions are met.
The pricing of the volumes supplied through this GSA is set at a blend of 115% of Henry Hub plus $7.95/MMBtu, excluding natural gas supplied to the units at San Juan 5 & 6, which historically consumed around 20 trillion Btu per year. The volumes are priced at 115% of Henry Hub plus $6.50/MMBtu.
The company underlines that these volumes are expected to be supplied by LNG produced from its Mexican 1.4 million tonnes per annum (mtpa) Fast LNG facility located offshore Altamira, which achieved commercial operation date (COD) in Q4 2024 and is currently producing LNG at a rate above nameplate capacity.
Puerto Rico’s key benefits from this gas deal are perceived to be the establishment of security of supply in San Juan for the seven years for power plants currently running on LNG and provision for the delivery of incremental LNG volumes, which will enable the conversion of additional gas-ready plants currently burning diesel.
While elaborating that this results in “hundreds of millions of dollars in energy savings for Puerto Ricans,” Edens added: “This contract complements our existing long term 25-year supply contract with Energiza and the new 550 MW power plant they are developing. We believe the development of new, efficient gas fired generation is the path to long term affordable and reliable power for Puerto Rico.
“NFE is excited for this next step in modernizing the fuel infrastructure of Puerto Rico and is proud to continue building on our longstanding partnership with Governor González-Colón and the Government of Puerto Rico.”