Macquarie gas unit floats plan to help Hawaii say 'aloha' to costly oil
Washington (Platts)--29Nov2012/508 pm EST/2208 GMT
A small Hawaiian subsidiary of Australian energy and infrastructure
company Macquarie said Thursday it wants to use natural gas to slow the
stream of oil imported by the US' only island state.
Hawaii already has a statewide plan to reduce oil use on the island 70%
by 2030. Most of what is currently used is low sulfur residual fuel oil No.
6, converted to lower sulfur No. 2 because of tighter environmental
regulations. Efficiency gains will reduce demand 30% while renewables such as
wind, geothermal, and solar will cut 40% of that pricey oil consumption,
according to the plan.
As a private initiaive, Macquarie unit Hawaii Gas plans to open the
island to more natural gas use with a three-phase project designed to import
increasing amounts of liquefied natural gas, first for emergency backup power
and finally as baseload power for Oahu and surrounding islands.
"Hawaii is really threatened by oil dependence," Hawaii Gas CEO Jeffrey
Kissel said at the Natural Gas Roundtable in Washington Thursday. Prices for
oil products on Asian indexes have doubled in the last ten years to eat up
13% of Hawaii's $64 billion/year gross domestic product, representing an
"enormous drag on our economy," Kissel said.
The first step in Hawaii Gas' plan to import LNG is to bring 2.5
Bcf/year of LNG in small canisters loaded on intermodal trailers. Kissel said
that small amount of gas will substitute for 6% of the synthetic natural gas
used in the state, which two refineries in Oahu currently produce.
That small amount of gas is less than what Disneyland uses in a month,
Kissel said. In the islands the gas will be used for emergency backup power.
Hawaii Gas submitted the plan to the Federal Energy Regulatory
Commission in August and expects approval within the next few months, Kissel
"We can land that gas at $22 to $25/Mcf," Kissel said, well below the
$42/Mcf equivalent cost of oil and oil products.
Ideally, that gas will come from US ports and be priced on a Henry Hub
index, Kissel said, while noting there are no West Coast US liquefied natural
gas terminals with export capabilities. Kissel said that Hawaii Gas could
still take gas from US Gulf Coast terminals through the Panama Canal and
deliver it cheaper than the $42/Mcf price for oil products.
In 2010, Hawaii's energy mix was dominated by oil and oil products, at
86%, with coal accounting for 6% and renewables 7%, according to the state
By 2025, Hawaii Gas envisions a future where natural gas accounts for
14% of the fuel mix, renewables 23%, and coal 7%, leaving 55% of the Hawaii's
energy needs met by oil.
That assumes that the second and third phases of Hawaii's gas plan are
approved by both the state and FERC.
The second phase of Hawaii Gas' plan calls for construction of 10,000
Mcf of storage capacity on Oahu and the replacement of liquid propane burned
by outer island power generators with LNG. In addition, the plan sees the
introduction of natural gas use by fleet vehicles and a more than doubling of
Hawaii Gas' 6% share of the gas send out to 15%, with refined synthetic gas
accounting for the rest.
The third, and last phase, calls for 2 Bcf of storage capacity in the
islands with three small LNG carriers delivering 1 Bcf/week.
Kissel said the Macquarie unit can provide the capital to build the
first two phases, but will seek outside investors for the third stage, which
should have revenue nearing $1 billion/year, according to a company
Kissel said he isn't worried that the Jones Act requirement that
requires cargoes between US ports to be carried by US ships manned with US
crews will be too costly. In fact, he said, he's enlisted the help of the
maritime unions to push the project forward, as it would mean more jobs for
--Bill Holland, firstname.lastname@example.org
--Edited by Carla Bass, email@example.com