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New Fortress says gas will weather oil collapse

Published:Tuesday | May 5, 2020 | 4:53 PMSteven Jackson - Senior Business Reporter
Wes Edens, chairman of New Fortress Energy.
Wes Edens, chairman of New Fortress Energy.

New Fortress Energy, NFE, is suggesting gas assets will remain competitive, notwithstanding the collapse in oil prices to levels that are comparatively cheaper than natural gas.

That’s due to lower maintenance costs and also the expectation that oil prices will rise again, according to NFE Chairman Wes Edens in a conference call with analysts on Tuesday.

As to whether existing and potential customers were growing weary about committing to new gas deliveries, Eden responded: “No we have not seen that”, while noting that LNG had been more affordable than diesel for “all but 15 days” over the past 10 years.

“The savings for a 100-megawatt power plant over 10 years is literally in the hundreds of millions of dollars, so I do not think that people expect oil prices to stay at US$10 to $15 over the next 10 years. So, they are betting that the price differential that existed over the last 10 years will be reflected over the next 10 years,” said Edens.

He added that gas also is cleaner and saves on maintenance costs.

New Fortress made a loss of US$60 million in the March quarter. It made similar losses in the comparative quarter of 2019.

The gas supplier said it experienced weaker volumes in Jamaica, where most of its assets are concentrated, due to COVID-19 impacts.

“While the coronavirus has affected our customers and electricity demand in the markets we serve, power and gas remain an essential good,” said Edens, in a statement accompanying the earnings report. “Customer receivables remain current and the business has ample liquidity to support operational demands and growth initiatives,” he said.

NFE turned on two plants during the quarter, a power station at Jamalco in Clarendon, Jamaica and a new terminal in Puerto Rico. Any excess LNG not utilised in Jamaica is to be shipped to Puerto Rico.