LPGNG Report Final Lowres-130217

LPG and Natural Gas
as Alternative Energy Sources for the Pacific

This research study was commissioned by the Pacific Region Infrastructure Facility and undertaken in collaboration
with the Pacific Power Association and the Secretariat of the Pacific Community.
The Pacific Region Infrastructure Facility (PRIF) is a multi-development partner coordination, technical assistance
and research facility that supports infrastructure development in the Pacific. PRIF members are: Asian Development
Bank (ADB), Australian Department of Foreign Affairs and Trade, European Investment Bank, European Union, Japan
International Cooperation Agency, New Zealand Ministry of Foreign Affairs and Trade, and the World Bank Group.
The Pacific Power Association (PPA) is an inter-development agency based in Suva, Fiji. It represents 25 electric power
utilities in the Pacific and is a member of the Council of Regional Organisations in the Pacific (CROP).
The Secretariat of the Pacific Community (SPC) was represented through its Economic Development Division in Suva,
Fiji. This office coordinates the implementation of the regional Framework for Action on Energy in the Pacific: 2010 –
2020; produces Country Energy Security Profiles; and is the host of the Pacific Region Data Repository which contains a
range of data on the energy sector.
The views expressed in this report are those of the authors – Craig Morgan and Derek Atkinson - and do not necessarily
reflect the views and policies of ADB, its Board of Governors, or the governments they represent or any of the other PRIF
agencies, the PPA or SPC. Although all care has been taken to ensure that the information provided in this document
is accurate, none of the above parties guarantees this or accepts responsibility for any consequence of its use. The
use of information contained in this report is permitted with appropriate acknowledgement. The report may only be
reproduced with the permission of the PRIF Coordination Office (PCO) or the relevant section of ADB.
For further information please contact:
PACIFIC POWER
ASSOCIATION
PRIF Coordination Office Pacific Power Association Secretariat of the Pacific

c/- Asian Development Bank Naibati House Community Economic
Level 20, 45 Clarence Street Goodenough Street Development Division
Sydney, New South Wales, Suva, 3rd Floor, Lotus Building
Australia, 2000 Fiji Nabua, Fiji
Tel: +61 2 8270 9444 Tel: +679 3306 022 Tel: +679 337 0733 ext. 401
Email: enquiries@theprif.org Email: ppa@ppa.org.fj Email: spc@spc.int
Website: www.theprif.org Website: www.ppa.org.fj Website: www.spc.int/edd
Note: Where references are made in this report to companies or photographs show company logos, these are intended as
illustrative points or examples only and not as endorsement of those companies. Photographs were either provided to the
consultants on the project or they were retrieved from company websites. The companies are duly acknowledged.
Desktop Publishing: Smudge Design.

Cover photos: Upper photo – Origin LPG. Lower photo - I.M. Skaugen SE, the 12,000 cbm LNG vessel Bahrain Vision.
Liquefied Petroleum Gas, or ‘LPG’, refers to a family of light gases called propane and butane, derived from the processing
of natural gas liquids and the refining of crude oil. LPG is gaseous at normal temperature and pressure, and becomes liquid
when subjected to modest pressure or cooling. LPG is used mainly in cylinders for portable applications, cooking, heating,
lighting, refrigeration and transport fuels.
Natural gas is composed primarily of methane (usually over 85% by volume), but it may also contain ethane and propane with
small amounts of heavier hydrocarbons (and some impurities which are removed before liquefaction). Liquefied Natural Gas,
or ‘LNG’, is natural gas which has been processed to liquid form for ease of storage or transport, by cooling it to approximately
-161°C depending on its exact composition, at which point it becomes a liquid, reducing the volume of the gas by a factor of
more than 600 times as it goes from its gaseous state to liquid form.
LPG and Natural Gas
as Alternative Energy Sources for the Pacific
Summary of Research and Workshop Outcomes
April 2016
LPG and Natural Gas as Alternative Energy Sources for the Pacific
Acknowledgements
Acknowledgement is given for the contributions a number of organisations and individuals have
made in the preparation of this report.
This study was proposed by the World Bank through Roberto Aiello, Senior Energy Specialist and
managed by Christine McMahon, Results and Research Manager at the PRIF Coordination Office
(PCO).
They were joined in the Project Implementation Committee by Alan Bartmanovich, Petroleum
Adviser, Secretariat of the Pacific Community (SPC) and Andrew Daka, Executive Director, Pacific
Power Association (PPA) Secretariat.
Craig Morgan (Team Leader) and Derek Atkinson (Research Analyst) were the consultants on the
study who conducted the research and prepared this report.
SPC hosted the consultants during the research phase of the project and provided inputs to the
data collection process, the document review, and administrative functions. Captain John Hogan
(Director of the Economic Development Division), Solomone Fifita (Deputy Director – Energy) and
their staff are all acknowledged for their support.
Staff from government ministries, industry organisations and other stakeholder groups provided
data and other information that was vital to formulating an understanding of logistical challenges
and opportunities for developing alternative solutions in the Pacific. Their participation also
included attending workshops and commenting on the draft report. Particular acknowledgement
is given to Ron Cox (Hawaiian Electric Company) and Alan Townsend (World Bank) for their
presentations at one of the workshops and to Elgas for hosting a visit to its facilities at Port
Botany in Sydney. Appendix A of the report provides a full list of the names of people who were
involved in the study and all are thanked for their time and participation.
Finally, the report benefitted from reviews undertaken by the ADB (David Ling), World Bank (Tendai
Gregan and Davinder Sandhu) and PCO (Sanjivi Rajasingham and Jack Whelan). Janice Molina and
Harini Rajan assisted with editing and formatting the report.
List of Key Acronyms
ADB Asian Development Bank

ADO Automotive diesel oil
ANP Autoridade Nacional de Petroleo (Timor-Leste)
ASME American Society of Mechanical Engineers
Barg Bar gauge
CEO Chief Executive Officer
CNG Compressed natural gas
CNMI Commonwealth of the Northern Mariana Islands
CP Contract price
CROP Council of Regional Organisations in the Pacific
DES Delivery ex-ship (in relation to LNG pricing)
DFAT Australian Government Department of Foreign Affairs and Trade
EIB European Investment Bank
EPA Environmental Protection Agency
EoI Expression of Interest
EU European Union
GDP Gross Domestic Product
GHG Greenhouse gas(es)
HFO Heavy fuel oil
HPDI High pressure direct injection
IDO Industrial diesel oil
FEA Fiji Electricity Authority
FOB Free on board
FSM Federated States of Micronesia
FSU Floating storage unit
FSRU Floating storage and regasification unit
IDO Industrial diesel oil
IPP Independent Power Producer
IRP Integrated Resource Plan (Guam Power Authority)
ISO International Organization for Standardization
JICA Japan International Cooperation Agency
Kg Kilogram
Km Kilometre
L/l Litre/litre
LCNG Liquefied compressed natural gas process
LCTs Local coastal tankers
LNG Liquefied natural gas
LPG Liquefied petroleum gas
ML Million litres
MMBTU One million British thermal units
MR/MRT Medium range/Medium-range tanker
MT Metric Tonne
MW Megawatt
MWe Megawatt electric
NGOs Non-government organisations
NZMFAT New Zealand Ministry of Foreign Affairs and Trade
OEM Original Equipment Manufacturer
OPEC Organization of the Petroleum Exporting Countries
opex Operating Expense
pa per annum
PCO PRIF Coordination Office
PICTs Pacific Island Countries and Territories
PJ Petajoule (10 to the power of 15) joules
PMC PRIF Management Committee
PNG Papua New Guinea
PPA Pacific Power Association
PPP Public-private partnership
PRIF Pacific Region Infrastructure Facility
PV Photovoltaic
RMI Republic of the Marshall Islands
SLN Société Le Nickel (smelter in New Caledonia)
SPC Secretariat of the Pacific Community
STP Standard temperature and pressure
T Tonnes
T/kL Tonnes per kilolitre
ULP Unleaded petrol / gasoline
USA United States of America
USD United States dollar
USP University of the South Pacific
Table of Contents
Executive Summary i
1 Introduction 1
1.1 Background to Study........................................................................................................ 1
1.2 Purpose of Study.............................................................................................................. 1
1.3 Scope of Study.................................................................................................................. 2
1.4 Research Questions.......................................................................................................... 2
1.5 Specifications and Assumptions..................................................................................... 3
1.6 Partnership Arrangements.............................................................................................. 4
1.7 Data Collection and Consultation Process..................................................................... 4
1.8 Structure of Report.......................................................................................................... 5
2 Pacific Context 6
2.1 Introduction...................................................................................................................... 6
2.2 Current Fuel Consumption.............................................................................................. 6
2.2.1 Total Market Size............................................................................................................... 6
2.2.2 Regional Sectoral Profile.................................................................................................7
2.2.3 Fuel Use in the Transport Sector................................................................................. 9
2.2.4 Residential and Commercial Use...............................................................................10
2.3 Public Power-Sector Fuel Use Profile...........................................................................11
2.4 Industry Sector Profile...................................................................................................16
2.5 Energy Prices.................................................................................................................. 17
2.6 Existing LNG Use in the Asia–Pacific Region..............................................................19
2.7 Existing Fuel Supply Chains..........................................................................................20
2.7.1 Diesel, Kerosene, ULP, Fuel Oil....................................................................................20
2.7.2 Current LPG Supplies.....................................................................................................21
3 Research Question 1: Why would expanding the use of LPG and
introducing natural gas be beneficial for Pacific Island Countries
and Territories? 24
3.1 Context............................................................................................................................24
3.2 Findings...........................................................................................................................24
3.2.1 LPG and Natural Gas for Cooking in the Commercial and
Residential Sector...........................................................................................................24
3.2.2 Gas for Industrial and Power Generation................................................................25
3.2.3 Gas for Transport . ..........................................................................................................25
3.3 Issues...............................................................................................................................26
3.4 Conclusions.....................................................................................................................26
4 Research Question 2: Is it technically viable to expand LPG and
introduce natural gas into the Pacific Island Countries and Territories? 27
4.1 Context............................................................................................................................ 27
4.1.1 LNG Supply Within Region...........................................................................................27
4.1.2 CNG Supply Within Region...........................................................................................30
4.2 Findings...........................................................................................................................30
4.2.1 Technical Viability of Expanding LPG Supply........................................................30

4.2.2 Technical Viability of Increased LPG Application for Households.................30
4.2.3 Technical Viability of Increased LPG Use in Commercial Applications........31
4.2.4 Technical Viability of LPG for Power Generation.................................................32
4.2.5 Technical Viability of LPG for Transport..................................................................32
4.2.6 Technical Viability of LNG for Power Generation.................................................32
4.2.7 Technical Viability of LNG for Transport Sector....................................................33
4.2.8 Technical Viability of Gas for Industrial Use..........................................................36
4.3 Issues............................................................................................................................... 37
4.3.1 Issues in Using Gas for Transport..............................................................................37
4.3.2 Energy Efficiencies through Maintenance..............................................................37
4.3.3 Issues in Using Gas for Power Generation.............................................................37
4.4 Conclusions.....................................................................................................................38
4.4.1 LPG for Households........................................................................................................38
4.4.2 LPG for Commercial and Industrial Use..................................................................38
4.4.3 LPG in the Transport Sector.........................................................................................38
4.4.4 LPG for Power Generation............................................................................................38
4.4.5 LNG for Power Generation...........................................................................................38
4.4.6 LNG for Transport ..........................................................................................................39
5 Research Question 3: Is it economically feasible to expand LPG and
introduce natural gas into the Pacific Island Countries and Territories? 40
5.1 Commodity Prices...........................................................................................................40
5.1.1 LPG ......................................................................................................................................40
5.1.2 LNG .....................................................................................................................................40
5.1.3 CNG .....................................................................................................................................42
5.2 Findings...........................................................................................................................43
5.2.1 LPG Delivered Cost.........................................................................................................43
5.2.2 Cost of LPG versus Kerosene for Households.......................................................43
5.2.3 LPG for Commercial and Industrial Sectors...........................................................44
5.2.4 LPG for Vehicles...............................................................................................................45
5.2.5 LNG Transport Options..................................................................................................45
5.2.6 LNG Shipping Using Small-Scale Bulk Ships........................................................46
5.2.7 LNG Shipping in ISO Containers................................................................................48
5.2.8 LNG Import Terminal, Floating Storage and Regasification Unit,
and On-shore Storage Costs........................................................................................50
5.2.9 LNG Truck Transport.......................................................................................................52
5.2.10 LNG Delivered Cost........................................................................................................53
5.2.11 CNG Delivered Costs......................................................................................................55
5.3 Issues...............................................................................................................................56
5.4 Conclusions..................................................................................................................... 57
5.4.1 Economic Viability of Expanding LPG......................................................................57
5.4.2 Economic Viability of Gas for Power Generation ................................................57
5.4.3 Economic Viability of Gas for Transport .................................................................59
Table of Contents
6 Research Question 4: Which Pacific Island Countries and Territories

have the highest potential to benefit from expansion of LPG or the
introduction of natural gas? 60
6.1 Context............................................................................................................................60
6.2 Findings...........................................................................................................................60
6.2.1 LPG for Light Vehicles in all PICTs............................................................................60
6.2.2 LPG for Air Conditioning in all PICTs........................................................................60
6.2.3 Potential Sites for Gas Power Generation: New Caledonia,
Guam, French Polynesia and Fiji................................................................................61
6.2.4 Potential for Gas-Piped Networks: PNG, Timor-Leste and Fiji.........................62
6.2.5 Potential Gas Use in Land Transport Sector: Hypothetical Scenario............63
6.2.6 Further Opportunities for Increased Gas Use in the Pacific:
New Caledonia and Fiji.................................................................................................65
6.3 Issues............................................................................................................................... 67
6.4 Conclusions..................................................................................................................... 67
7 Research Question 5: What factors need to change in order
to realise the benefits? 69
7.1 Context............................................................................................................................69
7.2 Findings...........................................................................................................................69
7.3 Issues...............................................................................................................................70
7.3.1 Issues for Converting to Gas for Power Generation............................................70
7.4 Conclusions.....................................................................................................................70
8 Research Question 6: Given the development of renewable
energy, what is the likely scenario for LPG and natural gas in
the longer term? 71
8.1 Context............................................................................................................................71
8.2 Findings...........................................................................................................................71
8.2.1 Stationary Power – Other Renewable Energies....................................................71
8.2.2 Transport Sector – Hybrids..........................................................................................71
8.3 Issues...............................................................................................................................72
8.4 Conclusions.....................................................................................................................72
9 Research Question 7: How can the findings of this study be
applied or developed? 73
9.1 Context............................................................................................................................73
9.2 Findings...........................................................................................................................73
9.2.1 Policy Considerations.....................................................................................................73
9.3 Conclusions.....................................................................................................................74
10 Overall Conclusions 75
10.1 Expanding Use of LPG...................................................................................................75
10.1.1 Feasibility and Cost Factors.........................................................................................75
10.1.2 Application in the Transport Sector..........................................................................75
10.1.3 Stimulating Demand for LPG......................................................................................75
10.2 Potential for Introduction of LNG.................................................................................75
10.2.1 Feasibility and Cost Factors.........................................................................................75
10.2.2 LNG for Stationary Power Applications...................................................................76
10.2.3 LNG for Transport Sector..............................................................................................77
10.3 LPG and LNG for Power Generation............................................................................. 77
11 Recommendations and Next Steps 79
11.1 Expansion of LPG...........................................................................................................79
11.2 Potential Introduction of Natural Gas..........................................................................79
11.3 For Both LPG and Natural Gas......................................................................................80
11.4 Fuel Pricing.....................................................................................................................80
11.5 Next Steps.......................................................................................................................80
Appendices
Appendix A: List of People Consulted/Involved in Study............................................................... A-1

Appendix B: Some Regional Resources................................................................................................B-1
Appendix C: Fuel Substitution Potential in Fiji and Tonga: Hypothetical Scenarios............ C-1
Appendix D: PICT Energy Market Breakdown.....................................................................................D-1
Appendix E: Registered Vehicles and Maritime Vessels.................................................................. E-1
Appendix F: Small LNG Ship Specifications........................................................................................ F-1
Appendix G: Fortis BC LNG Rate Schedule..........................................................................................G-1
Appendix H: Estimated Annual Fuel Consumption by Power Station/Utility......................... H-1
Appendix I: Engine Types in Power Utilities........................................................................................ I-1
Appendix J: Global LPG Partnership – Policy Comparisons............................................................ J-1
List of Tables
Table 1. Fuel Specifications in this Study........................................................................................... 3

Table 2. Gross Generation by Source in PICTs, 2011.....................................................................13
Table 3. Electricity Utilities’ Installed Capacity, Fuel Consumption and Tariffs...................15
Table 4. Selection of Mines and Associated Power Sources Operating in PNG..................17
Table 5. Example LNG and CNG Power-Generation Projects Operating or
Planned in the Region............................................................................................................20
Table 6. Saudi Aramco CP Prices, USD/Tonne..................................................................................40
Table 7. Potential Scenario for Gas Air Conditioning....................................................................45
Table 8. LNG Shipping Times and Cost with Budget Charter Rates for
Small-Scale Ship.......................................................................................................................47
Table 9. ISO LNG Container Solutions...............................................................................................49
Table 10. Costs of Shipping ISO Containers of LNG to Selected PICTs.....................................49
Table 11. LNG Storage Solutions...........................................................................................................50
Table 12. Storage Capital and Maintenance Costs...........................................................................52
Table 13. Costs of Shipping ISO Containers of CNG to Tonga......................................................56
Table 14. Transport LNG Hypothetical Scenario, Fiji: Buses and Trucks...................................64
Table 15. Transport LNG Hypothetical Scenario, Fiji: Passenger Vehicles...............................65
Table 16. Commercial and Regulatory Consideration for Gas Opportunities in PICTs........66
List of Figures
Figure 1. Overall Energy Profile of Individual Countries................................................................. 6

Figure 2. Total Annual Fuel Demands of PICTs by Fuel Type..........................................................7
Figure 3. Sectoral Fuel Use (MMBTU) in PICTs by Fuel Type......................................................... 8
Figure 4. Sectoral Fuel Use (% breakdown) in PICTs by Fuel Type.............................................. 8
Figure 5. Transport Sector Energy Profile by Country....................................................................... 9
Figure 6. Total Energy Demand by PICT for Residential and Commercial
Sectors by Country....................................................................................................................10
Figure 7. Household Cooking by Fuel Type, including LPG Prices, First Quarter 2014.......11
Figure 8. Public Power-Sector Fuel Use (MMBTU) in PICTs..........................................................12
Figure 9. Fuel Used in Industrial Sector by Country.......................................................................16
Figure 10. Retail Diesel, Gasoline and Kerosene Prices: Excluding Taxes and
Duties, First Quarter 2014.....................................................................................................18
Figure 11. Retail LPG Prices in Comparison to Volumes..................................................................18
Figure 12. PetroCorpVITAL Supply Chain..............................................................................................21
Figure 13. Local Coastal Tankers/Medium-Range Tanker Port Terminal in PICTs...................21
Figure 14. Origin Energy Australia’s LPG Supply to PICTs...............................................................22
Figure 15. Gladstone LNG Plant...............................................................................................................28
Figure 16. Shipping Routes Serving the Pacific..................................................................................29
Figure 17. Container Shipping Route for Swire Shipping’s Pacific Island Service..................29
Figure 18. LPG Growth Potential Due to Displacement of Kerosene and
Biomass for Cooking................................................................................................................31
Figure 19. Natural Gas in Transport Applications: LNG and the LCNG Process.......................34
Figure 20. Gas Engine Technologies.......................................................................................................34
Figure 21. Typical Transport Configuration...........................................................................................35
Figure 22. LNG and CNG Use in Vehicles, 2012..................................................................................35
Figure 23. LNG Price Comparisons to Oil and Diesel........................................................................41
Figure 24. Indonesian LNG and New York Diesel Price Ratio (USD per MMBTU)...................42
Figure 25. LPG Price Assuming a 10% Reduction for Every 100% Increase in Volume........43
Figure 26. Cost Comparison Between Kerosene and LPG: Retail Price Excluding T
ax and Duties, First Quarter 2014.......................................................................................44
Figure 27. Shipping Capacity for Small-Scale LNG Multi-Gas Carrier........................................46
Figure 28. Small-scale LNG Multi-gas Carriers, 10,000 cbm/4,500 tonne................................47
Figure 29. LNG Carrier.................................................................................................................................47
Figure 30. ISO 20’ Container for LNG......................................................................................................48
Figure 31. 300m3 Cryogenic LNG Tank in Tasmania.........................................................................51
Figure 32. LNG Road Tanker.......................................................................................................................52
Figure 33. LNG Built-Up Cost Analysis for Selected PICTs and Technologies..........................54
Figure 34. Built-Up Delivered Cost Analysis for all PICTs...............................................................54
Figure 35. CNG 20’ Containers..................................................................................................................55
Figure 36. CNG 40’ Containerised Solution..........................................................................................55
Executive Summary
(i) Introduction
The Pacific Island Countries and Territories (PICTs) face particular energy supply challenges in
regard to their small, remote island economies, limited natural resources, and long distances to
major markets. Most PICTS are highly dependent on imported petroleum products to meet their
energy needs. This dependence means they are heavily impacted by high or volatile global oil
prices. In addition, these countries are among the most vulnerable in terms of climate change and
natural disasters.
Historically, limited options have been available to displace liquid petroleum fuels such as
kerosene, gasoline and diesel. However, recent market developments have changed this situation.
Liquefied petroleum gas (LPG) and natural gas, including compressed natural gas (CNG) and
liquefied natural gas (LNG), are increasingly offering economical, low-emission interim solutions
in the transition from liquid petroleum fuels towards renewable energy. Gas use in stationary
power, trucks, cars, buses and ships is now well-established globally and technologies are
commercially available.
The study assesses the potential and economic feasibility of LPG, LNG or CNG to meet medium-
term energy needs in PICTs. It considers the end-use applications of power generation, process
heating, maritime transport, land transport, cooking and water heating. The existing fuels
considered for substitution include heavy fuel oil (HFO), diesel, gasoline, kerosene and biomass.
International aviation fuel is excluded because gas does not offer a technologically viable
alternative to aviation fuel at this stage.
The research phase of the study consisted of desk research; in-country research in Fiji, Papua New
Guinea (PNG), New Caledonia, Tonga and Vanuatu; and consultations with government officials
and industry representatives. Twenty countries and territories were included1. The consultations
with government and industry representatives were crucial because they indicated the most likely
scenarios or entry points, and the implications of different decisions that have been (or might be)
made by individual countries. Data has been aggregated from the best available sources at the
time of writing, though there are some data gaps.
Due to the volatility in international fuel markets and the uncertainty of investment by
governments, the private sector and others, generalisations can only be made with caution.
Therefore, this report presents scenarios and possible situations and reflects the collective
understanding at the time the information was being collated. The hypothetical scenarios include
one for LPG in air conditioning and two for fuel substitution with LNG or CNG.
(ii) Findings
Overview
Each PICT has unique geographic characteristics, fuel usage patterns and local conditions that
affect fuel supply chain costs to varying degrees. As such, their potential role in driving gas
uptake across the region varies significantly. For example, PNG and Timor-Leste have substantial,
untapped domestic gas reserves while Fiji and New Caledonia have made significant investments
in renewable energy resources.
1 The twenty countries and territories included were: American Samoa, Commonwealth of the Northern Mariana Islands (CNMI), Cook Islands, Fiji, French Polynesia, Federated States
of Micronesia (FSM), Guam, Kiribati, Nauru, New Caledonia, Niue, Palau, Papua New Guinea (PNG), Republic of the Marshall Islands (RMI), Samoa, the Solomon Islands, Timor-Leste,
Tonga, Tuvalu and Vanuatu.
(i)
This study has collected data on the size and components of the current energy market in the 20
countries. The total size of the regional energy market (excluding solar, wind and hydropower)
is estimated to be more than 216,800,000 MMBTU2 of diesel, biomass, HFO, gasoline, LPG, coal,
kerosene and natural gas. Liquid fossil fuel used in the transport sector (excluding aviation)
dominates energy consumption at 31% of fuel demand, with diesel as the main fuel type.
Residential and commercial applications represent the next largest user group. Fuel for these
applications is predominantly biomass, used mainly in the rural populations of PNG, Timor-Leste,
the Solomon Islands and Vanuatu. The power and industrial sectors are of similar size at 20%
and 18% of the total market respectively (although some power use is reported in the industrial
sector data, notably in New Caledonia’s nickel mining).
Market Conditions
The following developments are relevant for PICTs to consider in expanding use of LPG or
introducing LNG into their energy markets:
nn major LPG and natural gas resources in the wider Pacific region are being progressively
commercialised (see Chapter 2)
nn new LNG export terminals have been established in Australia, Indonesia, Malaysia, PNG,
Singapore and North America (see Chapter 2)
nn small-scale LNG transportation is possible through bulk ships, road tankers, and International
Organization for Standardization (ISO) containers though at significant cost (see Chapter 5), and
nn there is a strong potential that volatility will continue in wholesale fossil fuel markets which
could represent an opportunity to reduce energy costs for PICTs under the right circumstances
– including in both LPG and LNG markets (see Chapter 5).
Expanding Use of Liquefied Petroleum Gas

All PICTS already use LPG, mainly for household cooking and this study finds significant
opportunity for expansion. If use of LPG was expanded to displace all cooking kerosene and
biomass in the Pacific region, the current demand could double. The argument for making this
change is for health reasons, environmental sustainability and for cost-saving for individual
householders. However, the increase in demand could be expected to achieve better economies of
scale to different degrees across PICTs. Increased volume could drive some PICTs to move to bulk
delivery which could have a significant impact on the delivered price. The addition of LPG use in
transport or small piped gas networks would further increase volumes and might be expected
to achieve better bulk import economics. Based on commercial technology already available in
Australia, experimental work is currently being conducted in Fiji on use of LPG in heavy vehicles
and blending of LPG with other fuels in electricity generation.
There are also other ways to stimulate demand for LPG – both in domestic and commercial
settings, including:
nn providing grants or microfinance initiatives for early market uptake of LPG
nn organising information campaigns on LPG use for both domestic and commercial applications
nn introducing subsidised cylinder exchange/deposit schemes
nn adopting LPG in schools, hospitals, hotels and via other business customers
nn developing a niche use for LPG in commercial air conditioning systems, and
nn supporting or providing training of installers, contractors and building managers to operate
LPG appliances.
2 one million British thermal units
(ii)
This would not only directly stimulate use of LPG, but it would also grow the capacity of suppliers,
agents and depots and expand the secondary market through reduced overall costs for individual
domestic customers. It should be noted that LPG is benchmarked to the Saudi Aramco Contract
Price (CP) which has recently become more correlated to crude oil prices.
Potential for Liquefied Natural Gas

LNG can be shipped long distances cost-effectively in bulk ships in capacities as small as 10,000m3.
However, a major drawback is that in most PICTs unloading facilities and storage systems would
need to be built. These storage systems could be fixed land-based facilities, floating storage units
with land-based regasification, or floating storage and regasification units.
To cost-effectively supply LNG to PICTs, two pre-conditions are required. First, there must be
individual or collective points of demand that are large enough to justify bulk LNG shipping and
local unloading, storage and regasification facilities. This appears possible in meeting some or
all of the power generation demand in Fiji, French Polynesia, Guam and New Caledonia. Second,
the market conditions and supply arrangements must be such that the delivered cost of LNG is
less than that of diesel or HFO (depending on which fuel is being replaced) on a dollar/MMBTU
basis over the life of the contract, which would typically be 15+ years. Clearly, each country would
have to undertake its own economic cost-benefit analysis. However, once LNG is established in
a country on the back of an ‘anchor demand’, it could also be expanded to transport, commercial,
industrial or pipeline applications. There is also some potential for nearby PICTs to benefit from
the existence of storage units and supply, but each case would require careful analysis of the
risks, costs and benefits.
PNG is a unique case. Pipeline supply of natural gas to major centres might be feasible in the
short-term if supply for local needs can be made available from the well-head or via a branch
line from the existing pipeline to the LNG plant in Port Moresby.
Potential for Compressed Natural Gas

CNG cannot be shipped cost-effectively over large distances due to its relatively low energy
density. It can, however, be produced if LNG shipments are put through a pressurised vapourisation
process within the country – the so-called Liquefied CNG (LCNG) process. However, this technology
is very expensive, so it is likely to be less attractive to the PICTs.
Fuel Price Forecasts

Relative future fuel costs are critical to investment decisions on fuel conversion. There is
considerable volatility in the global market. End-users should understand the long-term price
trends for various fuels, as well as future fuel supply and demand scenarios, and make investment
decisions on this basis rather than on present-day cost and demand.
(iii) Conclusions
Expanding the Use of LPG
This study shows that there is significant opportunity in a broad range of PICTs to increase LPG
utilisation. It is a cleaner burning fuel than biomass and kerosene, therefore providing both health
and environmental benefits and increased uptake may improve economies of scale in supply
chains. In some cases, the capacity of existing port and storage infrastructure is sufficient but, in
others, it would require investment and expansion.
(iii)
Fiji has demonstrated that the adoption of LPG for land transport can result in developing
economies of scale and increased competition to deliver lower prices for household LPG. In other
PICTs, there are also opportunities for increased uptake of LPG in transport and other applications
in both domestic and commercial settings. These warrant further consideration.
Possible Introduction of LNG

Under current market conditions, LNG might possibly prove to be a viable investment for a few
of the PICTs. Any shift to the introduction of LNG requires considerable new capital investment
in ports, storage facilities, in-country distribution networks, and equipment conversion. It also
requires the development of new skills and regulations, as well as extensive marketing to ensure
adequate demand. Whether such investments and reforms are appropriate will depend on the
size of the market, the relative cost of alternative energy sources, and the degree to which costs
can be amortised over the life of the assets with a reasonable rate of return.
If LNG is introduced to a new market in the Pacific, a possible use could be for a limited number
of stationary power applications that are geographically concentrated in a few areas around
sites and/or major ports. Other possibilities also discussed in workshops in this study include
providing energy via a new gas pipeline network for an economic zone where LNG could be used
to displace existing fuels. The projects in this ‘economic zone’ would need to justify the upfront
investments in infrastructure, whereupon secondary markets could be developed over time. This
could include LNG and CNG for transport and industrial/commercial uses, which generally require
much smaller volumes per individual application.
The most relevant PICTs with sufficient fuel demand (either individually or in aggregate) are
Fiji, French Polynesia, Guam and New Caledonia. PICTs with smaller demands could conceivably
seek to leverage off any use of LNG in the larger economies, though this would also require
comprehensive analysis ahead of any infrastructure investments that would be needed.
In the situation where market conditions make cost-effective supply of LNG possible in a PICT, the
following actions could be considered:
nn an individual power station, IPP, government, gas importer, or consortium could enter into a
long-term contract for LNG supply, and/or
nn PICT governments could consider facilitating LNG use in transport or industry once LNG
infrastructure is established on the back of an ‘anchor demand’ in power generation.
PNG and Timor-Leste are special cases: they have indigenous supplies of natural gas and could
investigate local use of LNG or piped natural gas.
(iv) Recommendations
Although many further commercial, technical, policy and environmental factors need to align for
a significant fuel transition to occur, a number of recommendations can be made at this point in
time. These require a relatively low investment of time and resources. It is therefore recommended
that:
Expansion of LPG
1 The transition to LPG from biomass and kerosene for cooking be accelerated, given that it
has positive documented health and environmental benefits. This could include assessing
the need in some PICTS to reduce the import duty and tax for LPG relative to household
kerosene (given it is subsidised in some PICTs), supporting subsidised cylinder exchange/
(iv)
deposit schemes, microfinance initiatives or other initiatives designed to reduce health risks
(particularly for women), environmental impacts and overall costs for individual domestic
customers and some commercial enterprise as well.
2 PICT governments consider approaches for developing small piped LPG networks in urban
areas to supply LPG for cooking and other purposes. This approach would help improve
economies of scale and create centres of demand.
3 PICT governments consider developing LPG options for the transport sector. In addition to
providing a cleaner burning fuel, the increased demand may improve economics for LPG
across the region.
4 PICT governments consider introducing appropriate incentives for private sector and other
stakeholders to increase their LPG import and storage capacities to facilitate increased LPG
usage.
Potential Introduction of Natural Gas

5 Relevant end-users with an aggregate power-generation capacity of more than 40 Megawatts
(MW) assess the economic viability of importing bulk LNG, including using floating storage
units (FSUs) or a floating storage and regasification unit (FSRU).
6 Governments develop policy frameworks for LNG import and use in those countries where
there is realistic potential for LNG substitution.
For Both LPG and Natural Gas

7 Power-generating utilities and Independent Power Producers (IPPs) consider investing in
multi-fuel and gaseous fuel injection capability (LNG/natural gas, diesel, HFO, LPG) when
buying new generators in relevant countries. This offers maximum flexibility in future fuel
choices with a relatively small incremental cost.
Fuel Pricing
8 Secretariat of the Pacific Community (SPC) and Pacific Power Association (PPA) develop
an ongoing ‘watching brief’ on the world’s bulk LPG and LNG markets to identify potential
oversupply conditions and price anomalies and keep Governments and private sector groups
informed of emerging opportunities.
(v) Next Steps

This report will be distributed to development partners, governments and industry. The
recommendations and activities mentioned above provide the ‘next steps’ towards making
decisions about the technical and economic viability of increased gas use in PICTs. They do not
represent a barrier to the continued pursuit of sustainable and renewable energy systems for
power generation where viable. Rather, they may prepare countries to capitalise on potential
price disruptions and technical developments in world fuel markets.
For environmental and health reasons as well as long term energy security, PICTs need to reduce
their reliance on imported liquid fossil fuels and develop alternative renewable energy sources.
Gas and other new approaches may broaden access to energy for rural and remote areas, and
provide cleaner, cheaper and more reliable energy for power generation, industry and households.
Such change is vital for the region’s long-term future.
(v)
1 Introduction
The Pacific Island Countries and Territories (PICTs) face unique energy supply challenges in regard
to their small, remote island economies, limited natural resources, and long distances to major
markets. Most PICTS are highly dependent on imported petroleum products, including kerosene,
gasoline and diesel, to meet their energy needs. The physical characteristics of these fuels (very
high energy density, ease of transportation and storage, and for many years, a low cost) have
made them the fuels of choice in PICTs. However, high and volatile world oil prices since the
2000s have exposed the vulnerability of PICTs’ energy security due to their current dependence
on petroleum fuels.
1.1 Background to Study

With the growing global trend towards alternative energy sources, the World Bank proposed a
research project to the Pacific Regional Infrastructure Facility (PRIF) with the aim of considering
the potential of liquefied petroleum gas (LPG) and liquefied natural gas (LNG) for the Pacific
region. The PRIF Management Committee (PMC) approved the study in February 2014, to be
carried out in consultation with the Pacific Power Association (PPA) and the Secretariat of the
Pacific Community (SPC).
LPG has been imported by PICTs for several decades but, apart from this, there have been limited
options for replacing petroleum fuels in most PICTs. Recent developments are altering this
situation and warrant review of the possibilities for broadening energy choices in the region.
These developments include:
nn major new natural gas resources in the region, which are being commercialised with new LNG
export terminals in Australia, Indonesia, Malaysia, Papua New Guinea (PNG) and Singapore, and
nn small-scale LNG transportation, which is possible by means of bulk ships, road tankers, and
International Organization for Standardization (ISO) containers.
Gas use in stationary power, trucks, cars, buses and ships is now well established globally and
technologies are commercially available. There is a strong potential for volatility to continue in
fossil-fuel markets, which could be exploited to reduce energy costs for PICTs under the right
circumstances (including the LPG and LNG markets).
Although most PICTs are reliant on imported fossil fuels, there are exceptions. These are:
nn Fiji, which has harnessed significant hydroelectric resources and has more projects planned
nn New Caledonia, which uses imported coal and has access to renewable energy resources
nn Timor-Leste, which has substantial domestic natural gas and oil resources, and
nn Papua New Guinea, which has vast untapped natural gas reserves and hydropower potential.
In addition, almost all PICTS are following varying levels of investment in renewable energy,
including both solar and wind power.
1.2 Purpose of Study

The aim of this research study is to assess the potential and economic feasibility of LPG and
natural gas – LNG and compressed natural gas (CNG) – in meeting the medium-term energy
needs of the Pacific region for power generation, maritime transport, land transport, cooking,
water heating and other uses.
1
1.3 Scope of Study

Twenty PICTs are included in this study and they are generally referred to in this report as the
Pacific region or Pacific Islands region3. Each PICT has unique fuel usage patterns and geographic
characteristics that affect fuel supply chain costs. As such, their potential role in driving gas
uptake varies substantially. For the purposes of the study, PICTs are classified as:
nn economies with substantial fuel use: e.g. Fiji, French Polynesia, Guam, New Caledonia, PNG
nn economies with medium-size fuel use: e.g. Solomon Islands, American Samoa, Vanuatu, and
nn small fuel-users and sub-regional locations: e.g. Kiribati, Palau, Tonga.
The fuels and sectors included for the purpose of identifying market potential for either increasing
LPG utilisation or introducing LNG/CNG are: heavy fuel oil/industrial fuel oil (HFO) within the
power sector; diesel fuel oil (power, industrial and transport sectors); gasoline (transport sector);
LPG (industrial, commercial and household sectors); and kerosene and biomass (household sector).
International aviation fuels and bunkered fuels for re-export were excluded because gas does
not offer a technologically viable alternative to aviation fuel at this stage, and it is not likely that
PICT governments or the local private sector have the operational control needed to influence
a conversion to gas in international marine vessels. The report provides some hypothetical
scenarios – one for LPG in air conditioning and two for fuel substitution with LNG or CNG.
Importantly, the following factors, though relevant for evaluating gaseous fuels, were not studied
in detail but are mentioned where appropriate in the report:
nn changes to the relative prices between fuels due to prices that reflect their relative greenhouse
gas (GHG) intensity
nn economic or health benefits from using a gaseous fuel that reduces particulates and improves
air quality, or
nn any economic or environmental benefits from using a gaseous fuel that reduces impacts of fuel
spills in land or water.
It is understood that if any of these externalities are included in an economic analysis, it is likely
to favour gaseous fuels such as LPG, LNG or CNG.
1.4 Research Questions

The research study focuses on the following seven research questions:
nn Why would expanding use of LPG and introducing natural gas be beneficial for PICTs?
nn Is it technically viable to expand LPG and introduce natural gas into PICTs?
nn Is it economically feasible to expand LPG and introduce natural gas into PICTs?
nn Which PICTs have the highest potential to benefit from the expansion of LPG or the introduction
of natural gas?
nn What factors need to change in order to realise the potential benefits?
nn Given the development of renewable energy, what is the likely scenario for LPG and natural gas
in the longer term?
nn How can the findings of this study be applied or developed?
3 American Samoa, Commonwealth of the Northern Mariana Islands (CNMI), Cook Islands, Fiji, French Polynesia, Federated States of Micronesia (FSM), Guam, Kiribati, Nauru, New
Caledonia, Niue, Palau, Papua New Guinea (PNG), the Republic of the Marshall Islands (RMI), Samoa, the Solomon Islands, Timor-Leste, Tonga, Tuvalu and Vanuatu.
2
1.5 Specifications and Assumptions

Fuel specifications vary according to their source and how they are processed. They may also be
defined differently by suppliers or within the markets they serve. The definitions in Table 1 have
been used to provide consistent and relevant findings throughout the study.
Table 1. Fuel Specifications in this Study
Item LPG ADO IDO HFO LNG CNG ULP Kero-

sene
Composition LPG for automotive Similar to Varies Varies
use in Australia: ADO according to according to
50-100% Propane, the source, the source,
0-50% butane, 5% but mostly but mostly
other hydrocarbons methane methane
LPG in Fiji: 100%
butane
LPG in new
Caledonia: 100%
Propane
Energy Density 44.3 43.6 Similar to 40.5 52.1 (can be up 52.1 45.0
(MMBTU/T) ADO to 55)
Energy Density 24.4 36.6 Similar to 37.6 24.0 10.0 at 251 32.4 37.5
(MMBTU/kL) ADO bar
Density (T/kL) 0.55 0.84 Similar to 0.93 0.46 0.79

ADO
Atmospheric -161°C -161°C

Boiling Point at
Sea Level
Sulphur 0-500 ppm 0-3.5% 0-500

Content ppm
Other Vapourises in Vapourises in Disperses in

air quickly air quickly
air quickly
Other Possible Autogas Distillate No. 6 Fuel Oil

Names
Bottled-gas No. 2 Fuel Bunker Fuel,
Oil
Residual fuel
oil
Typical Storage <23 bar <18 bar <300 bar

Pressure
Note: ADO Automotive diesel oil; IDO Industrial diesel oil; ULP Unleaded petrol; MMBTU One million British thermal units
In addition this report is based on a number of general assumptions. These include the following:
nn most PICTs will be highly dependent on imported petroleum products to meet the vast majority
of their medium-term energy needs, the exceptions being Fiji (which uses hydro-power), New
Caledonia (which uses imported coal and also has access to renewable energy resources) and
PNG and Timor-Leste (which have substantial domestic natural gas resources)
nn PICT governments will assess the need for policy decisions about different options as well as
the implications of these policy decisions, creating an appropriate enabling environment to
support the desired changes in fuel supply and consumer behaviour
nn an appropriate supplier will be in a position to make LNG commercially available and supply
to the PICTs via small scale bulk ships (from Vancouver and Gladstone) and in ISO containers
(from Melbourne)
3
nn any shipping of LNG would be on a rotational basis (i.e. delivered from source to site followed
by return to point of origin for refueling) and that local storage tanks would be available in-
country
nn published tariffs for transport and storage costs are correct and do not change significantly
nn any general estimates in developing hypothetical scenarios are correct (or within reasonable
approximation), and
nn costs for containers for shipping LNG are generally spread over the full lifespan.
In the case of some of the hypothetical scenarios, the proposed situation is that an ‘anchor
demand’ for LNG is established in a country and that CNG is available at an equivalent delivered
price. This is based on an understanding that the additional infrastructure for CNG is minimal
in comparison to the bulk infrastructure and the shipping and commodity costs associated with
delivery of LNG to a country.
Other assumptions may be made in regard to particular tables or figures in the report and those
assumptions are explained as part of the table or figure.
Importantly, all assumptions and costings need to be verified by governments, companies or other
stakeholders that are considering exploring the options presented in this report.
1.6 Partnership Arrangements

A Project Implementation Committee was formed consisting of the PRIF Coordination Office
(PCO), PPA Secretariat, SPC and the World Bank. The PCO recruited and managed the consultants
on the project. SPC in Fiji hosted the consultants during the research phase of the project and
provided support in the data-collection process and administrative functions. Workshops were
held with governments and industry and findings were disseminated by the Committee members.
All Committee members reviewed the project documentation and provided guidance to the
consultants in finalising the report. The World Bank also organised specialised input on LNG and
held discussions with global industry bodies.
1.7 Data Collection and Consultation Process

The research phase of the study was comprised of desk research; in-country research in Fiji,
New Caledonia, PNG, Tonga and Vanuatu; and interviews, presentations and workshops with
government officials, development partners and industry representatives. The consultations
with government officials and industry representatives were particularly important because they
indicated the most likely scenarios or entry-points and the implications of different decisions
made by individual countries (see Appendix A for a list of persons consulted during the study).4
The study evaluated the size of the energy market including electricity, transport, cooking and
other uses. Available technologies, infrastructure needs and potential suppliers were then
assessed. The following research methodology was used to collect information:
nn desk research and direct communications with energy and statistics departments in the PICTs
to aggregate all data on energy use and the sectoral breakdown
nn desk research to review similar studies that have been completed, identify technology options,
and source any relevant case studies
nn consultation with industry on budget costs for all aspects of the LNG supply chain and
infrastructure costing
4 During workshops with industry, representatives were asked to supply photos that could be used in the report. Various company websites were also used to obtain data,
photographs and drawings. These are used for illustrative purposes and should not be taken as an endorsement of any particular company.
4
nn development of a built-up landed cost model using the budget costing from industry and the
desktop research
nn validation of fuel use quantities, fuel use sectoral breakdowns, and the viability of fuel
substitution through visits to representative countries, and
nn validation of the built-up cost analysis model and the viability of fuel substitution by holding
workshops where draft findings were presented, feedback was discussed and then incorporated
into the study.
The data for the study was compiled from material provided by relevant Ministries and other
government departments, and from additional non-government organisations (NGOs) and private
sector sources, as required. Some data gaps and inconsistencies in reporting of national statistics
remained at the time the study was completed. Most critical is that fuel quantities used by
Independent Power Producers (IPPs) for public or private power generation were not universally
available: some countries report IPP fuel use under the ‘industry’ sector, while others report it
under the ‘power’ sector. This means that the total fuel demand for all power generation that
could be substituted is more than that reported in the ‘power’ sector alone. In addition, at the time
of the research phase of the study, it was understood that Hawaii may have been going to expand
use of natural gas, but then it was subsequently decided to move comprehensively to renewable
energy – so reference in this report to the situation in Hawaii must be understood within this
changing context.
1.8 Structure of Report

In addition to the introductory sections of the report, there are 10 other parts, as follows:
nn Chapter 2 provides a detailed overview of the current energy market in PICTs and presents data
on fuel use, energy prices and the existing fuel supply chains
nn Chapter 3 explains the benefits of expanding LPG and introducing natural gas to PICTs
nn Chapter 4 addresses the technical issues related to the introduction of LNG and the expansion
of LPG in the region, and analyses the technical viability of displacing liquid petroleum fuels
with LPG and natural gas
nn Chapter 5 further considers the costs of LPG and LNG, including fuel pricing and the economics
of shipping and storing the gases
nn Chapter 6 looks at which PICTs could benefit the most from the use of LPG and LNG
nn Chapter 7 evaluates the factors that need to change in order for PICTs to realise the benefits of
using LPG and LNG
nn Chapter 8 briefly considers the long-term scenario of LPG and LNG in the broader context of
transitioning towards renewable energies
nn Chapter 9 explains how the findings of this study can be progressed
nn Chapter 10 provides an overall conclusion and addresses the issues of cost-effective delivery of
LNG, the viability of LPG, and their potential use in the power, transport, commercial, industrial
and residential sectors, and
nn Chapter 11 provides a list of recommendations for governments, power utilities and industry
if they decide to pursue LPG and/or LNG as alternative energy sources. A comprehensive set of
appendices supports the issues raised in the body of the report.
5
2 Pacific Context
2.1 Introduction
PICTs vary substantially in many ways. They have widely varying populations, different political
systems, and different levels of economic development and urbanisation. Some are more remote
than others, government institutional strength varies, as does the vibrancy of the private sector
and its contribution to PICTs’ development. However, one feature that most PICTs have in common
is that they are highly dependent on imported petroleum products to meet their energy needs.
The exceptions to this are Fiji, New Caledonia, PNG and Timor-Leste (as mentioned earlier). The
move towards developing renewable energy is also significant in considering the context over
the short-to-medium term.
2.2 Current Fuel Consumption

2.2.1 Total Market Size
It was not possible to develop a consistent baseline year for data analysis due to regional
variations in availability of information and reporting. Therefore, while the following volume data
provides a good indication in terms of overall market size, annual fluctuations in demand or
more recent changes in energy activity are not included and actual figures may vary from those
contained within this report. All volume data is derived from detailed breakdown of volumes and
references listed in Appendix Tables D.1 and D.2, unless otherwise noted.
The total size of the regional energy market – as considered relevant for displacement by LPG or
LNG (i.e. fuel sources that exclude renewable resources, aviation fuels and maritime bunkering)
– is estimated at approximately 220 million MMBTU of diesel, biomass, HFO, gasoline, LPG, coal,
kerosene and natural gas. Diesel is the largest fuel source at 41% of energy consumption, while
biomass is second at 28% (noting that the majority of biomass volume is in PNG where there are
significantly higher populations than in other PICTs). This is followed by HFO (17%) and gasoline
(10%), with only minor use of LPG, coal and kerosene.5 Even so, LPG has been used as an energy
source in Pacific countries for over 50 years and utilisation continues to grow (see Figure 1.)
Figure 1. Overall Energy Profile of Individual Countries

Heavy Fuel Oil
(943 ML), 17%
Gasoline
Biomass
(517 ML), 10%
(1,489 kTOE),
28%
LPG
(75.6 kT), 2%
Coal, 1%
Kerosene
(62.3 ML), 1%
Diesel
(2,423 ML),
41%
5 excluding aviation fuels
6
As Figure 2 shows, fuel demand profiles vary significantly among countries.
Figure 2. Total Annual Fuel Demands of PICTs by Fuel Type
120,000,000
100,000,000
8,000,000 Natural Gas
80,000,000 6,000,000 Kerosene
4,000,000 Coal
MMBTU
60,000,000
2,000,000 LPG
Gasoline
40,000,000 0
Heavy Fuel Oil
Va oa
oa
Tu u
Ki I
lu
ue
Sa I
Na .
.S .
Co aJ
RM
M
Is
er n Is
ng
at
la
ur
va
FS
am
Ni
rib
CN
ok
Pa
nu
To
Am mo
20,000,000 Biomass
lo
So
Diesel
0
G
am
l.
Va oa
ch iji
Am mo e
Sa I
oa
Ki I
or ly.
.S .
Co aJ
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Tu u
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ue
M
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er n Is
Is
ng
Ca
lo st
at
la
ur
PN
en F
va
FS
Ti Po
am
Ni
rib
CN
ok
So Le
Pa
Gu
nu
To
w
Ne
m
Fr
Note: Data was not available for CNMI (for transport and industry demand for all fuels), Guam (for maritime and industry
demand for all fuels), and RMI (for gasoline demand).
PNG has the largest energy demand among PICTs, principally driven by its significant industrial
activity and larger population. It is also the only country in this study that uses natural gas as
an energy resource (within private mining operations). Unfortunately, due to the availability
of information, consumption of natural gas within PNG could not be calculated and installed
generating capacities for major mining projects are detailed within the power sector breakdown.
Guam and New Caledonia also have high energy demands. Both are countries at the upper end of
development within the region, they have large tourist industries, there is a military presence in
Guam, and there is a significant nickel-mining industry in New Caledonia. New Caledonia is also
the only PICT that uses coal for thermal power generation. The next most sizable markets are Fiji,
French Polynesia and Timor-Leste. Notably, HFO is a significant fuel source in the larger markets
where it is used as a lower-cost fuel for the power sector.
Available data indicate a significant variance in sectoral demands for energy resources among
the PICTs. Key influences on these demands are urbanisation rates, use of hydropower (e.g. Fiji),
and whether or not there is any significant industrial activity.
2.2.2 Regional Sectoral Profile

Available data for the region shows that fuel demand is greatest in the transport sector, accounting
for 31% of estimated regional energy demand – noting that if aviation fuels were included in
this study it would make the sector even larger – with diesel being the most dominant fuel (see
Figure 3). The second highest area of demand is for residential and commercial use, a sector
that is dominated by biomass consumption, especially in the rural areas of PNG, Timor-Leste, the
Solomon Islands and Vanuatu. The power and industrial sectors are of similar size at 20% and
18% of the total market, respectively. However, it should be noted that some discrepancies can
exist across the region in terms of how fuel is reported. A considerable amount of HFO and diesel
used in independent power production is reported in ‘industry’ rather than in ‘power’ statistics,
most notably data on the nickel mining industry of New Caledonia. These figures have been
reconciled where appropriate and feasible.
7
Vanuatu. The power and industrial sectors are of similar size at 20% and 18% of the total market,
respectively.
LPG and Natural However,Energy
Gas as Alternative it should be noted
Sources for thethat some discrepancies can exist across the region in
Pacific
terms of how fuel is reported. A considerable amount of HFO and diesel used in independent power
production is reported in ‘industry’ rather than in ‘power’ statistics, most notably data on the nickel
mining industry of New Caledonia. These figures have been reconciled where appropriate and
feasible.
Figure 3. Sectoral Fuel Use (MMBTU) in PICTs by Fuel Type
Figure 3. Sectoral Fuel Use (MMBTU) in PICTs by Fuel Type
70,000,000 31% 30%

60,000,000 Kerosene
50,000,000 20% Coal

18%
MMBTU
40,000,000 LPG
30,000,000 Gasoline
20,000,000 HFO
10,000,000 Biomass
0
Diesel
TheThe following
following sections
sections of the
of the report
report present
present some
some additional
additional information
information on usage
on usage for for transport,
transport,
residential
residential andand commercial
commercial applications,
applications, thethepower
powersector
sectorand
andindustrial
industrial use.
use.
Figure 4 shows sectoral fuel use within different countries in the Pacific.
Figure 4 shows sectoral fuel use within different countries in the Pacific.
Figure 4. Sectoral Fuel Use (% breakdown) in PICTs by Fuel Type
Figure 4. Sectoral Fuel Use (% breakdown) in PICTs by Fuel Type
100%
90%
80%
70%
9
60%
50%
40%
30%
20%
10%
0%
Power Res./Commercial Transport Industry
Note: Data gaps remained at time of writing for the following countries: Guam’s marine and industry demand for all fuels;
Note:
CNMI’sData gapsand
transport remained
industryatdemand
time offor
writing forRMI’s
all fuels; the following countries:
gasoline demand Guam’s
in the marine
transport and industry demand for all fuels;
sector
CNMI’s transport and industry demand for all fuels; RMI’s gasoline demand in the transport sector
2.1.3 Fuel Use in the Transport Sector

As mentioned above, the available data show that the transport sector accounts for nearly one-third
of fuel use across the region.6 This is largely associated with the more highly populated, more highly
8
urbanised and/or most developed of the PICTs: Fiji, French Polynesia, Guam, New Caledonia and
2.2.3 Fuel Use in the Transport Sector

As mentioned above, the available data show that the transport sector accounts for nearly one-
third of fuel use across the region.6 This is largely associated with the more highly populated,
more highly urbanised and/or most developed of the PICTs: Fiji, French Polynesia, Guam, New
Caledonia and Timor-Leste (see Figure 5).
Figure 5. Transport Sector Energy Profile by Country
25,000,000
3,000,000
2,500,000
20,000,000 2,000,000
1,500,000
1,000,000
15,000,000 500,000
0
MMBTU
LPG
Amer. Samoa
Samoa
Solomon Is.
Vanuatu
Tonga
FSM
Palau
Cook Is.
KiribaK
Nauru
Tuvalu
Niue
CNMI*
RMI*
10,000,000
30 Gasoline
5,000,000 Diesel
0
PNG
Fiji
New Cal.
Timor Leste
Amer. Samoa
Samoa
Tonga
FSM
Cook Is.
KiribaK
Nauru
Tuvalu
Niue
French Poly.
Solomon Is.
Guam
Vanuatu
Palau
CNMI*
RMI*
Note: Diesel/Gasoline volume for transport sector was unavailable at time of report writing
Diesel is the most common fuel, with some use of gasoline and only a minor penetration of
LPG into the transport sector, solely in Fiji, which totals approximately 4% of Fiji’s transport fuel
demands. LPG, generally a more expensive fuel for transport for most PICTs, is influenced by low
demand and high supply-chain costs. Therefore, it is mainly viable only in markets where tax or
excise subsidies exist (such as in Fiji) or where air-quality standards drive interest. It is interesting
to note that within Fiji, most of the LPG market is for taxi fleets, and that in Fiji, Guam and
Vanuatu, there are significant bus fleets, although these run on diesel, not LPG.
The determination of specific market sizes between land and maritime transport consumption
has proved to be a difficult exercise during this study: energy statistics normally group transport
figures or fuel types collectively across both land and maritime transport.7 However, the size of
the overall transport energy sector does demonstrate that technical potential exists to expand
the use of LPG or to introduce natural gas as either LNG or CNG.
For the maritime sector, natural gas is emerging as a promising fuel option for large, newly-
built international tanker and cargo vessels.8 Although comprehensive data are unavailable, the
approximately 2,250 marine vessels registered within the Pacific islands encompass around
20 different classes of vessels. Of these, fishing fleets represent the largest proportion at 30%
and cargo vessels account for 14%; the majority are registered in Fiji, FSM, RMI and Samoa (see
Appendix E for a detailed breakdown).
6 As mentioned earlier, no data were available on the aviation sub-sector.

7 The University of the South Pacific (USP) commenced a research project during the course of this study to address data gaps in fuel consumption for Pacific GHG reporting of the
marine sector, however, preliminary results from this work were not available at the time of writing. The breakdown that could be discerned is represented within the detailed
energy table in Appendix D.
8 Case studies are available which demonstrate opportunities for long-range vessels.
9
2.2.4 Residential and Commercial Use

Figure 6 shows the fuel usage across the region for residential and commercial applications, with
Appendix D providing a more detailed breakdown of the data.
Figure 6. Total Energy Demand by PICT for Residential and Commercial Sectors by Country
Residen,al/Commercial Energy
4,000,000
PNG Biomass = 5,2045,025 MMBTU; PNG Total = 54,635,603 MMBTU
3,500,000
3,000,000
2,500,000
MMBTU
2,000,000
1,500,000
1,000,000
500,000
0
PNG
Timor Leste
Samoa
Fiji
KiribaD
FSM
New Cal.
Amer. Samoa
Tonga
Tuvalu
Cook Is.
CNMI
RMI
Niue
Nauru
Solomon Is.
French Poly.
Guam
Vanuatu
Palau
LPG Kerosene Biomass
As previously mentioned, biomass has a large market in many of the countries and kerosene is
significant, particularly in PNG. LPG is used mostly for cooking and hot water (in both residential
and commercial settings). It has also been introduced for new commercial applications in the last
decade, notably for air conditioning in Fiji, Tonga and Vanuatu.9
Although separate data on residential and commercial use of fuels are not widely available,
national household surveys do give some indication of patterns in different countries. What this
tends to show is that households may use a diversity of energy fuels, depending on a range
of factors such as price, accessibility, personal preferences and cultural influences.10 This is an
important point to remember when one considers the substitution potential for LPG over fuels
such as kerosene and biomass. Households use both high- and low-cost fuels, depending on
access, budget and personal preferences and/or needs. Figure 7 provides a breakdown of available
household energy access and pricing data.
9 Hale & Twomey (2013) Pacific Islands: LPG Supply and Pricing
10 Thomas Lynge Jensen, Environment and Energy Specialist (2011), “Selected Findings including Socio-Economic from recent UNDP-supported Household Energy Surveys in Pacific
Island Countries”, Environmental and Social Impact Assessment of Renewable Energy Projects Training Workshop, Novotel Hotel, Nadi, Fiji, 11–15 April 2011.
10
Figure 7. Household Cooking by Fuel Type, including LPG Prices, First Quarter 2014
Figure 7. Household Cooking by Fuel Type, including LPG Prices, First Quarter 2014
100% 6
90%
5
Household access to cooking type
80%
70%
4
LPG price (USD/kg)

60%
50% 3
40%
2
30%
20%
1
10%
0% 0
LPG Stoves Kerosene Stoves Cooking using biomass

Cooking using electricity LPG price w/o tax LPG price with tax
(Source: SPC SPC

(Source: Development Indicators
Development and and
Indicators Pacific FuelFuel
Pacific PricePrice
Monitor)
Monitor)
2.3 Public Power-Sector Fuel Use Profile

2.3
There is Public Power-Sector
considerable diversity in fuelFuel Use
used for Profile
power generation, as illustrated in Figure 8. This
variance
There is strongly influenced
is considerable diversity inby fuel
four used
factors: the status
for power of the country’s
generation, development,
as illustrated in Figure its
8.
This variance
population is strongly
size, influenced
its industrial activity,byand
fourwhether
factors: or
thenot
status of the country’s
significant hydropower development, its
resources are
population size,Guam
available. Both its industrial
and Newactivity,
Caledoniaandhave
whether or not significant
considerably larger fuel hydropower
use than thatresources are
of the other
available.
countries. Both
Guam’sGuam and
large New Caledonia
electricity demand have
is dueconsiderably
to significantlarger fuel use
commercial than
and that of
tourism the other
sectors, high
countries. Guam’s large electricity demand is due to significant commercial
energy use per household, and a large permanent military establishment. In New Caledonia, and tourism sectors,
the
high energy use per household, and a large permanent military establishment. In New Caledonia,
nickel mining industry is a major driver of electricity generation and consumption. However, these
the nickel mining industry is a major driver of electricity generation and consumption. However,
volumes
these are recorded
volumes within the
are recorded ‘industry’
within profiles;profiles;
the ‘industry’ domesticdomestic
demand for powerfor
demand is much
powersmaller
is muchby
comparison.
smaller Both Fiji and
by comparison. BothPNGFiji also
and have significant
PNG also hydropower
have significant resources resources
hydropower available for power
available
for power generation,
generation, which
which are not are not
shown here.shown here.
13
11
Figure 8. Public Power-Sector Fuel Use (MMBTU) in PICTs11
20,000,000
1,600,000
1,400,000
1,200,000
15,000,000 1,000,000
800,000
600,000
400,000
200,000
MMBTU
0
10,000,000
Amer.
Palau
Samoa
RMI
FSM
Tonga
Solomon Is.
Vanuatu
Cook Is.
Nauru
Tuvalu
Niue
KiribaI
Coal
HFO
5,000,000 Diesel
0
PNG
CNMI
Timor Leste
New Cal.
Amer. Samoa
Samoa
RMI
Niue
Fiji
FSM
Tonga
Cook Is.
Nauru
KiribaI
Tuvalu
French Poly.
Solomon Is.
Guam
Vanuatu
Palau
(Note: This Figure does not include renewables)
Many PICTs are dependent on imported diesel or HFO for most of their power generation,
with renewables supplementing supply to varying degrees. Only New Caledonia and PNG use
additional fuel sources, as previously mentioned. In PNG, there is a joint venture (Porgera Joint
Venture) which generates its power from a 62 MW gas-fired plant at the Hides gas field. However,
detailed data on natural gas consumed at this power plant were not available to this study.
Renewable energy is expanding in the Pacific countries. It currently totals around 25% of the
annual electricity generated by public utilities (see Table 2). For the purpose of this study,
renewables are not quantified with a view to replacing them with either LNG or LPG. However,
their existing and growing capacity needs to be taken into consideration as competing alternative
fuel options. The most significant impact of renewables has been for those utilities where access
to reliable hydropower is available (e.g. Fiji, New Caledonia and PNG). Some Pacific countries have
made significant wind-power investments: Tahiti (French Polynesia) generated over 25% of its
electricity needs in 2011.
11 excludes renewables and IPPs
12
Table 2. Gross Generation by Source in PICTs, 201112
PICT Utility ADO/IDO HFO Coal Hydro Wind Solar PV12 Total % RE+
A. Samoa ASPA 153,910 - - - 1,081 154,991 0.7%
Cook TAU 28,870 - - - - 28,870

Islands
Fiji FEA 256,220 83,540 456,469 4,977 35,978 837,184 59.4%
Guam GPA 29,872 1,801,036 - - - 1,830,908
French EDT (Tahiti) 132,034 352,264 181,313 489 666,100 27.3%

Poly.
FSM CPUC - 7,701 - - - 7,701

(Chuuk)
FSM KUA 6,504 - - - - 6,504

(Kosrae)
FSM PUC 33,241 - - - - 33,241

(Pohnpei)
FSM YSPSC 13,430 - - - 16 13,446 0.1%

(Yap)
Kiribati PUB 21,826 - - - - 21,826
Nauru NUC 22,026 - - - 51 22,077 0.2%
New Cal.* EEC, 28,369 1,123,554 635,694 455,211 52,312 4,056 2,299,196 22.3%
ENERCAL
NMI CUC 186,685 - - - - 186,685

(Saipan)
Palau PPUC 76,677 - - - 334 77,011 0.4%
PNG PNGP 221,064 141,111 - 766,480 - - 1,128,655 67.9%
RMI KAJUR 14,022 - - - - 14,022

(Ebeye)
RMI MEC 61,730 - - - - 61,730

(Majuro)
Samoa EPC 73,773 35,248 8 109,029 32.3%
Solomon Is. SIEA 83,810 - - - - 83,810
Timor- 318,000 318,000

Leste*
Tonga TPL 52,391 - - - - 52,391
Tuvalu TEC 6,531 - - - 41 6,572 0.6%
Vanuatu UNELCO 55463 - - 4,295 67 59,825 7.3%
Total 1,530,091 2,703,652 483,398 1,439,510 33,476 38,069 6,228,196
% of total 24.6% 43.4% 7.8% 23.1% 0.5% 0.6% 100.0% 24.3%

* All generation data shown for 2011, except New Caledonia and Timor-Leste (data for 2013).
All data sourced from PPA Benchmarking Report 2012, except for Fiji (Fiji Electricity Authority 2013), New Caledonia (ENERCAL
2012), PNG (PNG Power 2013), and Electricidade de Timor-Leste (Guterres, 2013).Excludes IPPs (MWh) and Biomass. Biomass
was removed because the raw data did not distinguish between biomass used for heating, cooking and power generation.
12 photovoltaic
13
IPPs also play an important role for some utilities. The Guam Power Authority receives around
40% of its electricity supply from three suppliers (Marianas Energy Company, Taiwan Electrical
and Mechanical Engineering Services, and Tanguisson Power Plant). Public distribution for the
main grid of Noumea in New Caledonia is also mostly reliant upon purchases from the Prony
power plant operated by ENERCAL. In PNG, the main grid of Port Moresby receives around 30% of
supply from the independently operated Kanudi thermal power station.
Heavy fuel oil (HFO) is a dominant fuel option in the larger power-producing countries due to cost
savings where volumes are sufficient to justify the more difficult fuel handling and logistics. In Fiji,
for example, HFO is currently around US 20 cents per litre less than diesel for power generation.13
Fiji also plans to expand HFO capacity since its initial uptake in 2007. The Fiji Electricity Authority
purchased 36 MW of additional HFO power generation capacity in four Wartsila generator sets
that will be installed at the existing Kinoya Power Station and delivered in 2015.
Despite these movements towards greater utilisation of HFO, LNG is still being considered as
a competitive fuel alternative. Guam, for example, is undertaking feasibility studies of the use
of LNG as an alternative fuel to HFO in power generation, with a goal to reduce costs and help
comply with new Environmental Protection Agency (EPA) air emissions requirements. Timor-Leste
is also a large user of HFO in its power sector but is expecting to convert to local supplies of
piped natural gas for power-generating purposes within the next few years. New engines that
were procured in the recent development and expansion of the power sector in Timor-Leste
were purchased with this fuel-switching capacity in mind.14 Some trials of LPG in generation
applications have occurred; however, price competitiveness to conventional fuels has proven an
obstacle.
Across the Pacific countries, considerable varieties of electricity generator types are in operation,
with varying ages and potential for conversion to gas fuels. Table 3 provides a more detailed
profile of electricity generation and associated petroleum fuel consumption for each of the
utilities at a country level. Despite the small size of the power sector in the majority of the
countries, there remains potential to introduce alternative fuels into these sectors. In an attempt
to ground the practicalities of the various challenges for substituting alternative fuels in the
power sector, available data on specific engine types in operation within each of the countries
covered within the study have been collated (see Appendix J for complete list).
13 Fiji Electricity Authority (FEA) Annual Report 2013.

14 Presentation by Virgilio F. Guterres (General Director of Electricity), Asia-Pacific Energy Forum 2013.
14
Table 3. Electricity Utilities’ Installed Capacity, Fuel Consumption and Tariffs
PICT Installed Gross Gross generation by Fuel consumption (ML) Energy equivalent (MBTU) Tariff Structure (USD/kWh)
capacity generation petroleum products
(MW) ex. IPP (MWh)
(MWh)
ADO/IDO HFO ADO/IDO HFO ADO/IDO HFO Res. Comm. Ind. Gov.
American 41.8 154,991 153,910 - 40.6 - 1,483,811 -

Samoa*
CNMI 126 186,685 186,685 - 87.1 - 3,185,261 -
Cook Islands 10.1 28,870 28,870 - 7.7 - 281,656 - 0.60 0.66 0.66 0.66
Fiji* 218 801,206 141,397 183,358 35.7 41.1 1,306,610 1,634,788 0.19 0.24 0.24 0.24
French 271 666,137 132,034 352,264 23.5 73.4 860,683 2,922,047

Polynesia
FSM 25.7 60,892 53,175 77,01 13.4 2.3 488,613 90,164 0.39 0.47 0.48 0.49
Guam 553 1,059,094 29,872 1,801,036 7.3 447.0 266,554 17,793,347
Kiribati 5.5 21,826 21,826 - 5.7 - 210,133 - 0.41 0.57 0.72 0.72
Nauru 4.45 22,077 22,026 - 6.2 - 226,992 - 0.16 0.26 0.52 0.21
New 359 2,264,341 28,369 1,120,874 4.2 266.6 152,288 10,612,385

Caledonia*^
Niue 2.1 3,000 3,000 - 0.7 - 26,132 - 0.49 0.49 0.49 0.49
Palau 30.3 77,011 76,677 - 25.0 - 914,627 -
PNG* 122.1 362,175 221,064 141,111 65.8 30.0 2,406,608 1,192,285
RMI 22.2 75,752 75,752 - 18.7 684,295 -
Samoa 35.6 109,029 73,773 20.5 748,707 - 0.43 0.43 0.43 0.43
Solomon 20.6 83,810 83,810 - 22.1 810,156 - 0.82 0.88 0.88 0.88
Islands
Timor-Leste* 286 318,000 318,000 76.6 - 3,050,317
Tonga 13.8 52,391 52,391 - 12.8 467,429 - 0.52 0.52 0.52 0.52
Tuvalu 3.2 6,572 6,531 - 1.8 66,371 - 0.43 0.58 0.58 0.58
Vanuatu 23.9 60,632 55,463 - 12.4 453,751 - 0.91 0.52 0.52 0.52
All data derived from Pacific Power Benchmarking Report (2012), unless otherwise noted.
Excludes Renewables and Coal Power Generation
*American Samoa Power Authority (2013); Fiji Electricity Authority (2013); ENERCAL (2013); Electricidade De Timor-Leste (Guterres, 2013); PNG Power (2013)
15
2.4 Industry Sector Profile

2.4 Industry Sector Profile
As mentioned previously, industrial demand for energy accounts for approximately 18% of the
total demand
As mentioned in PICTs.industrial
previously, Figure 9 provides
demand information onaccounts
for energy the demand
forby country.
approximately 18% of the total
demand in PICTs. Figure 9 provides information on the demand by country.
Figure 9. Fuel Used in Industrial Sector by Country
Figure 9. Fuel Used in Industrial Sector by Country
25,000,000
20,000,000
15,000,000
MMBTU
10,000,000 HFO
Diesel
5,000,000
Note: Information on the Guam IPP fuel use was not available at time of writing.
Note: Information on the Guam IPP fuel use was not available at time of writing.
The largest demand is in PNG, which has multiple, significant existing and proposed mining projects
that use
The various energy isresources
largest demand for independent
in PNG, which has multiple, power generating
significant purposes,
existing and such
proposed as hydro-
mining
projects
electric, that use various
geothermal, energy
diesel and resources
natural gas.forAvailable
independent
datapower generating
regarding purposes,
power such asfor the
generation
hydro-electric, geothermal, diesel and natural gas. Available data regarding power generation for
mining sector in PNG are detailed in Table 4.
the mining sector in PNG are detailed in Table 4.
16
Table 4. Selection of Mines and Associated Power Sources Operating in PNG
Project Project Status Power production
Frieda River Proposed Proposed 160 MW hydroelectric scheme for the copper-gold project.
Lihir Operating Independent power currently produced by a 52.8 MW geothermal plant.
Ok Tedi Operating The Ok Menga hydroelectric run-of-river scheme supplies about 75% of the project’s energy
requirements. Maximum power output from Ok Menga is 57 MW. A 45 MW diesel power station
and two diesel-fired gas turbine generators with a combined capacity of 16 MW at Tabubil, and
a two MW hydroelectric power station at Yuk Creek, meet any additional power.
Porgera JV Operating Porgera generates power from a 62 MW gas-fired plant at the Hides gas field. Total energy
consumption for overall mine operation in 2013 was 7,668,516 GJ (Barrick 2013 Responsibility
Report).
Tolukuma Operating The mine’s power source is a group of hydro and diesel units with capacities of 1.5 MW and 3.2
MW, respectively.
Wafi-Golpu Proposed Proposed 150 MW hydro scheme with either heavy fuel oil or LNG backup for the gold-copper
project.
Significant developments such as these mine sites, where demand is localised and intensified
for a significant time period, are of particular interest: they present an opportunity to initiate an
alternative energy market, such as natural gas. In this case, PNG is expanding its use of domestic
natural gas reserves. At such levels of demand, the associated costs of infrastructure might
be justified if an overall saving is possible in terms of fuel commodity pricing. Other sectors
within these locations would then be able to benefit from access to these energy infrastructure
investments that may not otherwise be justified for smaller demands.
However, as noted earlier, there is some ambiguity in reporting among industry uses, power
production and transport. Specific industrial applications for energy fuels in PICTs are mostly for
independent power production. A key example of this is New Caledonia’s nickel mining industry,
which currently accounts for around 67% of the country’s annual electricity use, mostly derived
from HFO. A coal-fired power plant also generates electricity for the Noumea grid.
Fiji also has a large industrial demand—most notably with the existing gold mine—which has an
annual fuel demand of over 23 million litres (ML) of diesel as an independent power producer.
Additional and larger industrial demand is also forecasted for Fiji with the proposed copper mine
to be located approximately 30 kilometres west of Suva in Viti Levu. This development presents a
major opportunity to establish an LNG-demand anchor point because the project will require an
independent power production capacity of around 100MW.
2.5 Energy Prices

The relative competition among fuel suppliers and procurement strategies varies across PICTs.
In some remote and smaller markets, there is limited competition in the supply of fuels. This,
together with vast transportation distances, adds to the unit costs.
Figure 10 provides a snapshot of average wholesale fuel pricing for the first quarter of 2014 in PICTs,
minus domestic duties and taxes. Although the chart compares fuels on a USD/L basis, this does not
equate to the specific cost per unit of energy contained in the fuels since the energy density differs. This
is, in fact, a contributing factor to end-users’ misunderstanding of the value of each fuel.
17
with vast transportation distances, adds to the unit costs.
LPG andFigure
Natural
10Gas as Alternative
provides Energy
a snapshot Sources for
of average the Pacific
wholesale fuel pricing for the first quarter of 2014 in PICTs,
minus domestic duties and taxes. Although the chart compares fuels on a USD/L basis, this does not
equate to the specific cost per unit of energy contained in the fuels since the energy density differs.
This is, in fact, a contributing factor to end-users’ misunderstanding of the value of each fuel.
Figure 10. Retail Diesel, Gasoline and Kerosene Prices: Excluding Taxes and Duties,
FigureQuarter
First 10. Retail Diesel, Gasoline and Kerosene Prices: Excluding Taxes and Duties, First Quarter
2014
2014
2.25
2
1.75
1.5
USD/L
1.25
1
0.75
0.5
0.25
0
Gasoline Diesel Kerosene Av. Gasoline Av. Diesel Av. Kero
(Source:SPC
(Source: SPCPacific
PacificFuel
FuelPrice
PriceMonitor)
Monitor)
Thebase
The baseprice
priceofofLPG
LPGasas delivered
delivered to to PICTs
PICTs is is generally
generally benchmarked
benchmarked to to
thethe Saudi
Saudi Aramco
Aramco CPCP(CP)
(CP) which recently became more correlated to crude oil prices. Distribution
which recently became more correlated to crude oil prices. Distribution and retailing costs andand retailing costs
and margins are then added. Bulk LPG pricing is not currently monitored by regional bodies such
margins are then added. Bulk LPG pricing is not currently monitored by regional bodies such as the
as the SPC and is therefore not readily available at present for each PICT. Anecdotal evidence
SPC and is therefore
suggests not readilyinavailable
that the distribution at present
small-scale for each
bulk ships PICT.
to PICTs Anecdotal
would evidence
cost around suggests that
USD350–500/
the distribution
tonne in small-scale
(or US 0.35–0.50 bulk ships to[kg])
cents/kilogram PICTs
in would
places cost
sucharound USD350–500/tonne
as Fiji or Tonga, and more for (orislands
US 0.35–
further
0.50 from the supply
cents/kilogram sources.
[kg]) in places such as Fiji or Tonga, and more for islands further from the supply
sources.
In general, LPG distribution and retailing costs are relatively high due to the low volumes
Indelivered
general, LPGto most PICTs. This
distribution and is demonstrated
retailing costs areinrelatively
Figure 11 which
high due compares
to the lowannual
volumesvolumes to to
delivered
retail pricing. Fiji and New Caledonia have comparatively lower pricing at higher volumes, as does
most PICTs. This is demonstrated in Figure 11 which compares annual volumes to retail pricing. Fiji
Tonga, which benefits from being on linked shipments with Fiji.
and New Caledonia have comparatively lower pricing at higher volumes, as does Tonga, which
benefits from being on linked shipments with Fiji.
Figure 11. Retail LPG Prices in Comparison to Volumes
Figure 11. Retail LPG Prices in Comparison to Volumes
6
Retail LPG (less tax) in USD/kg
Palau
5
Niue
4 Vanuatu
Cook Islands
3 New Caledonia
Kiribaj
2 Tonga
Fiji
1 20
0
0 5,000 10,000 15,000 20,000 25,000
Annual LPG volume (tonnes)
Note: Based on available data

Note: Based on available data
Compared to LPG, kerosene benefits significantly from economies of scale because domestic
18
kerosene is generally shipped to the islands as a proportion of bulk jet-fuel deliveries—typically in
Compared to LPG, kerosene benefits significantly from economies of scale because domestic
kerosene is generally shipped to the islands as a proportion of bulk jet-fuel deliveries—typically
in the range of 5 to 15%—but this differs depending on commercial flight needs in and out of
each island. A contradiction to this pricing trend is also found in examples such as Fiji, which
is known to have one of the region’s larger and more tightly regulated and competitive energy
markets.
HFO is generally considered to be much cheaper than other fuels. The Fiji Electricity Authority
publishes fuel pricing in its annual reports. As an indication of pricing, the 2013 report listed
the annual mean price at approximately US 0.75 cents/litre, which is around US 0.43 cents/
litre cheaper than the average regional diesel price, and US 0.21 cents/litre cheaper than the
wholesale price of diesel in Fiji. Because the fuels have similar energy content per litre, this price
difference is the rationale behind movements towards greater utilisation of HFO in the power
sector, despite the higher levels of particulate emissions (as per the Fiji example).
2.6 Existing LNG Use in the Asia–Pacific Region

LNG has a strong presence and is already being used in the broader Asia–Pacific region in a
variety of ways, as the following examples demonstrate:
nn Indonesia: in 2014 Hoeghe LNG supplied a Floating Storage and Regasification Unit (FSRU)
linked to the internal gas distribution system for Lampung, and sold the gas to Perusahaan Gas
Negara (PGN)
nn Singapore: British Gas imports LNG to supply natural gas to Singapore through a hub operated
by Singapore LNG (SLNG)
nn Australia: EVOL (Western Australia) supplies several IPPs that operate engine-based power
generation for mining companies
nn Australia: EVOL supplies a Tasmanian dairy factory for use in an industrial boiler
nn Australia: a Victorian dairy company is supplied LNG for a fleet of large milk supply trucks.
Importantly for this study, the availability, technology, awareness and experience in using LNG
in small volumes is increasing. Numerous studies have already been undertaken to determine
its applicability to remote-area power generation and use. Some public commitments have also
been made, which include the following countries:
nn Indonesia: Pertamina has committed to powering multiple remote-area power supplies with
shipped LNG. An engine-based power plant in Bali was due for commissioning in Q4 2014.
nn Hawaii: Hawaii Gas is investigating the use of LNG for power generation and substitution for
Syngas. It has undertaken a trial import using ISO containers, and has now called for tenders to
supply bulk LNG.
nn Guam: The Guam Power Authority (GPA) appears to have committed to a medium-term strategy
to use LNG for power generation. The 2013 Annual Report of the GPA indicated a seven-year
program to replace all baseload power-generating units with combined-cycle gas turbines:
“GPA is currently exploring the number of new plants to install. The range of costs for the
generation facilities and the LNG regasification plant are estimated to be between [USD] 500
and [USD]800 million, depending on the number of generators to be installed. However, nearly
a billion dollars in net present value savings will be achieved over a 30-year period despite the
enormous capital infrastructure cost associated with implementation plans in the Integrated
Resource Plan (IRP).”15 LNG use is estimated to save 13% of fuel costs, or USD30 million or more,
with implementation beginning in 2021.
15 GPA. (2013). Taking the right steps: 2013 GPA Annual Report. http://guampowerauthority.com/gpa_authority/investors/gpa_annual_reports/php, p.24.
19
nn The Caribbean: Crowley Maritime Corp has signed an agreement to supply two bottling plants
in Puerto Rico with LNG in ISO containers from the US.
nn Table 5 summarises information about LNG and CNG power-generation projects in the region
(based on available information).
Table 5. Example LNG and CNG Power-Generation Projects Operating or Planned in

the Region
Country Operator Location Capacity/Fuel Status

Australia Energy Developments Sunrise Dam 28 MegaWatt electric Operating
(MWe) LNG/Diesel
Australia Energy Developments Darlot 12 MWe LNG/diesel Operating
Australia Energy Developments Yulara 4.5 MWe Operating

CNG
Indonesia Pertamina Bali, Pesanggaran 200 MWe Start Q4 2014
Indonesia (Pertamina) Pertamina East Kalimantan, Unknown 2015

Sulawesi, North Maluku
(6 in total)
Hawaii Gas Hawaii Gas/ Oahu Unknown Planned. Trial import of

HECO LNG complete.
Planned Guam Power Authority Guam HFO Planned
2.7 Existing Fuel Supply Chains

2.7.1 Diesel, Kerosene, ULP, Fuel Oil
Singapore is the main regional market for the Pacific region, although the source of supply for
refined petroleum fuels can be from any of a number of regional refining centres including Korea,
Japan, Taiwan, India and most recently Russia. A number of petroleum supply-chain models are
used in the Pacific region. These include:
nn medium-range tankers (MRTs) from supply centres such as Singapore to supply PICTs including
Guam, Fiji, French Polynesia, New Caledonia, American Samoa, Samoa, Solomon Islands, which
have significant storage capacity and often have multiple drops per voyage
nn onward transport by means of smaller local coastal tankers to smaller markets such as Kiribati,
Tuvalu, Tonga and Cook Islands
nn ISO containers (and in some cases containers filled with 200-litre drums) from New Zealand
and other secondary supply points to some small markets such as Rarotonga, Aitutaki, Tuvalu
and various outer island groups, and
nn high-seas fuel supply for the fishing fleet, with mother ships sailing directly from regional
refining centres to refill a multi-vessel fleet of small supply ships, which in turn supply fuel
directly to fishing vessels on the high seas, thus saving them from the need to pause their
fishing activities to re-fuel.
Although only a snapshot of regional supply arrangements that can be subject to change, these
existing supply chains demonstrate the capacities for bulk supply options to PICTs as well as
further redistribution options.
20
Figure 12 shows the supply routes used in the northern part of the region.
Figure 12. PetroCorpVITAL Supply Chain
Northern supply chain cluster
Figure 13 shows the location of ports in the region.
Figure 13. Local Coastal Tankers/Medium-Range Tanker Port Terminal in PICTs
(Source: SPC)
2.7.2 Current LPG Supplies

Current gas supply to PICTs is limited to LPG in the form of either butane or propane, or propane/
butane blends, which are transported in bulk on purpose-built LPG tankers, in ISO containers or in
filled cylinders, directly to small, more remote island groups.
21
The transport of liquid petroleum products to smaller islands (using local coastal tankers, ISO
containers or 200-litre drums) increases fuel costs substantially, albeit in relatively small volumes.
Some PICTs achieve fuel prices similar to those of Australia (through government-controlled
tenders and/or fuel-price regulation). Therefore, it could be argued that they do not suffer any
particular disadvantage from their remoteness or low volumes. However, two important points
should still be considered in these instances: (i) the share of Gross Domestic Product (GDP) that
fuel imports represent is much higher in the PICTs in general than in more developed economies;
and (ii) the use of these imported fuels in power generation presents a significant disadvantage
for PICTs when compared to larger economies where other, lower-cost fuel options are more
readily available.
Geogas Trading is the major wholesale supplier in the Pacific region. Origin Energy Australia is the
major importer for the majority of PICTs, and the South Pacific Petroleum Corporation (SPPCorp)
is a major importer in the northern islands. Origin Energy operates in American Samoa, the Cook
Islands, PNG, Samoa, the Solomon Islands, and Vanuatu, and is a major shareholder (51%) in Fiji
and Tonga, trading as Fiji Gas and Tonga Gas, respectively (Figure 14). Smaller distributors are also
present in the southern islands, such as Blue Gas in Fiji (30% market share), as well as Kiribati
Oil Company Limited (KOIL), the sole distributor in these islands. SPPCorp imports LPG for Guam,
Micronesia, the Northern Marianas and Palau, within which various additional distributors operate.
Figure 14. Origin Energy Australia’s LPG Supply to PICTs
(Source: http://www.originenergy.com.au/1760/Where-we-are)
22
Most of the LPG used in the countries south of PNG is sourced from the east coast of Australia
(Brisbane and Sydney) and the west coast of the north island of New Zealand (Taranaki). New
Zealand also produces LPG as a by-product of its natural gas production, shipping from Taranaki
for domestic consumption and for export to Pacific islands. PNG, Vietnam or North America could
emerge as a significant supplier of LPG to the Pacific region in coming years.
Geogas brings bulk shipments of LPG into Fiji, Guam, Tonga, the Cook Islands, New Caledonia, the
Solomon Islands and Vanuatu, and uses 18-tonne ISO containers to distribute LPG to smaller-
demand locations such as Kiribati. Sub-distribution occurs in the form of cylinder crate deliveries
and individual cylinders at the smallest end of the supply chain.
In the region more broadly, only Hawaii currently has a gas distribution network of any notable
scale. It uses Syngas manufactured from refined products,16 which could be more expensive than
imported LNG. Total gas volumes sold and consumed vary significantly throughout the region, but
remain small relative to total world demands.
16 LNG for Hawaii study.
23
3 Research Question 1: Why would expanding

the use of LPG and introducing natural gas be
beneficial for Pacific Island Countries
and Territories?
3.1 Context
PICTs face unique challenges in regard to their small, remote island economies, limited natural
resources, and long distances to major markets. Their heavy dependence on imported liquid fossil
fuels for their energy needs makes them vulnerable to high-cost and volatile fuel prices.
In addition, these countries are among the most vulnerable in the world to the impacts of climate
change and natural disasters. The rises in sea levels and increases in ocean temperatures are
impacting on communities and livelihoods. Many island nations on low-lying land are prone to
land erosion, cyclones and tsunamis.
Demand for electricity in the region is forecast to grow by 7% each year from 2005 to 2030,
with electricity generation estimated to increase by 6.4% each year. Imported liquid fossil fuels
are expected to continue to generate electricity over this period.17 For economic, social and
environmental reasons, these Pacific countries are looking at options to reduce their reliance
on imported fossil fuels and develop alternative renewable-energy sources. New approaches
may broaden access to electricity and other energy sources for rural and remote areas, and may
provide cleaner, cheaper and more reliable energy for industry and households. Such change is
vital for the region’s long-term future.
Although the majority of the Pacific countries are reliant on imported fossil fuels, almost all are
installing renewable energy sources in some form, and PNG and Timor-Leste can use domestic
gas reserves. At the same time, recent market shifts have improved the situation under which use
of LPG could be expanded and natural gas could be a potential energy source for a few of the
PICTs.
3.2 Findings
3.2.1 LPG and Natural Gas for Cooking in the Commercial and Residential Sector
LPG has a long presence in the Pacific Islands, having been used as an energy source for at least
50 years.18 Its application as an energy source in the commercial and residential sector has been
the primary use of LPG in the region, displacing kerosene and biomass for cooking, and also for
heating (hot water systems), whilst providing a more socially and environmentally sustainable
energy resource for households. It may also be possible to stimulate demand for LPG in other ways
such as introducing subsidised cylinder exchange/deposit schemes; introducing microfinance
initiatives; or other initiatives designed to reduce overall costs for individual domestic customers
(e.g. supplying schools, hospitals, hotels and other business customers, thereby growing capacity
of suppliers, agents and depots and expanding the secondary market through reduced overall
costs for individual domestic customers).
17 Pacific Energy Update 2014, Asian Development Bank.

18 Hale & Twomey (2013) ‘Pacific Islands: LPG Supply and Pricing’, available at http://www.palauenergyoffice.com/wp-content/uploads/2013/06/Pacific-Islands-LPG-Supply-and-
Pricing.pdf
24
For social, environmental and other reasons (as mentioned above), LPG has also received much
promotion by development agencies such as the Asian Development Bank (ADB) and the World
Bank.19 The United Nations Development Program has also partnered with the World LPG
Association in promoting LPG as a resource in achieving sustainable energy goals in peri-urban
and rural populations.20 Related to this work, the World LPG Association recently released a study
specifically citing the benefits of LPG to small island developing states (SIDS). It set out the
socioeconomic benefits of LPG in addressing the premature deaths of an estimated four million
people annually from respiratory illnesses, cancers and diseases caused by indoor air pollution.
However, the study highlights cost as the principal barrier to greater utilisation of LPG in SIDS,
whereby poorer households often struggle with the upfront and ongoing costs of switching to LPG
as primary household fuel, even when the higher efficiency rates of LPG are taken into account.21
In addition, major changes in the technology, scale and economics of liquefied gas supply are
opening up opportunities for remote areas and island states to transform or augment their energy-
supply mix. Over the last five to ten years, there has been a dramatic reduction in the economies
of scale required to ship LNG cost effectively, with the advent of small-scale floating LNG storage
and regasification plants and a greater supply of smaller-scale LNG tankers – although these
techniques have not been used to date in the Pacific region.
3.2.2 Gas for Industrial and Power Generation

Australia, Indonesia and PNG are all progressing as major exporters of LNG for the region.
They are nearby and have the potential to export greater volumes of LPG, LNG and CNG. From
a broader perspective in relation to small-scale gas supply, Indonesia, some Caribbean Islands,
Hawaii and Guam are all actively looking at, or have already invested in, small-scale LNG supply
arrangements as an energy resourced for their power sectors. Small-scale LNG has also been
used in remote parts of Western China, Western Australia, Tasmania, Victoria and Turkey, and is
used increasingly for heavy-vehicle road transport along the east coast of Australia.
In this study, the power sector is a key focus for potentially increasing gas utilisation. Although
there are various energy options for electricity generation, gas has the following benefits
compared to other fuels:
nn it is one of the cleanest burning from an air-quality perspective and can be used in cogeneration
applications in dense urban areas
nn regional gas supply is growing and new supply sources are opening up with lower costs
nn supply costs are decreasing and technology is improving in small-scale shipping and distribution
nn gas utilisation can improve the range of fuel options available to a utility and therefore the
security of electricity supply
nn gas can be used in a wide variety of technologies including gas turbines, which generally have
very high efficiencies, low maintenance and quiet operation, and
nn gas can be used in processing applications within both industrial and commercial settings.
3.2.3 Gas for Transport

Within the Pacific, the development of alternative energy options has largely been focused on the
power sector. The application of alternative fuels has been limited within the transport sector,
beyond a small penetration of LPG (currently around 4%) in Fiji.
19 See for example: The World Bank (2011) The Role of Liquefied Petroleum Gas in Reducing Energy Poverty. Available at http://siteresources.worldbank.org/INTOGMC/Resources/
LPGReportWeb-Masami.pdf
20 United Nations Department of Economic and Social Affairs. Cleaner fossil fuels initiatives. Available at http://www.un.org/esa/desa/climatechange/fossil.html
21 WLPGA (2015) LP Gas: Exceptional Energy for Small Island Developing States. World LP Gas Association. Available at http://www.wlpga.org/wp-content/uploads/2015/09/lp-gas-
exceptional-energy-for-small-island-developing-states-2.pdf
25
In this regard, natural gas is a proven transport fuel that has the potential to be used in nearly
any kind of land and marine vehicle (LNG for aircraft was not considered in this study). Worldwide
uptake of LNG for transport has been significant in recent decades, with over 1,400 LNG refuelling
stations now installed globally.22 LNG trucks accounted for 7% of all truck sales in China in 2013,23
and there are now more than 15 million natural-gas vehicles in operation across 84 countries.
Iran is the global leader with over 2.86 million vehicles, followed by Pakistan with over 2.85
million.24
When used as a dedicated transport fuel in spark-ignition gas engines, LPG is also well proven
and is used globally. However, because LPG has historically had a higher price compared to natural
gas, diesel or gasoline, uptake has traditionally been in markets where subsidies exist either on
fuel taxes, vehicle taxes, registration fees, or vehicle conversion costs.
The following are some of the numerous advantages of using LPG (rather than LNG or CNG) in
light vehicles:
nn LPG has lower storage pressures and requires less sophisticated storage tanks
nn more readily available technology exists with an associated lower cost of conversion
nn PICTs can leverage transportation usage off existing LPG logistics and storage infrastructure,
and
nn LPG use can be easily scaled if demand increases are guaranteed in order to justify investment.
3.3 Issues
A range of other new energy sources, apart from gas, may be used in the Pacific region. For
example, electricity can be generated from a variety of competing resources, both renewable (e.g.
solar, wind, hydro, geothermal, biofuels, biomass, wave and tidal) and non-renewable (e.g. diesel,
HFO, LNG, LPG, CNG and coal). In addition, energy-efficiency and renewable-energy integration
technologies, such as waste heat recovery turbines, exhaust-driven turbines, and battery storage,
further crowd the landscape and compete for investment capital.
3.4 Conclusions
The Pacific region can benefit in a number of ways from the expanded use of LPG and the
introduction of natural gas. These include:
nn increasing the region’s energy security by creating diversity in the market
nn improving air quality by reducing liquid petroleum fuels and kerosene for cooking (and
contributing to an improvement in GHG emissions)
nn enabling a future transition to indigenously produced renewable biogas
nn providing lower fuel costs and breaking the Pacific’s reliance on volatile fuel prices (in some
sectors and areas)
nn promoting capacity building through the use of new equipment and technologies, and
nn increasing rural and remote communities’ access to energy.
22 IGU: FactsFigures_contentOct2014
23 IGU: World LNG Report 2014 Edition
24 NGV Global Statistics (2011) http://www.iangv.org/
26
4 Research Question 2: Is it technically viable to

expand LPG and introduce natural gas into the
Pacific Island Countries and Territories?
4.1 Context
LPG usage occurs in all PICTs and major storage systems exist at some import terminals. There
is an established supply chain that could be incrementally expanded as needed. Supply is not
constrained and the combined LPG demand of the PICTs is small relative to the rest of the region
including Australia and New Zealand. LPG faces some technical challenges in its application
in power generation, and commercial challenges around distribution and cost competitiveness
against other fuels.
Overall, there is much greater capacity to produce LNG in the broader Asia–Pacific region than
there would be potential demand from PICTs, with over 100 million metric tonnes (MT) per
year of production capacity implemented or planned in Australia alone.25 To put this production
capacity into perspective, this study illustrates a potential demand in the Pacific of less than one
million MT per year. Conversely, although significant LNG resource potential is available to PICTs,
the inherent varying and mostly small size of PICTs’ energy demands, their lack of LNG import
facilities, and their distance from export terminals introduces a variety of challenges.
4.1.1 LNG Supply Within Region

As noted previously, PNG’s and Timor-Leste’s substantial domestic reserves of natural gas can be
used locally. PNG’s mining industry, and the PNG LNG liquefaction facility are already utilising
natural gas for power generation. It is certainly technically viable to introduce natural gas to
other sectors and for other uses. A recent agreement between Exxon Mobil PNG and PNG Power26
will see 25 megawatts of gas-fired power supplied into the Port Moresby grid, whilst LNG could
theoretically be transported to smaller scale power generators around the country. In Timor-
Leste, the recent procurement of gas-compatible generators (currently running on HFO) indicates
a commitment to domestic utilisation of gas reserves that could flow into other sectors within
the country.
Other PICTs without their own reserves can access a wide variety of LNG supply terminals that
are emerging in Australia, Asia and North America, with millions of MT per year available in
supply capacity. Some are designed as liquefaction and export terminals suited to very large bulk
shipments; some are multi-purpose liquefaction and storage facilities whose primary function is
system security for a gas network; and others are solely an import terminal with a storage and
regasification purpose. Within each of these terminals, the ability to load small bulk ships, road
tankers, or ISO containers that would be suitable for shipments to PICTs also varies.
As shipping costs are significant in considering the overall delivered cost of LNG, the closer
loading points of PNG and the north coast of Australia are of particular interest. These encompass
the major LNG exporting terminals at Port Moresby (PNG) and Gladstone in Australia (see Figure
15), and the Australian truck and ISO container loading facilities of Melbourne (existing) and
Tomago (planned). A summary of gas terminals within reasonable proximity to PICTs includes:
nn PNG: PNG LNG (Port Moresby) – on stream
25 Peter Behrenbruch (2011). Liquefied Natural Gas–The Australian Race.

26 http://www.lngworldnews.com/exxonmobil-png-agrees-electricity-sale-to-png-power/
27
nn Australia: Conoco Philips APLNG (Darwin) – on stream

nn Australia: BG’s QCLNG (Gladstone) – due to be operational in 2015
nn Australia: Santos’ GLNG (Gladstone) – due to be operational in 2015
nn Australia: APA Group’s LNG gas storage (Melbourne) – able to load ISO containers
nn PNG: Interoil’s development of new LNG projects from the Elk-Antelope field – due for a final
investment decision in 2017, and
nn Australia: AGL’s proposed facility at Tomago, being built to meet AGL’s peak gas market
requirements over winter and to provide additional security of gas supply during supply
disruption events – planned.
Figure 15. Gladstone LNG Plant
(Source: www.santosglng.com)
The Tomago facility will have the following key features that make it suitable to supply some of
the smaller applications:
nn capability of processing up to 66,500 tonnes of LNG per year
nn an insulated, non-pressurised LNG storage tank capable of containing 30,000 tonnes or 63,000
cubic metres (m³) of LNG, equivalent to 1.5 petajoules (PJ) of natural gas
nn a truck-loading facility to allow the dispatch of up to 1,000 tankers of LNG per year, and
nn an estimated capital cost of USD300 million.
Further away from the Pacific, LNG is also available in Singapore, Indonesia, Malaysia, Brunei
and North America. The Singapore LNG facility’s import terminal is being used to bunker and re-
export LNG. Although it is ideal to source LNG locally near the point of demand, it could be viable
to ship containments over longer distances if there is a price advantage on the LNG purchase.
This could be the case with LNG supplied from North America.
28
The Pacific
Pacifi is well served
c Islands by container shipping (see Figure 16). This means that the use of LNG in
Service
ISO tanks is unhindered by lack of available shipping routes or capacity. Discussions with various
shipping companies reaffirm this view. Furthermore, if volumes of LNG container-based shipping
rise
OurtoPacific
whereIslands
capacity ever
Trade is abecame a constraint
multi-purpose or a concern,
liner service cateringdedicated ships
for container andcan be bulk
break chartered
cargo.or
contracted space can be purchased.
The service links Australia with New Caledonia, Vanuatu, Fiji, the Samoas, Tonga, Kiribati & the
Marshall Islands.
Figure 16. Shipping Routes Serving the Pacific
Service Frequency Cargoes

• Pacific Islands Service 16 day frequency from • Base cargo including rice, flour, wheat and sugar
Australia to Noumea, Port Vila, Lautoka, Suva, • Refrigerated foodstuffs
Apia, Pago Pago and Nuku’alofa. Transhipment • Nickel Hydroxide
service to Tarawa and Majuro • Project cargo
• Pacific Islands Service 35 day frequency from • Agricultural supplies
Australia to Santo
(Source: SPC)
Container ships visit PICTs with varying degrees of regularity. Figure 17 indicates one of the key
supply routes for general cargo (on left), and one that can accommodate LNG containers. Other
routes also serve the north Pacific from Asia and serve the east Pacific from the United States of
America (USA). Regardless of existing shipping routes, logistics companies indicated during this
study that once volumes are large enough, dedicated ships and routes may be negotiated and
supplied.
Port Coverage
Figure 17. Container Shipping Route for Swire Shipping’s Pacific Island Service
Transit Times
Australia / Pacific Islands Australia / Vanuatu / New Caledonia
Northbound Southbound Northbound Southbound
Melbourne * Noumea * Melbourne * Santo *

Sydney 2 Port Vila 1 Sydney 2 Prony 1
Brisbane 4 Lautoka 4 Brisbane 5 Melbourne 11
Prony 8 Suva 5 Santo 25 Sydney 15
Noumea 9 Apia 9 Brisbane 18
Port Vila 11 Pago Pago 10
Lautoka 14 Nuku’alofa 12
Suva 15 Melbourne 23
Apia 19 Sydney 25
Pago Pago 20 Brisbane 28
Nuku’alofa 22
T/S Suva to Tarawa, Majuro
www.swireshipping.com PROJECT CARGO HEAVY LIFT BREAKBULK REEFER

Updated February 2014
29
4.1.2 CNG Supply Within Region

Shipping of CNG to PICTs may be considered in one of the following forms:
nn derived from vapourised LNG shipped from an LNG terminal
nn shipped in high-pressure cylinders collated in an ISO 40’ container, with gas sourced from any
major gas pipeline in countries such as Australia, Indonesia or PNG, or
nn in a high-pressure bulk CNG ship (subject to the success of the Indonesian project), with gas
sourced from any major gas pipeline in countries such as Australia, Indonesia or PNG.
Shipment of CNG in specialised containers is relatively common and could be achieved using
existing shipping container routes. Around three ISO 40’ containers of CNG at 250 bar would
need to be shipped in order to deliver the equivalent gas contained in one ISO 40’ container of
LNG. This is because the energy density (kg/m3) of CNG at 250 bar is around half that of LNG, and
the packing density of CNG cylinders in a 40’ container footprint reduces the effective carrying
capacity.
Transporting CNG by bulk shipping is much less common. However, PLN (Indonesia) has announced
that it will ship CNG from Gresik in East Java to Lombok in West Nusa Tenggara, a distance of
approximately 580 kilometres. The planned project will fuel a 90 MWe power plant in Lombok.
In general, because the capital requirements for creating CNG are relatively small and scalable,
the solution is worth investigating. Furthermore, if the Indonesian trial is successful, it may soon
be possible to transport CNG in small-scale bulk ships.
4.2 Findings
4.2.1 Technical Viability of Expanding LPG Supply
Since LPG supply chains exist in many PICTs, the technical potential to expand LPG use is high.
There is already substantial supply and distribution infrastructure, supply chains, regulations,
experience in handling and use of LPG, and cultural acceptance of using it for different purposes.
Incremental increases can probably be absorbed relatively easily within existing industry capacity,
whereas large expansions might require investment in new unloading and/or port facilities.
4.2.2 Technical Viability of Increased LPG Application for Households

In the residential sector, the fuel chosen for cooking by households varies according to
affordability, availability and local norms. Dedicated LPG stoves are available and LPG has a
higher stovetop efficiency than kerosene. It is also safer and cleaner than kerosene and traditional
biomass. However, kerosene is used commonly in the PICTs because it can be purchased in
smaller quantities and can be cheaper than LPG since it is delivered in bulk with aviation fuel
and is often subsidised. In addition, the logistics of supply and return of gas bottles to a depot
is problematic for remote communities. Biomass retains a strong foothold in rural areas as it is
readily available, free if collected by householders themselves, and the fuel that has been used
traditionally. However, there are significant opportunity costs for women (and children) who have
the main responsibility for collecting biomass in terms of the time they lose that could be spent
on income-producing or other activities.
It has been estimated that if LPG displaces all cooking kerosene and biomass in the Pacific region,
the current quantities could double. In the larger markets, this sort of increase is not expected
to reduce the price significantly. However, in some subregional markets, a move from an ISO
container delivery to bulk delivery could have a significant impact on the delivered price.
30
Figure 18 shows the overall potential for increased use of LPG in household cooking across the
region. However, any impact on local LPG prices will be country specific and likely to be greatest
in places like the Solomon Islands where traditional biomass is used in large volumes.
Figure 18. LPG Growth Potential Due to Displacement of Kerosene and Biomass for
Cooking
90,000
80,000
70,000
LPG in all PICTs, Tonnes p.a.
60,000
50,000
40,000
30,000
20,000
10,000
-
Tonnes p.a. Tonnes p.a. Tonnes p.a.
LPG Use - today's volumes LPG use - at 50% displacement of LPG use - at 100% displacement of
kerosene and biomass kerosene and biomass
4.2.3 Technical Viability of Increased LPG Use in Commercial Applications

There are very few, if any, technical barriers to the greater use of LPG in the commercial sector.
This uptake could be in three main areas, as described below:

nn LPG air conditioning in all countries
nn hot water production in the more developed economies, and
nn commercial cooking and piped networks.
LPG Air Conditioning

There are commercially available gas-driven air conditioning systems. These can be cost effective
where the retail price of electricity is expensive but costs would need to be verified in any country
where installation is being considered.
Hot Water Production

There are few, if any, technical barriers to using LPG for hot water production. Electricity or
nn
diesel/oil is used for hot water generation in some PICTs. For example, New Caledonia is a
developed economy that, somewhat surprisingly, uses comparatively little LPG (~8,000 tonnes
per year). Subsidies have historically been given to hotels in the tourism industry for running
electric hot water systems. LPG is likely to be cheaper if subsidies like this are removed, with
both LPG and solar power available as potential alternatives.
31
Commercial Cooking and Piped Networks

The implementation of piped networks for commercial use would face planning, logistical, and
possibly economic challenges, but few technical ones. It is possible to create LPG piped networks
in economic zones to better stimulate uptake. Increasing LPG use in the commercial sector could
benefit household LPG prices through better economies of scale in the supply chain. Opportunities
for growth in LPG volumes for commercial and industrial use exist under the following condition:
that there is an opportunity to develop small-scale gas pipe networks in economic zones to create
an initial demand for LPG, or at least to benefit from bulk delivery cost structures.
4.2.4 Technical Viability of LPG for Power Generation

LPG has historically been a much more expensive fuel than diesel or gasoline. Therefore, it
has not been feasible for use in large-scale power generation. However, in terms of technical
viability, there are some trials underway (through BlueGas in Fiji) in which up to 30% LPG is being
blended into large stationary diesel engines. This practice is not supported by all engine original
equipment manufacturers (OEMs) because most would recommend the use of separate spark-
ignition gas engines for LPG. Even so, some after-market equipment suppliers can modify diesel
engines to suit. Results of these trials are currently being compiled and are not available to this
study. If this approach is successful, it could provide an alternative fuel without major conversion
costs, as well as some improved fuel security without the need to invest in major LNG storage
infrastructure (since LPG is already being used in many countries).
Although LPG can also be used in gas turbines through liquid injection, it is not applicable in
most PICTs. Gas turbines are generally found in larger power stations and where domestic natural
gas supplies exist.
4.2.5 Technical Viability of LPG for Transport

Due to the established nature of the LPG transport industry worldwide, this study did not go into
detail on the technical viability of increasing LPG use in the transport sectors of individual PICTs.
Rather, it can be assumed that it is technically viable under the right regulatory conditions and
with suitable industry capacity building. In reality, there may be some PICTs for which having
an alternative fuel may not be pragmatic if the market is too small to support reliable and safe
industrial practices over the long term, or if it is not cost effective to do so.
4.2.6 Technical Viability of LNG for Power Generation

LNG can be used for electricity generation through a variety of different technologies, including
the conversion of existing diesel engines and boilers. This, of course, is in the situation where the
logistics and costs of shipping make it cost effective. The following list details possible options
for power generation using natural gas:
nn convert existing engines to dual or tri-fuel, and accept a slight drop in efficiency (1–3%)
nn install new gas-only spark-ignition engines
nn install micro-turbines
nn install gas turbines, and
nn convert an existing boiler that currently uses HFO or diesel.
Discussions with some of the engine manufacturers which have the more significant numbers
of installed engine capacity in the Pacific show different approaches to dual-fuel technology
32
and gas conversions. Some have tested and will support dual-fuel engine conversions for some
models, while others indicated they will not. All have gas-only technologies. The percentage of
gas that may be used in a converted engine can vary significantly based on the engine model
and manufacturer. Therefore, an individual engine-by-engine evaluation must be conducted to
determine the costs of supplying gas to any particular power station and the diesel substitution
potential.
To convert a diesel engine to dual fuel the following changes need to be allowed: installation of
LNG storage, gas fuel train, and tanker unloading facilities; new engine head; new valves; new
control system; and commissioning.
Conversion costs will vary but, for example, one company advised that the costs for conversion
of a large 10 MW low-speed engine to dual-fuel capability would be around USD1.5 million per
engine. Subject to delivered fuel prices and engine size, the payback on this investment could be
very short (possibly less than two years). However, in reality, this may not be the case in the Pacific.
The following additional observations of gas-engine options for generation were made after
discussions with various other engine manufacturers:
nn larger, low-speed diesel engines are more tolerant of dual fuel than smaller, high-speed diesel
engines
nn engines converted to dual fuel exhibit a lower efficiency when running on either diesel or HFO
(up to 3%) and lower efficiency when running on gas (up to 1%)
nn it may make sense to install new gas engines rather than convert old ones to maximise
efficiency when operating them on gas
nn once commissioned on dual fuel, the percentage of diesel use can vary from 0% to 99%,
depending on the brand of engine
nn having dual or tri-fuel capability (LNG+HFO, or LNG+diesel) improves fuel security
nn both OEM supplied and after-market conversion systems exist, but OEM-supplied systems are
generally constrained to select models, and
nn some engines in the Pacific are already configured as dual fuel and the effort to convert them
to run on LNG could be relatively minor.
4.2.7 Technical Viability of LNG for Transport Sector

Assuming that the considerations of transporting and processing LNG in small countries have
been addressed, then the focus in looking at the application of gas in the transport sector has
primarily been on investigating the potential use in heavy vehicles (trucks and buses) of LNG or
CNG derived from the so-called LCNG process (i.e. vapourising LNG at the desired CNG pressure –
see Figure 19). This is technically feasible and there are already over 400 LCNG refuelling stations
around the world27.
27 IGU: FactsFigures_contentOct2014
33
Figure 19. Natural Gas in Transport Applications: LNG and the LCNG Process
LNG fueled heavy duty trucks & buses. LNG

tank
LNG trailer LNG

LNG dispenser
submerged
LNG pump
saturation
vaporizer
LNG
CNG fueled light goods vehicles & cars. tank
product
vaporizer high pressure CNG
LNG trailer buffer dispenser
LCNG
Odorizer
high-pressure
pump
(Source: Chart LNG)
In larger engines or vehicle fleets, the cost of fuel switching or blending generally needs to
be justified by intensive fuel use. There are substantial costs involved in undertaking engine
conversion, having on-vehicle fuel tanks, developing land-based storage of LNG, providing
skills training for the conversion work and ensuring good vehicle maintenance. Therefore, the
more specialised and intensive utilisation environments of commercial and industrial vehicles
are considered more likely to take up LNG/CNG. Heavy vehicles can also be set up as dual-fuel
capable (i.e. diesel engines with gas injection) or gas-only (i.e. using spark-ignition engines).
This study also conducted a brief review of the potential in smaller commercial and private
vehicles. Unlike in heavy vehicles, gas stored on board light vehicles and buses is typically CNG,
created through the so-called LCNG process, as described above. Some potential exists, though it
is not likely to be a substantial demand. LNG and CNG conversions are currently available as OEM
or after-market solutions in a variety of configurations (see Figures 20 and 21).
EN G IN E TECH N O LO G IES
Figure 20. Gas Engine Technologies
-S U M M A R Y O F N A TU R A L G A S EN G IN E TY P ES
NG Engine
Technologies
Spark Compression
Ignition (SI) Ignition (CI)
High Pressure
Stoichiometric Lean Burn Fumigated Direct Injection
(HPDI)
(Source: Shell)
Copyright The Shell Company of Australia Limited October 2012
October 2012 9
34
VEHICLE BACKGROUND
Figure 21. Typical – LNG TANK SCHEMATIC
Transport Configuration
2
1
3
7
4 9
6
5
-160°C 8
1) Liquid dispenser 3) Relief valve (PRD) 5) Vapour space – small

2) Top fill – Spray of 4) Fuel gauge – can
unit – Fuel stored as – allows escape of boil hole near top of tank
liquid allows faster be mounted in cab or
cryogenic liquid at off gas to prevent absorbs excess pressure,
filling by fuel receptacle
fuelling depot pressure build up extends tank hold time
6) Tank - Insulated by double 7) Economizer regulator

8) Vaporiser – heated 9) Fuel – enters engine as a
walled stainless steel tank, – determines and controls
with engine coolant to gas (pressure depends on
vacuum space between layers tank operating pressure to
evaporate fuel engine type)
to act as thermal barrier minimise boil off
(Source: The Shell Company of Australia)

Copyright The Shell Company of Australia Limited October 2012
October 2012 11
Industry consultations during this study indicated that one supplier in China recently reported
double-digit growth in its supply of gas-only engines. This growth has been attributed to its
capacity to avoid some of the early problems with dual-fuel engines. Figure 22 illustrates current
uptake and typical applications of LNG and CNG.
N A TU R A L G A S TECH N O LO G Y A N D
Figure 22. LNG and CNG Use in Vehicles, 2012
FU EL CH O ICE B Y A P P LICA TIO N
Gas Cu r r e n t
A p p lica tio n Pow er P a y lo a d Fu e l / Y e a r Fu e l Ch o ice
Te ch n o lo g y U p ta k e
Direct Injection
Large Marine >5,000 HP >300T Up to 30M L ~100
Dual Fuel
Off-Highway
1,000-5,000 Direct Injection
Rail/Marine
Mine Truck
HP
>200T ~1,000,000 L
Dual Fuel LN G ~0
Heavy Duty Direct Injection

On- highway 400-600 HP 30-140T ~100,000 L Dual Fuel ~10,000
trucks Spark Ignited
Medium Duty Spark Ignited
Buses 200-350 HP 5-30T ~40,000 L Lean ~ 300,000
Refuse Stoich + EGR
Light Duty
Pass. Cars <300 HP 0.5-2T ~4,000 L Spark Ignited CN G ~ 14,000,000
LD Trucks
Values are coarse estimates and information is based on Westport’s best knowledge
(Source: Westport Power Inc.)

LNG is more suitable than CNG for heavy duty and off- highway applications
Copyright The Shell Company of Australia Limited Copyright 2012 Westport Power Inc. October 2012
October 2012 13
Various OEM and after-market suppliers are now offering dual-fuel conversions. Feedback from
industry representatives indicates a preference for OEM solutions to ensure that the formal
engineering assessment is completed to suit the rough roads and remote conditions of many
PICTs, and that the most suitable engines are converted.
35
Some fleet operators contacted during this study indicated that operation costs for dual-fuel
engines used in heavy vehicles are higher than for diesel, while other industry participants claim
they are lower. Advice from one of the leading heavy vehicle gas-engine technology providers
is that the LNG cost needs to be 30% less than the cost of diesel to justify the capital and
operational cost of fleet conversion. The same is not true for passenger vehicles, which operate
small spark-ignition engines (as opposed to traditional diesel engines).
4.2.7.1 Mining Fleet

The use of LNG in surface-based mining fleets is currently at the research and development
stage. Trials and demonstrations on a Caterpillar 793 Haul Truck have been conducted in the USA
by a third-party technology provider. It allows 30–50% use of LNG blended with diesel and uses
high-pressure direct injection (HPDI) technology.
4.2.7.2 Maritime Transport

For the marine sector, natural gas is emerging as a promising fuel option for large international
tanker and cargo vessels. This is due in part to the greater availability of LNG as a fuel, and to
the increasing stringency of various ports around the world in regard to sulphur and particulate
emissions.
There are now reference projects with ferries and off-shore supply vessels operating on LNG
engines. Feedback from the industry at the consultation workshops indicates that a simple
engine change-out or fuel-blending solution may not optimise a large vessel’s efficiency. The
fuel, engine and propulsion system should therefore be optimised together. For example, one
company has developed a complete fuel-gas handling system that can be used in conjunction
with a gas engine, with over 20 installed to date.
Common equipment required for a fuel substitution includes:

nn new engine or dual-fuel conversion kit
nn replacement fuel-storage tank (either fixed or replaceable)
nn vaporisation system
nn new fuel-control system, and/or
nn new fuel-loading system or replaceable fuel-tank system.
4.2.8 Technical Viability of Gas for Industrial Use

Current fuel use in commercial and industrial applications is very small relative to that in
power generation and transport. Even in New Caledonia, which has the largest industrial sector
of countries in this study, much of the ‘industrial’ fuel demand is ultimately for on-site power
generation purposes.
Typical uses in industry where LNG would be suitable are in direct combustion applications such
as boilers, hot water and process heat. Such an example exists in Puerto Rico where a company
is successfully substituting LNG for LPG in industrial use at a high energy-use bottling plant.
However, it is important to note that this example is also characterised by having access to
lower-cost LNG from the USA and short transport distances, which means that the use of 40-
foot shipping containers is viable. Therefore, industrial use in the Pacific is not likely to be a key
driver of fuel switching to LNG, but it may provide benefits as a secondary use following the
establishment of an LNG industry.
36
4.3 Issues
4.3.1 Issues in Using Gas for Transport
4.3.1.1 Maritime Transport
The conversion of domestic marine fleets to gaseous fuels appears to be challenging. It is also
likely to be difficult to establish sufficient demand and develop the skill base for installation and
maintenance. The expected costs of conversion are also projected to be very high. In comparison
to land vehicles, more specific technical requirements would need to be determined for each
conversion, including associated fuel-storage capability on a vessel-by-vessel basis. Based on its
lower energy density, LNG would require more space for the same energy storage and reduce
vessel range. That being said, the tourism sector (with smaller fleets) has a higher turnover than
other marine classes and could be an early ‘up-taker’ of alternative energy supplies in the region.
The opportunities to retrofit local ships face challenges on several fronts:

nn insufficient demand
nn high cost of conversion
nn low engine/vehicle turnover
nn use of low-cost HFO, and
nn lack of in-country stocks of LNG.
nn Similar to the power sector, the viability of converting a ship would need to be determined on
an individual case-by-case basis, which was not possible under the scope of this study.28
4.3.2 Energy Efficiencies through Maintenance

During the site visits in this study, it was observed that many buses are not tuned or well
maintained. A comparable or much lower investment in maintenance and tuning of the heavy and
commercial vehicle fleet might yield similar or better fuel-cost savings than any investment in
gas infrastructure and use. One such policy mechanism might be to require annual tune-ups with
renewal of registration.
4.3.3 Issues in Using Gas for Power Generation

As the viable application of gaseous fuels in PICTs’ power sectors is very much determined by
site-specific characteristics, visits to several power stations were undertaken during the research
phase of this study. These stations included:
nn Kinoya, Fiji: a 50 MW plant with 37% industrial diesel oil (IDO) and 53% HFO use
nn Tagabe, Vanuatu: an 8 MW plant powered mainly by coconut oil, and
nn Tonga: a 12 MW plant with diesel used in the engines as well as 17% renewable electricity
(mostly from solar power).
Based on the LNG pricing identified in this study, none of these three power stations would be
viable to convert, considering cost savings only. The delivered cost of LNG to each power station
is higher than the existing and projected fuel costs. Each station also has good reasons why other
courses of action are being taken.
nn Kinoya (Fiji) is moving away from diesel+HFO to HFO-only generation, based on historical prices
showing that HFO costs less than landed diesel and possibly LNG
28 Data on specific engine details and associated fuel consumption were not readily available for the majority of countries.
37
nn Tagabe (Vanuatu) uses mostly coconut oil and, at 8 MW, is too small to justify the LNG
infrastructure for bulk delivery, while containerised LNG is at this stage not cost-effective.
Unelco also stated that locally sourced coconut oil was cheaper than diesel, and pursuing this is
consistent with its corporate objectives of greater penetration of renewable energy
nn Tonga has ~7 MW peak demand and would therefore need to rely on LNG delivered in ISO
containers, since it is too small to justify LNG delivery using bulk ships. This is not cost effective.
Furthermore, it is aggressively pursuing increasing amounts of renewable energy and already
has 2 MW of solar PV installed, which is producing around 6% of overall electricity needs.
4.4 Conclusions
4.4.1 LPG for Households
Using LPG is technically feasible and beneficial but expansion would require public policies to
encourage its use.
4.4.2 LPG for Commercial and Industrial Use

Using LPG is technically feasible and expansion could be achieved in either the commercial
sector (for air conditioning) or the industrial sectors (for boilers and process heat).
4.4.3 LPG in the Transport Sector

Using LPG is technically feasible in transport in the PICTs since it is an established industry
worldwide. There are significant barriers to overcome, however, including policy, regulations, and
industry capacity in those PICTs that do not currently use LPG in vehicles.
4.4.4 LPG for Power Generation

Blending LPG with diesel into existing engines is not generally supported by OEMs, but is offered
by after-market suppliers. It can, however, be used in dedicated spark-ignition gas engines as
a direct fuel in gas turbines. To date it is has not been cost effective to use as a base-load fuel
anywhere within the PICTs studied.
4.4.5 LNG for Power Generation

Stationary power generation can offer a large single-point load source around which costly LNG
can be introduced. Each power station, however, will face different challenges in regard to the
technical feasibility of converting existing engines or securing LNG supply, the location of storage
systems, and the technical skills required to operate it. The cost of converting some of the older
engines to LNG is likely to exceed the total cost of procuring a new gas-fired engine, or is simply
not technically possible. Furthermore, each PICT has multiple power stations that would face
individual logistical challenges in securing, delivering, and storing LNG supply (see Appendix H
for fuel consumption by power station and country).
38
4.4.6 LNG for Transport

This study finds that LNG for transport, as either LNG or LCNG, is technically feasible but it faces
many technical and commercial challenges in PICTs. There is virtually no near-term market for
conversion to LNG of the maritime fleet based in the Pacific, but there could be an increasing
demand for offering LNG bunkering facilities to international fleets, or for new ships purchased
that are LNG fuelled. If LNG refuelling capabilities develop over time, PICTs may be able to
consider LNG fuel ships either as a new or second-hand purchase.
Due to the costs and technical challenges of converting and running transport fleets on
alternative fuels, it may only make sense to carry out fuel conversions in countries in which
high numbers of heavy vehicles exist, and an established technical skill base exists, so that a
conversion ‘industry’ could be established. Fiji, with over 1,600 buses in operation, may offer one
of the best opportunities to use LNG or CNG as an alternative fuel. A hypothetical scenario has
been prepared to examine and identify the potential opportunities (see Appendix C).
39
5 Research Question 3: Is it economically feasible

to expand LPG and introduce natural gas into the
Pacific Island Countries and Territories?
5.1 Commodity Prices

5.1.1 LPG
Retail LPG prices vary significantly across the Pacific where the delivered specific cost per MMBTU
is generally higher than either diesel or gasoline. This is due to the relatively low volumes, low
levels of competition, more costly infrastructure for storage and transportation, and current
wholesale pricing structure.
This study assumes that the current link to Saudi Aramco CP prices remains in place and that LPG
is not a competitor to diesel and gasoline for either the power or transport sector if it is taxed
equivalently. Table 6 illustrates the recent wholesale Saudi Aramco CP pricing history for LPG.
Table 6. Saudi Aramco CP Prices, USD/Tonne
Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun-
13 13 13 13 13 13 14 14 14 14 14 14
Propane 795 820 850 820 875 1100 1010 970 855 770 810 835
Butane 790 820 875 850 915 1225 1020 970 870 845 825 835
(Source: Argus LPG World Monthly Newsletter, Issue 14, 15 July 2014)
5.1.2 LNG
The price of LNG, either delivered ex-ship (DES) or free on board (FOB)29, is usually set by one of
four mechanisms:
nn oil-linked pricing
nn gas-linked pricing
nn subsidised pricing, and/or
nn regulated pricing.
Supplies of LNG to PICTs are potentially available from Asia (where oil-linked pricing is most
common) and North America (where gas-linked pricing is more common). Therefore, for the
purpose of this study, subsidised and regulated pricing structures are not discussed further.
Oil indexation has traditionally been the preferred pricing mechanism in East Asia. The formula
below gives an example of how LNG prices move in accordance with oil prices.
Price (in USD/MMBTU, FOB or DES) = (0.14 x Brent) + 0.60 + S + A
where:
nn the factor of 0.14 varies with the characteristics of the market and individual deals (in a supply-
long market and presumably for larger deals, the discount to oil will widen)
nn ‘Brent’ is a trading classification of sweet, light crude oil that serves as a major benchmark price
for purchases of oil worldwide
29 Refers to product loaded on ships i.e. the cost of the product plus all costs to put it on the ship.
40
nn ‘S’ is an S-curve factor to provide extra margin to the Seller if Brent is below a certain threshold,
and to reduce the overall price to the Buyer if Brent is high
nn ‘A’ means all costs and expenses (expressed in USD per MMBTU) incurred by or on behalf of
the Seller in relation to reloading cargo (LNG) at an international bunkering terminal and may
include shipping if agreed
nn ‘DES’ is delivered ex-ship to the buyer’s terminal, and
nn ‘FOB’ is free on board the delivery vessel.
For example, one such contract structure for gas-linked pricing is offered by Fortis BC, Canada
and is detailed in Appendix G. Gas-linked pricing, however is forecast to maintain a relatively low
percentage share of the near-term forward market, which also currently appears to be dominated
by contracts with USA suppliers.30 To access gas-linked LNG pricing, LNG must be shipped from
the USA to the Pacific. This may prove to be economical provided there is enough price discount
to Asian LNG markets. Some Asian buyers have already purchased LNG from North America.
Price can, and does, vary substantially among markets, applications and specific contracts with a
range (ex-terminal) of USD7–15/MMBTU (see Figure 23). Quotes obtained during this study and
other work show that LNG is currently priced at approximately USD15/MMBTU in Singapore,
USD15–16/MMBTU delivered to Japan, and approximately USD7–10/MMBTU ex-terminal in
Vancouver, depending on volumes and contract length. Small Australian-distributed applications
see USD15+/MMBTU ex-terminal price (subject to contract quantities and conditions) with USD17–
23/MMBTU delivered to Australian industrial sites for transport and stationary energy applications.
Figure 23. LNG Price Figure 23. LNG Price

Comparisons to OilComparisons
and Dieselto Oil and Diesel
25# 140.00#
120.00#
20#
100.00#
USD$per$MMBTU$
15#
80.00#
USD$per$bbl$
60.00#
10#
40.00#
5#
20.00#
0# 0.00#
Jun-06#
Dec-06#
Mar-07#
Jun-07#
Dec-07#
Mar-08#
Jun-08#
Dec-08#
Mar-09#
Jun-09#
Jun-10#
Jun-11#
Jun-12#
Jun-13#
Sep-07#
Sep-08#
Sep-09#
Dec-09#
Dec-10#
Mar-11#
Sep-11#
Dec-11#
Dec-12#
Dec-13#
Jun-14#
Dec-14#
Mar-10#
Mar-12#
Mar-13#
Mar-14#
Sep-06#
Sep-10#
Sep-12#
Sep-13#
Sep-14#
LNG#-#Indonesian#Liquified#Natural#Gas#Price#(US#Dollars#per#Million#Metric#BriIsh#Thermal#Unit)#
Diesel#-#Diesel#Price#(US#Dollars#per#MMBTU)#(New#York#Harbor#Ultra-Low#Sulfur#No#2#Diesel#Spot#Price)#
LNG#-#Japan#Liquified#Natural#Gas#(CIF)#(US#Dollars#per#MMBTU)#
Crude#-#Crude#Oil#(US#Dollars#per#bbl)#(Ave#of#WTI,#Brent,#Dubai)#
(Source:www.indexmundi.com
(Source: www.indexmundi.com –– World
World Bank)
Bank)
It is interesting to note that data on Indonesian LNG show that LNG has become less competitive
against
againstdiesel
dieselover
overthe
thelast eight
last years
eight years(see Figure
(see Figure24). Some
24). private
Some contracts
private may,
contracts however,
may, still
however, be
still
discounted relative
be discounted to delivered
relative dieseldiesel
to delivered prices.prices.
Figure 24. Indonesian LNG and New York Diesel Price Ratio (USD per MMBTU)
30 IGU World LNG report, 2014 edition.
1.40
41
1.20
(Source: www.indexmundi.com – World Bank)
against diesel over the last eight years (see Figure 24). Some private contracts may, however, still be
discounted relative to delivered diesel prices.
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Apr-07
Jul-08
May-09
Jun-11
Apr-12
Oct-09
Mar-10
Jul-13
Oct-14
Nov-06
Dec-08
Jan-11
Sep-07
Feb-08
Nov-11
Sep-12
Feb-13
May-14
Aug-10
Jun-06
Dec-13
Indonesian Liquified Natural Gas / Diesel Price Rajo (New York Harbour Ultra-
Low Sulfur No.2)
(Source:
(Source: www.indexmundi.com
www.indexmundi.com – World Bank)
– World Bank)
The most proximate detailed example of LNG procurement studies for the region is the work
undertaken in Hawaii. The Hawaii LNG study undertook a detailed analysis of the projections for
LNG FOB prices. It identified that the difference between the forecasts for oil-linked LNG prices
in Australia, Canada, Alaska (at USD15.66–20.36/MMBTU to 2030) and the gas-linked projects on
the US Gulf Coast and US West Coast (at USD8.63–11.02) varies from 50% to 85%.31 As a result,
46
the authors of the study concluded that shipping LNG from the US mainland to Hawaii was the
preferred option compared to the oil-linked projects being targeted at Asia.
Another study exists for Guam, which also discussed future LNG prices extensively in order to
conclude that what looks like a marginal benefit could easily disappear, for a very large capital
expenditure.
For the purposes of this study, the costs were compared as a snapshot in time of LNG supply
from Australia and North America. It was assumed that there were no constraints in supply of the
quantities requested, and that:
nn bulk shipped LNG is available from Gladstone at USD15/MMBTU, FOB
nn bulk shipped LNG is available from Vancouver at USD8/MMBTU, FOB, and
nn ISO container LNG is available from Dandenong (Melbourne) at USD15/MMBTU, FOB.
5.1.3 CNG
CNG can be easily created from pipeline natural gas in small quantities and, as such, can be
located much more flexibly than LNG liquefaction plants. The gas-compression infrastructure is
scalable, quick to establish (i.e. it takes less than one year) and relatively inexpensive. For this
reason and the purposes of this study, it was assumed that CNG is available in Brisbane, a major
port close to Fiji, Tonga and Kiribati, which are used as case studies in this report. A nominal price
for natural gas (prior to compression) at the gas pipeline in Brisbane was USD5/MMBTU.
31 Facts Global Energy (2012). Liquefied Natural Gas for Hawaii: Policy, Economic, and Technical Questions.
42
In terms of CNG use in transport, this study assumed that CNG could not be shipped to the Pacific
in a cost-effective manner, but could be used in-country if it is derived from vaporising LNG at the
working pressure with a relatively small amount of additional equipment. Therefore, the price of
CNG for in-country use can be assumed to be the same as that of LNG.
5.2 Findings
5.2.1 LPG Delivered Cost
Other studies have examined in detail the landed cost of LPG in various Pacific countries. The price
‘build-up’ includes some or all of Saudi Aramco CP, as well as costs associated with bulk storage,
handling, freight, and retailers’ margins. Figure 25 illustrates a coarse LPG price breakdown in a
high- and low-cost PICT. The LPG base price of USD850/tonne shown is an approximation of the
historic Saudi Aramco CP that all wholesale LPG suppliers currently pay.
To illustrate the potential economies of scale associated with increases in volume, an assumption
has been made that the costs associated with bulk storage, handling, freight and retail margins
would reduce by 10% for each doubling in volume.
Figure 25. LPG Price Assuming a 10% Reduction for Every 100% Increase in Volume
80.00
70.00
USD/MMBTU (Wholesale price, ex tax and duy)
60.00
50.00
Freight, ISO container fees + Gross Revenue
for distributor
40.00
Gross Revenue for LPG Retailer before costs
30.00
Terminalling, Handling, Freight - esOmate
20.00 Base price (linked to Saudi CP)
10.00
-
LPG Price LPG Price LPG Price LPG Price LPG Price LPG Price
(Fiji) (Fiji), 50% (Fiji) 100% (Samoa) (Samoa) (Samoa)
increase in increase in 50% 100%
volume volume increase in increase in
volume volume
5.2.2 Cost of LPG versus Kerosene for Households

One of the key factors in considering whether LPG consumption should be promoted more heavily
is whether disruption in global LPG markets is likely to result in price reductions. At present,
LPG pricing is linked strongly to the Saudi Aramco CP, but industry sources suggest that this
could change or at least increase in volatility. If so, and if flexible and cost-effective contracting
arrangements become possible, then stimulating LPG demand could deliver beneficial results.
Furthermore, LPG may also become available soon in reasonable quantities in PNG which could
change the supply–demand balance in favour of local users in the Pacific region.
43
The World LPG Association acknowledges that the principal barrier to more widespread use of
LPG in the Pacific islands is the cost issue, both in terms of the fuel itself and the equipment
needed to utilise it.32 As Figure 26 illustrates, this appears to be the case in almost all of the
countries in the Pacific where comparative data is available, including French Polynesia, Kiribati,
Niue, Palau, Samoa, Solomon Islands and Tuvalu. In addition, as gas cooking equipment is more
sophisticated, it is often more expensive than cheaper kerosene or basic wood stoves even when
higher stove energy efficiency is taken into account. There is also the logistical challenge of
transporting and returning cylinders for refuelling in remote rural or in outer islands.
Figure
Figure26.
26.Cost
CostComparison
ComparisonBetween Kerosene
Between and LPG:
Kerosene RetailRetail
and LPG: Price Excluding Tax andTax
Price Excluding Duties,
and Duties, First Quarter 2014 First Quarter 2014
2.5
2
USD/litre
1.5
0.5
Kerosene LPG Ave. Kerosene Ave. LPG
(Source: SPC Pacific Fuel Price Monitor)

(Source: SPC Pacific Fuel Price Monitor)
Data
Data on on
thethe costofofenergy
cost energydelivered
delivered toto the end-use
end-useapplication
applicationisisalso
alsointeresting. Several
interesting. Severalstudies
studies
that have compared kerosene and LPG cook-stove efficiencies have found
that have compared kerosene and LPG cook-stove efficiencies have found them to be roughly them to be roughly
similar33, so the key issues for end-users are likely to be availability and cost. In some countries,
similar33, so the key issues for end-users are likely to be availability and cost. In some countries,
kerosene may be the lowest-cost option since it is often derived from larger aviation fuel imports
kerosene may be the
(approximately lowest-cost
10%-20%). optionthe
This raises since it isofoften
issue whetherderived from need
subsidies largertoaviation fuel imports
be considered by
(approximately
governments 10%-20%). Thistoraises
if they decide the LPG
introduce issueforofhealth
whetherand subsidies need reasons.
environmental to be considered
Alternative by
energy sources
governments maydecide
if they also beto
considered,
introduceincluding
LPG for locally
healthand/or regionally produced
and environmental biofuels
reasons. and
Alternative
distributed
energy sourcessmall
mayscale
also renewable energy
be considered, sources (e.g.
including solar
locally PV or regionally
and/or wind). produced biofuels and
distributed small scale renewable energy sources (e.g. solar PV or wind).
5.2.3 LPG for Commercial and Industrial Sectors
5.2.3
TableLPG for Commercial
7 presents a brief comparison and Industrial of electric Sectors
versus LPG-driven air conditioning based on real
gas and electricity prices in Tonga as well as data derived from the engineering characteristics
Table 7 presents
of heat pumps aand briefother comparison
engineering of electric
calculations. versus The LPG-driven
data shows airthat,
conditioning basedelectricity
at this pricing, on real gas
andiselectricity
the cheaper prices in Tonga
alternative and,as only
well ifasthe data derived
relative costfrom of LPGtheisengineering characteristics
more favourable, of heat
would further
investigation
pumps and other of engineering
this option be warranted. As
calculations. Thementioned
data shows earlier,
that,LPG
at air
thisconditioning is currently
pricing, electricity is the
available in Fiji, Tonga and Vanuatu, which could
cheaper alternative and, only if the relative cost of LPG is more favourable, would further indicate that different costs or improved
economies of scale could be factors. However, cost comparisons need to be verified in any
investigation of this option be warranted. As mentioned earlier, LPG air conditioning is currently
particular situation where change to LPG is being considered.
available in Fiji, Tonga and Vanuatu, which could indicate that different costs or improved economies
of scale
32 could
The World LP Gasbe factors.
Association (2014). LPHowever, costfor Small
Gas Exceptional Energy comparisons need to be verified in any particular situation
Island Developing States.
33 Center for Energy Studies (2001). Efficiency Measurement of Biogas, Kerosene and LPG Stoves, plus others.
where change to LPG is being considered.
44
Table 7. Potential Scenario for Gas Air Conditioning
Item Electric Heat Pumps Gas (propane/butane) Heat Pumps

Coefficient of Heat Pump Performance 4 4
(assumed)
Gas Use per MMBTU of Cooling Capacity 0 0.71 MMBTU
Electricity use per MMBTU of Cooling 0.25 MMBTU 0.03 MMBTU

Capacity
Energy Price Assumptions (Tonga) US 0.37c/kWh USD1.70/kg

(99/MMBTU) (36/MMBTU)
Gas Cost (USD/MMBTU cooling) 0 USD26
Electricity Cost (USD/MMBTU cooling) USD25 USD3
Total Cost USD25/MMBTU cooling USD29/MMBTU cooling
(Source for Tonga power prices as at July 2015: http://www.tongapower.to/NewsRoom/ElectricityTariffIncrease

Effectivefrom1stJul.aspx; Source for Tonga LPG prices as at June 2015: http://www.tongapower.to/NewsRoom/Electricity
TariffIncreaseEffectivefrom1stJul.aspx)
5.2.4 LPG for Vehicles

An opportunity exists to grow the LPG market for vehicles in PICTs. At present this is limited
to Fiji, but it could also be adopted elsewhere. This would require a public policy decision by
governments and this section of the report provides a summary of a few suggestions that could
be investigated.
The first is the use of LPG in government fleets, buses and private vehicles (as indicated earlier
in the report). The second is the introduction or expansion of an LPG scooter market, especially
given that many second-hand scooters are becoming available from regions such as China, where
LPG/CNG small vehicles are encouraged through policy positions aimed at improving air quality.
Moreover, scooters are a far more accessible entry-level transport option for PICTs. Their low up-
front transport investment costs can improve market access for residents in the distribution of
goods and services.
At one of the consultation workshops with the industry, a Fiji-based LPG distributor advised that
it is undertaking successful trials of LPG blending on recreational boats and in its own diesel-
truck fleet. Therefore, it is seeking to expand such efforts to grow this market. This development
could be monitored for its potential in the PICT marine and land transport sectors.
5.2.5 LNG Transport Options

Some of the significant components of the LNG delivered cost, which are unaffected by oil or
gas price fluctuations, are shipping, electricity costs for liquefaction, fixed costs and capital
amortisation related to capital infrastructure. Shipping and transport are a particular cost issue
for PICTs, due to the long distances from markets and varying port and transport infrastructure in
each country.
For the purposes of evaluating transport costs in the built-up cost analysis, this study assumes
that LNG is available for supply to PICTs under the following arrangements:
nn Vancouver: small-scale bulk ships;
nn Gladstone: small-scale bulk ships; and
nn Melbourne: ISO containers.
45
Regional experience in LNG transport includes small-scale bulk shipping, road transport and 20’
or 40’ ISO containers. Existing facilities in Australia are receiving LNG over long distances by
means of single- or twin-trailer haul trucks. Shipping companies in Singapore confirm that they
have already received LNG loads from Conoco-Philips’ Darwin LNG terminal in 10,000–12,000
cbm small-scale ships.
The main LNG transport solutions investigated in this study are:

nn small-scale LNG shipping: from an LNG supply terminal (e.g. Gladstone or Vancouver) to a
central storage terminal in a Pacific country, followed by truck transport to localised storage at
the end-user’s site; at site, the cargo would be discharged into on-site storage tanks and the
empty truck returned to the port for refilling, and
nn ISO container LNG shipping: 20’ or 40’ ISO containers delivered from the supply point in
Melbourne to a site in the Pacific; at site the cargo would be discharged into on-site storage
tanks and the empty container returned to the port for return shipping.
5.2.6 LNG Shipping Using Small-Scale Bulk Ships

A variety of ships are suitable for small-scale delivery of LNG to PICTs, where annual supply
volumes are dependent on proximity (see Figure 27).
Figure 27. Shipping Capacity for Small-Scale LNG Multi-Gas Carrier
(Source: Norgas)
Ships suitable for small-scale bulk delivery to PICTs are available and operating in Asia (see
Figures 28 and 29). One such ship has the following key specifications and was used to estimate
shipping costs in this study:
nn a semi-refrigerated ship capable of carrying LNG at -163°C
nn a re-liquefaction facility to eliminate boil-off losses
nn dual upper and lower cargo manifolds to allow loading at large terminals in Australia, PNG,
Singapore or Vancouver
nn capacity = 10,000–12,000 m3
nn discharge time = 10–12 hours, and
nn speed = 16.5 knots.
46
Figure 28. Small-scale LNG Multi-gas Carriers, 10,000 cbm/4,500 tonne
(Source: Norgas)
Figure 29. LNG Carrier
(Source: www.skaugen.com)
Table 8 below presents an example of an estimation of the costs for small-scale bulk shipping to
PICTs. The example assumes that Suva in Fiji would be a regional hub, although it is possible that
the ship could easily transfer bulk to other major ports such as New Caledonia or Tahiti. These
figures are consistent with the study for Hawaii Gas of USD3–5/MMBTU for transport and boil-off
for LNG delivered to Hawaii from the US Gulf Coast or West Coast.
Table 8. LNG Shipping Times and Cost with Budget Charter Rates for Small-Scale Ship
From To Nautical Sailing and Charter Cost Shipping Capacity Estimated Shipping Cost
Miles Port Days at (per annum) (USD/ MMBTU)
16.5 Knots
Vancouver Suva 5,100 13 + 1 ~USD2.18 m per month* 71,000 USD6.35
Singapore Suva 4,600 12 + 1 ~USD2.18 m per month* 78,100 USD5.77
Darwin Suva 3,000 8+1 ~USD2.18 m per month* 114,900 USD3.92
Melbourne Suva 2,200 6+1 ~USD2.18 m per month* 150,300 USD3.00
Gladstone Suva 1,700 5+1 ~USD2.18 m per month* 170,000 USD2.65
*Charter rate of USD1.2 million per month includes crew and ship charter, but excludes port fees and fuel, which are estimated
at ~USD30,000 per day.
47
5.2.7 LNG Shipping in ISO Containers

ISO containers used to ship LNG are commercially available (see example in Figure 30), and the
question of whether LNG should be shipped in ISO containers or by bulk is a decision mostly of
transport and container cost (not the commodity cost). These containers are vacuum-insulated
and hold LNG without boil-off for up to 80 days. Various designs are available with different
holding times, and the choice affects cost. The model evaluated in this study uses the following
assumptions:
nn a fleet of containers is owned by the buyer, seller, shipping line, or other third party
nn cost of the containers and a nominal financing cost is spread over their full lifespan
nn containers are delivered to the site, where their contents are discharged into local storage
tanks and then returned to the point of origin, and
nn containers take around two to three months for each rotation, depending on the PICT.
When LNG containers are shipped between two locations – whether full or emptied - they are
classed as a Dangerous Goods Class 234 and require special handling at ports and on ships.
Discussions with shipping companies and regional port operators indicate that this attracts a
premium cost that can be negotiated downwards with volume.
Figure 30. ISO 20’ Container for LNG
(Source: Cryeng, Australia)
For the study, budget quotes were obtained for the purchase of ISO containers. It was difficult to
confirm a narrow average price band and economies of scale for 40’ containers, but prices seemed
consistent across suppliers for 20’ containers. Quotes indicated that containers are available at:
nn USD130,000 for a 20’ LNG container, and
nn USD150,000–200,000 for a 40’ LNG container.
The 2012 Hawaii gas study quoted 40’ containers at USD180,000–200,000 each. Some industry sources
quoted USD150,000, while others believe that container costs could be lowered substantially by:
nn international sourcing for a large order, and
nn optimising the design and minimising LNG holding-time requirements based on specific
transport routes.
In considering this diversity of industry advice, for the purposes of this study it was assumed that
ISO containers used for transport of LNG have the characteristics shown in Table 9.
34 Given that, even when emptied, they may contain some residual gas.
48
Table 9. ISO LNG Container Solutions35
Item 20’ Container 40’ Container

Max. Working Pressure 10 bar 6–17 bar
Volume 20kL 44.5–46kL
Tare Weight (ASME35 code) 6.6–10 T 10.7–18.5 T
Mass of LNG (Tonnes) ~9 T ~18 T
Energy Content for LNG ~468 MMBTU - 937 MMBTU
Hold Time without Releasing Boil-off 52–75 days 53–85 days
Cost used in this Study USD130,000 USD150,000
Regasification Rate 1.65 tonnes per hour 1.65 tonnes per hour
Cost per Tonne USD14,444/Tonne USD8,333/Tonne
Life of Container in the Pacific 10 years 10 years
Ownership Third party or shipping line Third party or shipping line
Time Spent on Round Trip to PICTs Varies from 2–3 months Varies from 2–3 months
Loading Port Melbourne’s APA facility in Dandenong Melbourne’s APA facility in Dandenong
In order to understand the cost of shipping, budget quotes were obtained for shipping a 40’ LNG
container from Melbourne to Fiji, Tonga and Kiribati, as examples of a major end-user and sub-
regional delivery points. The quotes include both en-route and return voyages (inclusive of port
fees, forklifts, transport to and from ports, shipping line charges, and surcharges for handling and
transport of dangerous goods), as well as an amortised container cost (i.e. reflecting the gradual
‘writing-off’ of the initial cost over the life of the asset). These are added up and divided by the
total amount of LNG delivered to work out the specific shipping cost. Table 10 illustrates the cost
per MMBTU for ISO container delivery from Melbourne to Fiji, Tonga and Kiribati.
Table 10. Costs of Shipping ISO Containers of LNG to Selected PICTs
Item Fiji Tonga Kiribati

Container Type 40’ 40’ 20’
Tonnes of LNG per Container 18 18 9
Energy per Container 938 938 469
Container Turnaround Time 2 months 3 months 3 months
Life of Containers 10 years 10 years 10 years
No. of Container Loads p.a. for 2,316 322 268

50% of Power Consumption
and Some Transport
Total No. of Containers 386 80 67
Total Delivered Cost per USD9,901 USD12,188 USD7,561

Container (Return to
Melbourne)
Cost per MMBTU for Shipping USD10.55 USD12.99 USD16.12
Cost per MMBTU for Amortised USD3.68 USD5.51 USD9.26

Container Cost
35 American Society of Mechanical Engineers
49
5.2.8 LNG Import Terminal, Floating Storage and Regasification Unit, and On-
shore Storage Costs
LNG storage will be required in any logistics solution. For bulk shipping, large volume storage will
be required at the port as a land-based tank, floating storage unit (FSU, without regasification)
or floating storage and regasification unit (FSRU). For both container and bulk solutions, the LNG
would be trucked to a site (e.g. a power station, bus/truck depot) from the port and stored there in
tanks with 20–90 days’ holding time.
The costs of these facilities have been estimated and amortised over a project life, with results
shown in Table 11. A cost of USD5,870/tonne was used for site storage, and USD5,000/tonne for
bulk import terminal storage and handling facilities. It was also decided to use 60 days as the
required storage for the bulk terminals, but only 30 days’ storage for the site tanks. This is because
any power station or transport operator which converted to LNG would probably retain dual-fuel
capability and additional fuel supplies of, for example, diesel. Therefore, long-term storage at site
was not likely to be required.
Whilst a risk assessment has not formed part of this study, it would need to be completed for each
storage facility, and this would influence the final construction cost. Consideration would need to
be given to urban planning, public safety, local construction capability, cyclones/weather events,
and geological events such as earthquakes. In this respect, those promoting floating storages
claim they are less susceptible to major events since they can be floated out to deeper waters
where the impact of these is generally less.
Table 11. LNG Storage Solutions
Item Vertical On-Site On-Site Bulk Bulk FSRU Storage

Steel Tanks– Storage Storage Receiving Receiving
General (Cryeng 300 (Cryeng Terminal Terminal
m3 vessel) 1,000 m3 Storage– Storage–
vessel) Finland Hawaii Study
Max. Working Pressure 17–18 bar
Net Capacity 3–102 kL 300kL 1,000 kL 120,000 kL
Daily Evaporation Rate at 0.9–0.37 %/day

15°C and 100 kPA
Overall Width 2–3 m
Overall Depth 2.1–3.3 m
Overall Height 4–23 m
Mass of LNG (Tonnes) 1.5–48 ~140 ~460 50,000 55,000 ~55,000
Energy Content for LNG 55 GJ/tonne
Regasification Rate 7 tonnes/hr 7 tonnes/hr
Hold Time Without Unknown Unknown

Releasing Boil-off
Cost for Tanks Only USD0.75 m ex USD1.5m ex

works works
Cost for Full Installation USD1.5 m USD3 m USD122m USD275 m USD80–140 m

(USD) (est. at twice (est. at twice (including (excluding wharf,
the tank cost) the tank cost) wharf, piping, piping, re-gas
re-gas costs) costs)
Cost per Tonne of Storage USD5,870/ USD5,870/ USD2,44/ USD5,000/ USD1,450–2,550/

Capacity (USD) tonne tonne tonne tonne tonne
Facility Life 20+ years 20+ years 20+ years 20+ years 20+ years
50
Figure 31. 300m3 Cryogenic LNG Tank in Tasmania
(Source: Cryeng)
The development cost for port storage is significant because it needs to be large enough to
accept the entire load from a bulk supply ship. Due to the highly site-specific costs and significant
engineering exercise associated with costing this storage, it has not been possible to quantify
these amounts with any level of high accuracy for this study. Nonetheless, some reference pricing
is available from other studies and market information.
One example is at the Tornio port unloading facility in Northern Finland. One equipment
supply company was awarded a contract that includes unloading, a 50,000-tonne storage tank,
regasification equipment, and a 10-year maintenance contract for approximately Euro(€)100
million (representing around €2,000/tonne stored).36 In the Hawaii gas study, estimated bulk
import terminal costs were:
nn USD145 million for a 55,000-tonne bulk storage tank
nn USD50 million for other onshore infrastructure including piping, controls, buildings and
gasification (not necessary in the Pacific)
nn USD80 million for a marine berth
nn Total: USD275 million, or USD5,000/tonne stored.
The end-result is that large variations in this cost are not very significant in the overall delivered
cost analysis, but port storage does represent a large upfront investment and potential capital
barrier. Table 12 illustrates the costs of storage for the three case studies selected here.
36 http://www.lngglobal.com/lng-for-fuel/waertsilae-receives-full-notice-to-proceed-for-its-first-lng-terminal.html
51
Table 12. Storage Capital and Maintenance Costs37
Item Fiji – Bulk Delivery Tonga – ISO container Kiribati – ISO container
Delivery Delivery
No. of Days of Storage 60 30 30
Bulk Import Terminal and Storage Cost USD34 m Not applicable Not applicable
(USD)
Site Storage Cost (USD) Not included USD4.6 m USD1.9 m
Maintenance Cost for Storage at 6% of USD0.95 USD0.93 USD0.93

Capital (per annum)37
Amortised Cost of Storage (USD/MMBTU) USD1.49 USD1.45 USD1.45
5.2.8.1 Floating Storage Units (FSU) and Floating Storage and Regasification Units
(FSRU)
Discussion with suppliers indicates the existence of some 20 FSRUs in total around the world,
mostly much larger than the targeted 25,000 m3 required for the largest need in the Pacific.
Although some are built new, others are converted from second-hand LNG ships that still have
vessel and tank integrity suitable for lasting 20+ years. The cost for a 120,000 m3 vessel would be
around USD80–140 million, with the bulk of this cost being for the conversion. As these vessels
have multiple tanks (up to six), it is theoretically possible to operate at smaller capacities but the
fixed operating costs would be amortised over a smaller volume.
Due to the relatively small, early-stage, and ‘bespoke’ nature of this segment of the industry38,
broad cost data were not available.
5.2.9 LNG Truck Transport

Truck transport is most likely required in the supply chain for bulk ships and ISO container
deliveries to PICTs. For a bulk shipping solution, either road tankers (see Figure 32) or gas
pipelines are required to ship the LNG from the receiving storage tanks to the end-use site. For an
ISO container solution, container trucks would be required at both the supply and receiving ends
to move the container to and from the port. These road tankers cost around AUD1.5 million each
and two would likely be required in-country in the bulk receiving solution.
Figure 32. LNG Road Tanker
(Source: BOC)
37 Hawaii LNG Study

38 Includes commercial-in-confidence arrangements, something that is not available on the open-market, or something previously contracted.
52
5.2.10 LNG Delivered Cost

Figures 33 and 34 illustrate the delivered LNG price using a ‘bottom-up’ cost model, compared
to other fuels as determined in this study. The data in these Figures has been developed using
a range of different data sources. Delivered LNG pricing using a small-scale bulk ship was
developed using the following sources:
nn LNG pricing (from two suppliers)
nn Norgas Ship volume (from Norgas public data)
nn Norgas Ship capacity (from Norgas public data)
nn ship charter cost + fuel at 25 t/day of fuel oil (from Norgas data)
nn sailing time - return trip (calculated based on nautical miles travelled)
nn port loading fees at supply port (estimate based on discussions with LNG suppliers)
nn port unloading fees - destination port (estimate)
nn storage at receiving terminal (personal communications and reference reports based around
total capex estimates, scaled for each country)
nn storage tanks, pipelines, wharf, excluding regasification (personal communications and reference
reports based around total capex estimates)
nn storage - maintenance costs @6% of capital
nn road tanker pricing for delivery to power station sites (BOC pricing provided in industry workshop)
nn operating expense (opex) for road tanker (estimate).
The fixed costs are amortised over the total fuel volume assumed to be delivered for each PICT
over the life of the plant. Transport costs (including the empty return voyage) are amortised over
the volume of fuel in each delivery.
The delivered cost of LNG in ISO containers was a bottom-up cost model using:
nn 20’ and 40’ ISO container prices based on budget pricing from Cryeng Industries, personal
communications with Singapore LNG (SLNG), and discussions with Agmark Logistics and
FuelGarden LNG
nn transport of LNG containers from APA Group’s LNG facility in Dandenong, Victoria to/from the
Port of Melbourne by TOLL Logistics
nn LNG pricing, including truck loading, from APA Group
nn shipping and transport charges to Fiji and Tonga by Williams & Gosling Limited including sea
freight, dangerous good surcharge, origin and return port charges, port services, forklift use,
biosecurity, wharfage, agency fees, port congestion charges, cartage to site
nn shipping and transport times based on Swire Group’s published routes for shipping container
fleets in the Pacific
nn amortisation of the ISO container cost was based on the return voyage times for containers
using the above shipping route times, allowance for time in Australia for refilling, and allowing
some time in the destination country for unloading of the whole container at the destination
port, delivery to site, emptying the LNG into land-based storage, and return of the empty ISO
container to port.
nn site costs for small-scale LNG storage and gasification were based on:
-- budget quotes for site facilities from Cryeng
-- information obtained at the workshop in November 2014 that was part of this study,
and
-- industry reports
53
nn road tanker pricing for delivery to power station sites (BOC pricing provided in industry
workshop), and
nn opex for road tanker (estimate).
nn An importers margin of 5% was assumed. Import duty and VAT was excluded from the analysis.
Figure 33. LNG Built-Up Cost Analysis for Selected PICTs and Technologies
Figure 33. LNG Built-Up Cost Analysis for Selected PICTs and Technologies
$45.00 Importer's margin @ 5%
$40.00
$35.00 Storage
$30.00
$25.00 Road transport, port charges, trans-
USD
shipment fees, etc

$20.00
LNG bulk shipping fees
$15.00
$10.00
LNG ISO container cost amorjsajon
$5.00
$-
LNG ISO container shipping fees
LNG ex terminal price
Note:
Note: The
The data this Figure
data in this Figure isis for
fordelivery
deliverytotosite
siteusing
usingvarious
various transport
transport methods.
methods.
Figure 34. Built-Up Delivered Cost Analysis for all PICTs

Figure 34. Built-Up Delivered Cost Analysis for all PICTs
!$80.00!! !$80.00!!
$80.00 $80.00
!$70.00!! !$70.00!!
$70.00 $70.00
Importer's!margin!@!5%!
!$60.00!! $60.00 !$60.00!! Importer's margin @ 5%
$60.00
Storage!
Storage
!$50.00!! $50.00 !$50.00!!
$50.00
USD/MMBTU(
USD/MMBTU
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Road transport, port charges,
!$40.00!! $40.00 !$40.00!! trans-shipment
$40.00 fees, etc
trans#shipment!fees,!etc!
LNGLNG!bulk!shipping!fees!
bulk shipping fees
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!$30.00!!
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$20.00 $20.00 LNG!ISO!container!cost!
amorLsaLon
!$20.00!! !$20.00!! amorXsaXon!
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$10.00 $10.00 LNG!ISO!container!shipping!fees!
!$10.00!! !$10.00!!
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Note: Includes LNG, HFO, diesel and LPG but excludes bulk LPG prices
Note: Includes LNG, HFO, diesel and LPG but excludes bulk LPG prices
54
5.2.11 CNG Delivered Costs
5.2.11 CNG Delivered Costs

The main CNG transport solutions investigated in this study involved the delivery of ISO 40’
containers of CNG from a supply point in Brisbane to Tonga. At site, the cargo would be discharged
into on-site storage tanks and then the empty containers would be transferred back to the port
for return shipping. The 40’ containers for high-pressure CNG cost approximately USD300,000
each. The following Figures show several examples.
Figure 35. CNG 20’ Containers
(Source: Hexagon Raufoss)
Figure 36. CNG 40’ Containerised Solution
(Source: Hexagon Raufoss)
Compression infrastructure suitable for providing gas to a 10 MW power station was selected to
include compressors, a container filling station, and associated engineering drawings. The total
capital cost is estimated at approximately USD2 million without gas connection costs, civil works,
electrical and mechanical works, planning and environmental approvals, etc. For the purposes of
this study, the total installed costs of the ‘mother station’ are estimated at USD5 million.
55
In contrast to LNG, around USD77 million in 40’ containers would need to be purchased in order
to supply a 10 MW load. CNG has around half the density of LNG and cannot fill as much space in
a 40’ container footprint as LNG. In this regard, shipping costs become very important. Like LNG,
40’ containers with CNG tanks need to be shipped and returned to the point of origin for refilling.
The estimated annualised costs required to deliver CNG are presented in Table 13.
Table 13. Costs of Shipping ISO Containers of CNG to Tonga
Item Tonga
Container Type 40’
Tonnes of CNG per Container 7.1
Energy per Container 370 MMBTU
Container Turnaround Time 2 months
Life of Containers 10 years
No. of Container Loads p.a. for 50% of Power Consumption 812

and Some Transport
Total No. of Containers 203
Total Delivered Cost per Container, return to Melbourne (USD) USD12,188
Cost per MMBTU for Shipping (USD) USD30.52
Cost per MMBTU for Amortised Container Cost (USD) USD104.77
Due to the very high-cost penalty of shipping lower volumes of gas (in both the shipping cost
and container amortisation), international CNG supply was not investigated in greater detail than
this. Shipment of CNG appears most viable over very short distances where high utilisation of the
transport vessel can be achieved.
5.3 Issues
Due to the uncertain nature of commodity markets (e.g. oil supply, demand and pricing are
influenced by the Organization of the Petroleum Producing Countries [OPEC],39 market conditions,
natural disasters or geopolitical events), it is impossible to know with any certainty what the future
competitive position of oil and LNG will be. However, it could well be the case that delivered LNG
might at times be cheaper than delivered diesel, and vice versa. Hawaii has moved forward on the
basis of a high probability that LNG shipped from the US mainland will be competitive with its
existing Syngas and/or diesel costs for the foreseeable future. This sort of probability analysis is
beyond the scope of this study.
For the Pacific, it will be important to understand the extent to which both oil and gas-linked
pricing structures are affected by fluctuations in oil or gas prices. Both spot and contract markets
exist for LNG, with the spot market growing to 33% of global trade in 2013,40 which was a new
peak for the industry.
Some of the significant changes that would need to occur for LPG to become competitive on a
specific energy cost basis are listed below:
nn the need for greater demand in the Pacific to reap the benefits of economies of scale
39 OPEC is an intergovernmental organisation established in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela and later joined by other countries. OPEC’s objective is to
coordinate and unify petroleum policies among its member countries in order to secure fair and stable prices for petroleum producers, efficient, economical and regular supply of
petroleum to the customer base, and a fair return on capital to those investing in the industry. (Source: OPEC website: http://www.opec.org/opec_web/en/about_us/24.htm, as at 17
September 2015).
40 IGU World LNG report, 2014 edition.
56
nn the basis of LPG pricing would need to shift from the Saudi Aramco CP and provide more
flexible contract pricing for wholesale suppliers, and
nn bulk delivery and receiving facilities may need to be expanded.
5.4 Conclusions
5.4.1 Economic Viability of Expanding LPG
For LPG the main point to be drawn from this analysis is that the current high underlying base
price of LPG limits the reduction in the specific price that might occur from increased supply
volumes. This means that LPG remains a high cost fuel relative to diesel and HFO for power
generation or industrial use.
Incremental expansion of LPG is, however, relatively easy compared to the introduction of LNG
due to the existence of import facilities and supply chains in most PICTs. Incremental increase
in use will likely continue in niche applications such as gas air conditioning, and household or
commercial cooking where it can be the cheapest alternative, and the incumbent LPG industry
and some NGOs are actively promoting it as a cleaner alternative to kerosene.
Therefore, whilst it may be economically feasible to incrementally increase market share, large-
scale displacement of diesel and HFO using LPG seems unlikely.
5.4.2 Economic Viability of Gas for Power Generation

Prices for renewable energy technologies generally decrease over time, while the prices of
extractive industries such as oil and gas tend to increase. Future pricing of LNG is a hybrid
between cost reductions through technological development in liquefaction and distribution,
with possible cost increases in the primary gas commodity. What is certain is that fuel prices will
continually vary in relation to each other and it is impossible to forecast this with any accuracy.
It would appear that for many stationary power applications, renewables and energy efficiency are
increasingly good long-term investments. The exception to this are large point-source electricity
generators/users, such as mining and smelting operations, in which power systems may be subject
to limited investment timeframes, tightening emissions and air-quality requirements, and high
power densities. For these sites, LNG could present a viable alternative (or addition) to diesel,
HFO or renewables.
For many small Pacific countries where LNG and/or LPG are generally expensive compared to
diesel, pursuing an aggressive strategy of using renewables, energy storage, and energy efficiency
(both supply side and demand side) is possibly the most viable approach to reduce overall fuel
costs.
To cost-effectively supply LNG to the Pacific countries, two pre-conditions are required. First,
individual or collective points of demand must exist; these must be large enough to justify bulk
LNG shipping and local unloading, storage and regasification facilities. This appears possible for
power-generation demand in Fiji, French Polynesia, Guam and New Caledonia. The approach of
delivering LNG using ISO containers and returning them to the point of origin is a higher-cost
option, with capital and operating costs being amortised over the volume of gas supplied. Second,
the market conditions and supply arrangements should be such that the delivered cost of LNG
must be less than the predicted diesel or HFO price (depending on which fuel is being replaced)
on a USD/MMBTU basis over the life of the contract, which would typically be 15+ years.
57
Power generation could be the necessary ‘anchor demand’ for an LNG supply chain. When
compared to transport applications, the advantage of using LNG in power generation is that the
costs of converting an engine fleet to dual fuel or natural gas can be spread over a larger energy
base because power generators often have a much higher utilisation relative to installed capacity.
Furthermore, stationary power generation can offer a large single-point load source around
which costly LNG infrastructure could be built and broader uptake by smaller uses could occur. An
example of this is in Melbourne where APA’s LNG storage facility is primarily used for gas network
security, but is also being used now to supply industrial LNG loads by means of road tankers.
However, as renewable energy technology develops and implementation experience grows,

many PICTs realise the potential for use of renewables in stationary power (electricity) systems.
Therefore, it is very difficult to make broad assumptions about the opportunity for each PICT to
introduce LNG into its power sector because each power station will face different challenges in
the technical and economic feasibility of converting existing engines or securing LNG supply. The
cost of converting some of the older engines to LNG is likely to exceed the total cost of procuring
a new gas-fired engine, or is not technically possible. Furthermore, each PICT has multiple power
stations that would face individual logistical challenges in securing and delivering LNG supply
(see Appendix H for fuel consumption by power station and country).
There is also an issue related to whether LNG can be cost effective for different sizes of power
plants. For small power stations operating on diesel, the avoided cost of diesel is relatively high
and, at first glance, it seems to be a good target for substitution. However, at this scale, LNG
infrastructure is relatively expensive and renewables offer many additional advantages. For larger
power systems, the economies of scale for delivering LNG improve significantly but, at that point,
utilities and IPPs show a preference for cheaper fuels such as HFO and even coal, and it is difficult
for LNG to compete. This means that non-cost drivers, such as regulations on air quality or GHG
emissions, in medium to large systems could make the business case successful.
Ultimately, this study finds that, although LNG for power generation in PICTs is technically
feasible, it faces many commercial challenges. Even so, introducing LNG in the short to medium
term could be viable under certain circumstances. An individual or collection of medium to large
power stations (i.e. more than 40 MW in aggregate) such as those in Fiji, French Polynesia, Guam
and New Caledonia, could justify dedicated small-scale bulk shipping and storage facilities and
attract competitive LNG pricing if:
nn high emissions standards require substitution of HFO and/or diesel
nn prospective power stations do not have any realistic prospects over the coming 10 to 15 years
to use cost-effective renewable energy such as solar PV systems or coconut oil on a large scale
nn the large capital cost of LNG infrastructure is not a barrier and the end-user has a sufficient
credit rating to underwrite the contract for LNG off-take over a long term
nn the contract for LNG supply can be confirmed for longer than 10 years
nn new engines or boilers are planned, provided that their conversion to dual fuel is relatively low
cost compared to the expected savings in fuel costs
nn the delivered cost of LNG can be confirmed as competitive with alternatives (e.g. diesel, HFO,
coal) with a high likelihood over the contract timeframe
nn there is potential for secondary use in industry and/or transport
nn there are skilled labourers to maintain and operate the equipment and maintain high safety
standards
nn using LNG is considered on its merits to improve fuel security through energy diversity
nn fuel diversity and the use of LNG are consistent with regional government or utility policies,
and
58
nn power generation efficiencies are not severely penalised by using LNG instead of the incumbent
fuel.
Larger power-generation capacities could initially be targeted in order to justify the economies
of scale necessary for bulk LNG shipping. Therefore, the potential sites for consideration have
been identified as French Polynesia, Guam, New Caledonia and possibly also Fiji (see Research
Question 4 for additional details).
5.4.3 Economic Viability of Gas for Transport

This study finds that LNG for transport, as either LNG or LCNG, is technically feasible but it faces
many commercial challenges in PICTs. An individual land transport ‘hub-and-spoke’ application
is unlikely to be large enough on its own to justify the large-scale shipping of bulk LNG, which
would be required to minimise the delivered cost. Nevertheless, it might be possible for such an
application to leverage off a major LNG hub created for other purposes, as noted above.
This study finds that there is virtually no near-term market for conversion to LNG of the maritime
fleet based in the Pacific, but there could be an increasing demand for offering LNG bunkering
facilities to international fleets, or for new ships purchased that are LNG fuelled. If LNG refuelling
capabilities develop over time, PICTs may be able to consider LNG fuel ships either as a new or
second-hand purchase.
Due to the costs of converting and running transport fleets on alternative fuels, it may only make
sense to carry out fuel conversions in countries in which high numbers of heavy vehicles exist,
so that a conversion ‘industry’ could be established. Fiji, with over 1,600 buses in operation, may
offer one of the best opportunities to use LCNG or LNG as an alternative fuel. A hypothetical
scenario has been prepared to examine and identify the potential opportunities (see Appendix C).
In conclusion, increasing LNG and LCNG for transport in the medium to long term could be viable
under all or some of the following circumstances:
nn centralised LNG infrastructure is installed in the country on the back of an ‘anchor demand’
such as a large power station, and LNG for transport can subsequently leverage off this
nn if new vehicles are purchased directly with dual-fuel or gas-only engines, the marginal cost
needs to be relatively small compared to the expected savings in fuel costs
nn trucks operating on LNG would need to travel a minimum distance of 200,000 kilometres (kms)
per year with LNG 30% cheaper than diesel to justify the additional costs of running on LNG, or
less distance if the conversion is subsidised
nn the delivered cost of LNG or LCNG needs to be cheaper than alternatives (diesel, gasoline, LPG)
with a high likelihood of remaining so over the vehicle life
nn there are skilled labourers to maintain and operate the equipment
nn there are high safety standards associated with operation and maintenance of vehicles running
on LNG, LCNG or CNG, and
nn the fuel diversity and use of LNG are consistent with regional government or utility policies.
The expansion of LPG for transport is relatively straightforward using existing infrastructure,
but its use would need to be subsidised because it is often more costly than gasoline or diesel
in PICTs. Further work would need to be conducted to estimate the wider economic impact of
subsidising the use of LPG in vehicles to stimulate demand.
In conclusion, increasing LPG for transport in the short to medium term could be viable if
subsidies or incentives put in place to drive LPG uptake are offset by wider economic benefits
that outweigh the costs (this would need to be the subject of an economic study).
59
6 Research Question 4: Which Pacific Island

Countries and Territories have the highest
potential to benefit from expansion of LPG or
the introduction of natural gas?
6.1 Context
As noted earlier, PICTs have varying sizes of population, economies, energy needs, and levels of
infrastructure development. The use of LPG could be expanded. PICTs with smaller demands may
seek to leverage off any use of LNG in the larger economies. If LNG is established in a country
on the back of an ‘anchor demand’, it could be further used in transport, commercial, industrial or
pipeline applications.
6.2 Findings
6.2.1 LPG for Light Vehicles in all PICTs
As mentioned, Fiji is the only PICT with significant numbers of LPG vehicles. It also enjoys the
lowest LPG price in the Pacific. It could be inferred that the low LPG price is a result of the
fact that more than 50% of LPG is used in vehicles, and that this drives economies of scale and
encourages competition.
There appears to be an opportunity to replicate this situation in other countries in the Pacific;
for example, by artificially stimulating LPG demand through vehicle concessions. Barriers to the
uptake of this would include:
nn ensuring trained support for installing and maintaining LPG vehicle technologies, and
nn adjusting transport safety and other acts or regulations for vehicles.
Moving this forward would first require a detailed economic analysis to assess the potential
impact on these economies. Governments would then need to decide whether to encourage the
necessary LPG vehicle uptake.
6.2.2 LPG for Air Conditioning in all PICTs

LPG distributors in the Pacific are already operating and promoting gas-powered air conditioning.
Although there are a few technical barriers to the further use of this technology, there are also
some commercial barriers that may need to be resolved. These include the following:
nn LPG-based air conditioning is viable at a certain price spread between LPG and retail electricity
prices, but this spread varies across and within PICTs (therefore, success in one installation is
not necessarily transferable to another)
nn sales and marketing of air conditioning systems are limited to a few retailers, and the awareness
of LPG among local air conditioning contractors (and the market in general) is low
nn some people may perceive the requirement to continually refill or replace gas bottles as an
inconvenience, and
nn few contractors outside of the gas companies with the skills and knowledge to maintain the
equipment once it is installed.
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Nevertheless, none of the barriers appears to be major and can be resolved locally. Adoption will
take time and at a rate in proportion to the sales and marketing effort of incumbent appliance
retailers. There is some justification for involvement by governments or third parties to help
overcome the abovementioned barriers to uptake. This might include:
nn conducting an information campaign targeted at buyers, specifiers (e.g. building-design
consultants) and contractors who are not fully informed of gas-fired heat pumps as a choice,
and/or
nn fostering increased competition in the retailing of these appliances.
6.2.3 Potential Sites for Gas Power Generation: New Caledonia, Guam,
French Polynesia and Fiji
The research in this study suggests that larger power-generation capacities must be initially
targeted to achieve the economies of scale necessary for bulk LNG shipping. In addition, there
should be as many non-cost drivers (such as EPA air-quality targets or limits) as possible to help
justify and support the conversion. Therefore, the potential sites are French Polynesia, Guam, New
Caledonia, and possibly Fiji.
6.2.3.1 French Polynesia

French Polynesia uses a considerable amount of HFO in power generation, and is also
geographically located relatively close to the USA. For these reasons, it is in a good position to
utilise bulk LNG supplied from Vancouver or the US Gulf Coast or West Coast.
This study shows that the price difference between HFO and LNG delivered to French Polynesia
from Vancouver is marginal. The country also uses the same diesel supply as Vanuatu and New
Caledonia, which is of high standard and cost, operates under French law, and thus has relatively
high air-emissions standards. Therefore, there may be some non-cost drivers that could shift the
balance in favour of LNG in this location.
Further study of the costs and benefits of LNG at specific power stations in French Polynesia
should be considered in further studies which are beyond the scope of this project.
6.2.3.2 Guam
A number of factors have led the Guam Power Authority to consider LNG as an alternative fuel.
These factors include an ageing power-generation plant, tightening emissions controls, and large
power demand. The Authority plans to phase in LNG and build combined-cycle power plants
over the next seven or eight years, utilising ultra-low-sulphur diesel fuel oil as an interim and
alternative fuel source in the near term. This involves replacing old oil-fired steam boilers and
turbines that are likely to have a lower efficiency compared to new combined-cycle power plant.
The range of costs for the generation facilities and the LNG regasification plant are estimated at
USD 500–800 million, depending on the number of generators to be installed. These investments
are expected to deliver nearly a billion dollars in net present value savings over a 30-year period,
despite the significant capital infrastructure cost associated with the plan’s implementation.
6.2.3.3 New Caledonia

New Caledonia has around 500 MW of installed generation capacity. An opportunity to replace the
ageing power generation plant at the nickel smelter (comprising 160 MW of boilers and steam
turbines) led the country to consider LNG several years ago. The site is in the main population
centre of Noumea where emission standards are tightening, and there are good economies of
scale for small-scale bulk LNG.
61
Discussions with authorities in New Caledonia indicated that, when they considered LNG supply
as an alternative fuel to replace HFO at the smelter, they deemed it too expensive compared
to using pulverised coal, which is the current technology being used. However, the project is
currently stalled and there is still a slim possibility that LNG will be reconsidered. If this is the
case, it would establish a good supply hub in the South Pacific and act as an anchor-demand
point for other uses to be investigated.
New Caledonia has other advantages in relation to LNG supply. The first is its close proximity
to Gladstone, so shipping costs for LNG would be relatively low in comparison to other PICTs. In
addition, if LNG were to be used in transport, the avoided diesel cost would be one of the higher
prices in the region since the country uses a relatively expensive, high-grade quality diesel.
The interesting aspect of this example is that, as the size of power generation increases in any
particular location, so do the available options for fuels. For example, coal has become available
in New Caledonia since the power plant size increased to very large capacities. Therefore, it is
difficult, if not impossible, for LNG to compete.
6.2.3.4 Fiji
Although existing utility power stations do not exhibit ideal characteristics for LNG substitution,
Fiji is a large regional fuel user for transport and power and, if a large ‘anchor demand’ can be
found, it might foster increased use of LNG over time in the transport and industrial sectors. Two
such anchor-demand points could be:
nn the existing gold mine with 20 MW of baseload power generation using diesel, and/or
nn the planned copper mine, where the 100 MW of power generation is currently proposed to be
generated using HFO.
During this study, both mining companies expressed interest in the LNG solution, and both
emphasised that cost drivers would be very strong in selecting the fuel of choice. Prospective
LNG fuel suppliers would benefit from investigating these specific opportunities in greater detail.
6.2.4 Potential for Gas-Piped Networks: PNG, Timor-Leste and Fiji

PNG and Timor-Leste have domestic natural gas resources, some of which are close to urban
centres (e.g. Port Moresby). In such cases, these countries may decide to extend pipelines to major
power generation or thermal loads where diesel or LPG is currently being used. The decision to
further extend the gas pipelines to commercial and industrial centres would need to take into
account the likely end-use patterns, the energy-demand profiles, and the competing environment
of more cost-effective electricity that should be produced from gas-fired electricity generation.
During industry consultations in this study, it was proposed that a small gas pipeline network in
an economic zone could provide a potential ‘anchor demand’ to justify larger-scale gas supply
to a Pacific country that lacks natural gas resources. The heating, cooling or power demands
for industrial and commercial sectors in this zone could be met with gas. Furthermore, it was
proposed that LPG could be used as a transitional fuel to supply the initial needs. As demand
grows, the transition to LNG might become economical.
Of the countries studied in this research, there is one piped LPG network in Fiji’s Denarau Island
tourism precinct. Of interest is a Syngas-piped network in Kapolei, West Oahu, Hawaii, which is
a major contributing factor to Hawaii’s choice to pursue LNG. Currently, the costs for producing
Syngas in Hawaii are high: up to USD 40/MMBTU.41 This means that imports of LNG using either
ISO containers or small-scale bulk shipping to substitute for Syngas would be cost effective.
41 Liquefied Natural Gas for Hawaii: Policy, Economic, and Technical Questions.
62
As a consequence, Hawaii Gas:

nn has applied to US federal agencies to diversify its fuel used at the Syngas plant by up to 30%
LNG, and
nn is seeking a third-party supplier to supply in bulk, ship, store in an FSRU, and re-gasify LNG (as
of December 2014).
In Hawaii’s case, there is a clear cost driver for LNG imports to substitute Syngas with cost savings
of 30% to 65%.
6.2.5 Potential Gas Use in Land Transport Sector: Hypothetical Scenario

It is difficult to make general assumptions about the opportunity for uptake of gas in the transport
sectors of the various PICTs, so case-by-case-basis assessments are therefore required. However,
the following are observations relevant to the conditions under which a successful LNG and/or
CNG transport opportunity could be proposed:
nn CNG is better suited to shorter routes due to its lower energy density (this should not be a
problem in many PICTs that are geographically small)
nn LNG and CNG suit central ‘hub-and-spoke’ systems in which the vehicle returns to a central
location for refuelling
nn delivered cost of LNG/CNG should be significantly cheaper (more than 30%) than that of diesel
nn where trucks travel a minimum of around 200,000 kms per year (in order to justify the engine
conversion costs)42, or less if the systems are subsidised
nn where air quality and noise are relevant local considerations
nn because no CNG systems currently exist in PICTs, the initial projects should rely on large fleet
operators to be the first movers to create LNG demand, and
nn it is more cost effective to convert trucks and taxis than buses, personal cars or other light
vehicles.
In summary, hub-and-spoke transport operations involving heavy vehicles (particularly buses)

represent a strong prospect for CNG utilisation in PICTs. A hypothetical scenario was completed
for a bus and truck fleet in Fiji (see Table 14). It represents a potential end-use with some scale
because Fiji has one of the largest numbers of registered vehicles in the Pacific (around 1,600 in
total).
The cost of vehicle conversion is estimated at USD80,000, with the following range observed:
nn USD30,000 for conversion of a large vehicle to CNG (Exxon Mobil, 2014);
nn USD70,000–90,000 for conversion of a large vehicle to LNG (Exxon Mobil, 2014); and
nn USD45,000–100,000 for large vehicle conversion (suggested by participants at an industry
workshop held in February 2015 as part of this study).
In contrast, the marginal cost of purchasing an LNG-fuelled prime mover or bus direct from an
OEM is estimated at USD45,000 for a prime mover of USD 250,000 purchase value.
This assumes a scenario in which the delivered cost of LNG is cheaper than that of diesel. That
might occur under a circumstance where an ‘anchor demand’ has helped to establish a LNG
supply route from Vancouver to Fiji via small scale bulk ships as indicated in Figure 34, and this
LNG is then made available for transport uses. It assumes that gas is used in heavy vehicles as
LNG. Table 14 shows potential total annual savings of USD227,000 for buses and USD323,000 for
trucks.
42 Industry workshop conducted as part of this study.
63
Table 14. Transport LNG Hypothetical Scenario, Fiji: Buses and Trucks
Item Unit Bus Truck

Vehicles in Fleet No. 50 20
Fuel Use L/day 70 150
Fuel Use L p.a. 24,500 52,500
Fuel Cost - Diesel USD/L USD1.12 USD1.12
Fuel Cost – Diesel USD/MMBTU USD27.62 USD27.62
Fuel Cost – LNG (best case) USD/MMBTU USD 22.19 USD22.19
LNG % (assumes new fleet) % 100% 100%
Marginal Capital Cost USD USD80,000 USD80,000
Engine Efficiency Before Conversion 40% 40%
Engine Efficiency After Conversion 40% 40%
Energy Use Before Conversion MMBTU 896 1,921
Energy Use After Conversion MMBTU 896 1,921
Diesel Cost USD p.a. USD27,440 USD58,800
LNG Cost USD p.a. USD19,891 USD42,624
Additional Maintenance Cost USD p.a. USD3,000 USD3,000
Savings (per Vehicle) USD p.a. USD4,549 USD16,176
Total Savings USD p.a. USD227,446 USD323,525
Cost of Conversion USD USD80,000 USD80,000
Simple Payback years 17.6 4.9
Note: Based on dual-fuel conversion
Another scenario was developed to investigate the opportunity for use of CNG (converted from
LNG) in a private vehicle or taxi in Fiji (Table 15) in view of the potential for LNG substitution in
the country.
For small passenger vehicles, others have estimated the cost of vehicle conversion to be:
nn USD8,000 for conversion of a small vehicle to CNG (Exxon Mobil, 2014), and
nn USD1,900 for conversion of a small vehicle to CNG (PTT, Thailand).
Given Thailand has converted over 300,000 vehicles and is very experienced in the requirements
of the process, this study has chosen to use a conversion figure closer to that of Thailand.
64
Table 15. Transport LNG Hypothetical Scenario, Fiji: Passenger Vehicles
Item Unit Private Taxi

Vehicles in Fleet No. 1 50
Fuel Use L/day 5 50
Fuel Use L p.a. 1,750 17,500
Fuel Cost – Diesel USD/L USD1.12 USD1.12
Fuel Cost – Diesel USD/MMBTU USD27.62 USD27.62
Fuel Cost – LNG USD/MMBTU USD22.19 USD22.19
CNG % (assumes new fleet and conversion % 100% 100%

from LNG)
Conversion Capital Cost USD USD2,000 USD2,000
Engine Efficiency Before Conversion 40% 40%
Engine Efficiency After Conversion 40% 40%
Energy Use Before Conversion MMBTU 64 640
Energy Use After Conversion MMBTU 64 640
Diesel Cost USD p.a. USD1,960 USD19,600
CNG Cost (converted from LNG) USD p.a. USD1,421 USD14,208
Additional Maintenance Cost USD p.a. USD500 USD500
Savings per Vehicle USD p.a. USD39 USD5,392
Total Savings USD p.a. USD39 USD269,605
Cost of Conversion USD USD2,000 USD2,000
Simple Payback Years 51 0.4
This scenario shows there is some potential for use of CNG as a transport fuel in taxis under the
following conditions:
nn if LNG can be delivered to the country for less than the cost of diesel – this can only happen if
it is delivered in bulk ships based around a large ‘anchor demand’ (i.e. not simply a taxi fleet)
nn if cost of conversion is kept low – certainly less than USD 2,000 per vehicle
nn if the distance travelled or fuel used for the vehicle is significant at more than 10,000 L per
year, and
more frequent fuel refilling may be required for CNG powered vehicles compared with
conventional fuels.
6.2.6 Further Opportunities for Increased Gas Use in the Pacific: New
Caledonia and Fiji
In addition to the preceding discussion, five of the most promising opportunities for increased
gas use in the Pacific are:
nn LPG for light vehicles in many PICTs where broader benefits from uptake can be demonstrated
nn LPG for air conditioning in PICTs where LPG already exists and electricity is expensive
nn LNG for New Caledonia’s nickel smelter, and
nn LNG for Fiji’s current and future mining sector (~120 MW of power generation).
65
Table 16 summarises the commercial and regulatory considerations for these opportunities. The
following sections discuss some potential pathways to realising these and other opportunities.
Table 16. Commercial and Regulatory Consideration for Gas Opportunities in PICTs
Issue LPG for Light Vehicles LPG for Air LNG for New LNG for Fiji’s Current
in all PICTs Conditioning in all Caledonia Nickel and Future Mining
PICTs Smelter Sector
Commercial Readiness Technology at this scale Technology at this scale Technology at this scale Technology at this scale
of the Technology is fully commercial. is fully commercial. is fully commercial. is fully commercial.
Competing Fuels Gasoline, diesel Electricity Coal Diesel and/or HFO
Long-term, Large-Supply No No Yes Yes

Off-take Required
Existing Fuel Importing Yes, but LPG blends for Yes No No

Infrastructure household and transport
use are different.
New Infrastructure and May need increased LPG May need increased LPG Limited port space Several options exist,
Land Requirements import storage capacity. import storage capacity. at the nickel smelter. including FSRU, new
Would probably need ports for the mines,
FSRU. gas pipelines, trucking
routes.
Fuel-Importing LPG importing exists in LPG importing exists in LNG would be a new LNG would be a new
Arrangements many PICTs. many PICTs. fuel for the country. fuel for the country.
Sovereign Risk Varies Varies Low Medium
Skills and Training Service and support Some training for Required–would not be Required–would not be
Requirements staff and infrastructure service and support problematic. problematic if confined
would be required for all staff in regard to gas air to mining sector.
countries except Fiji. conditioning.
Regulatory Changes Yes–significant if LPG is Probably minor if LPG is Yes–possibly significant Yes–possibly significant.
Required a new transport fuel. already being imported
and distributed.
Scale of Investment Possible increased LPG Possible increased LPG USD200–300 million in USD50 –200 million
Required for storage requirements at storage requirements FSRU plus associated in port infrastructure
Governments, Private port, investments in new at port. changes to boilers at plus associated piping
Sector or Development vehicles, and/or vehicle nickel smelter. or trucking to get gas
Partners conversions. to sites.
Non-Cost Drivers Possible flow of benefits None Strong air-quality None

in reducing household driver due to location
LPG pricing. of the nickel smelter in
Noumea.
Barriers Current pricing of LPG is Market understanding of Société Le Nickel (SLN) The Vatukoula gold mine
higher relative to diesel gas air conditioning. has already started is already operating
and gasoline in small- down the pathway of at around 20 MW load
volume LPG markets. Different energy-price utilising coal but is but this is about half
structures in each PICT currently experiencing the required capacity
mean that assumptions difficulties. A small to justify full-time
on viability need to be window of opportunity charter of a 12,000 cbm
tested at each site. to change direction may LNG ship. The 100 MW
exist. Namosi JV is in planning
stage only.
6.2.6.1 LNG for New Caledonia’s Nickel Smelter

The opportunity to use LNG in powering up to 200 MW for the SLN smelter in New Caledonia is
significant. The smelter has committed to changing fuels from HFO but had previously committed
to using pulverised coal technology as the replacement. However, there appears to be a small
window of opportunity to change direction because the project costs for this option have
increased since they were first conceived.
66
Although it is not known whether a fully developed LNG project will be competitive with coal, it
does appear competitive with HFO at this scale.
In order to realise this opportunity, several points need to be considered. The government-owned
SLN would need to agree to the possibility that LNG could be used to supply the smelter and then
place the coal-repowering project on hold while a fully costed proposal is developed. Assuming
that this occurs, the project does not appear to face any significant technical obstacles, and the
Government of New Caledonia would have the capacity to fund the infrastructure requirements
and/or attract private-sector investments. If this LNG project takes place, LNG would consequently
become available in closer proximity to many PICTs than to any other current supply point.
6.2.6.2 LNG for Fiji’s Mining Sector

nn Fiji’s has one major operating mine, which has a relatively flat 20 MW electricity demand. This
is approximately half the capacity required to fully occupy a 12,000 cbm LNG supply ship that
delivers LNG from Vancouver. Mining personnel consulted during the study confirmed that they
are very interested in fuel-cost reduction opportunities, including the possibility of using LNG.
Even so, the use of LNG to displace diesel at the mine may not be economical. This means that
other parties would need to be involved for it to be feasible. This could potentially include:
nn Fiji Electricity Authority’s (FEA’s) use of LNG for some of its diesel-power generation
nn a future copper mining project (with a projected 100 MW electricity demand) as a potential user
when the project is completed

nn governments or development agencies partly funding or financing storage infrastructure in the
country, and/or
nn joint commitment by other diesel power stations in the region to purchase LNG; the ship
delivering LNG could make multiple drops on the same fuel run, as MRTs and LCTs do for other
fossil fuels.
However, there are many challenges to achieving a project such as this. For example, arrangements
in which multiple private-sector and/or government parties need to collectively negotiate are
likely to be relatively complex, time consuming and costly, and likely require one party to initiate
and manage the process. In addition, because mining operations can move from viable to unviable
if the commodity price drops too far, an investment in LNG infrastructure and fuel switching at
mining power stations is inherently riskier than power stations that supply public power.
6.3 Issues
For both the power and transport sectors, it is difficult to make general assumptions about the
opportunity for uptake of gas in various Pacific countries. Therefore, case-by-case assessments
are required for each power station and transport sector in each country and territory.
6.4 Conclusions
There appears to be a case for encouraging increased use of LPG in most PICTs in niche
applications where it can provide cost, air quality, and/or health benefits. This includes using LPG
for vehicles in cities where pollution is an issue, household cooking where there are air quality
and health benefits, and commercial air conditioning where the cost of LPG relative to electricity
makes this a viable alternative.
In the short term, LNG is most beneficial to only a few countries. Guam may be the first country
in this study to import LNG into its fuel supply chain. It may create opportunity for other PICTs to
benefit from the establishment of supply chains and from experience in the region.
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For PNG and Timor-Leste, the development of piped networks could be fed either by domestic
LNG or piped natural gas, depending on the location of the end-use demand. For PICTs with no
natural gas resources, an initial investment in a piped gas network within an economic zone may
create a larger gas demand that could initially be supplied by LPG. Transition to LNG could take
place over time as demand grows and LNG becomes more widely available in the region.
If market conditions for cost-effective supply of LNG to one or more PICTs are achieved, the
nn an individual power station, IPP, government, gas importer, or consortium could enter in to a
infrastructure is established in a country building on the ‘anchor demand’ in power generation.
68
7 Research Question 5: What factors need to

change in order to realise the benefits?
7.1 Context
There is scope to increase LPG use cost-effectively in a broad range of PICTs. This could have a
flow-on effect in improving economies of scale in supply chains. In some cases, the capacity of
existing port and storage infrastructure is sufficient, while in others it would require investment
and expansion.
In contrast, any shift towards introducing natural gas (LNG) requires considerable new capital
investment in ports, fuel off-take and storage facilities, in-country distribution networks, and
equipment conversion. It will also require the development of new skills and regulations for
gas management and handling. In addition, there would probably be a need for extensive gas
marketing to ensure adequate demand.
7.2 Findings
Most PICTs do not have regulatory frameworks for use of LPG as a transport fuel, and may require
regulatory changes and/or concessions to allow for small LPG piped networks to be created for
household and commercial use. On the other hand, the distribution and use of bottled LPG is
common and so ‘take-up’ in small-scale appliances and commercial air conditioning should be
possible.
This study suggests that the introduction of LNG into a PICT that lacks its own natural gas
requires a sufficient collective demand to justify a large investment in new fixed infrastructure,
optimal market conditions, and suitable technologies for gas use. The recent move towards LNG
imports in Hawaii is a good example of a place where such conditions exist.
However, because most PICTs in this study do not individually experience the same conditions as
those of Hawaii, they would each need to install multi-fuel technologies suitable for using LNG
in the future, and then collectively aggregate fuel demand to incentivise supply to the region.
The most relevant PICTs with sufficiently large fuel demand, either individually or in aggregate,
are Fiji, French Polynesia, Guam and New Caledonia. PNG and Timor-Leste could investigate local
use of their domestic reserves of LNG or piped natural gas. PICTs with smaller demands could
conceivably seek to leverage off any use of LNG in these larger economies.
LNG can be shipped cost-effectively over considerable distances in bulk ships as small as 10,000
m3. To use LNG in PICTs that lack domestic gas resources, the unloading facilities and storage
systems that would need to be built require large-scale capital investment. These storage
systems could be fixed land-based facilities, floating storage units with land-based regasification,
or floating storage and regasification units.
This study shows that, under current market conditions and with infrastructure costs amortised over a
25 years project cycle, LNG would be more competitive as an alternative fuel option in some PICTs.
69
7.3 Issues
7.3.1 Issues for Converting to Gas for Power Generation
PICTs and their utilities would need to consider the following issues when deciding to convert
their power generation to LNG:
nn LNG is at its most cost effective at a scale larger than the power consumption of most individual
PICTs (i.e. above 40 MW baseload)
nn LNG needs large upfront investment in infrastructure and is not easily scaled to demand
nn LNG is highly volatile, is transported at cryogenic temperatures, and needs very costly storage
and handling systems relative to diesel, gasoline, coal, LPG or HFO
nn well-trained and skilled operators are needed, and
nn engines running on gas are not as flexible as current diesel engines in their capacity to take
step changes in load.
7.4 Conclusions
Infrastructure and/or energy ministries within PICT governments could consider developing
(and/or developing concessions for) small piped LPG networks to supply LPG for cooking and
air conditioning. This approach would help to improve economies of scale and create centres of
demand for future LNG substitution.
If LPG use is encouraged to grow, it may be possible to expand its use cost-effectively with little
additional investment. Planning regulations and activities for any LPG storage and distribution
infrastructure should take into account this projected growth.
Although a number of commercial, technical, policy and environmental factors need to change for
a fuel transition to occur, power-generating utilities and IPPs can invest in multi-fuel capability
(gas, diesel, HFO, LPG) when buying new generators to give them maximum flexibility in future
fuel choices with relatively small incremental costs (likely to be less than 5% of the power
generator’s capital cost).
Relevant end-users with an aggregate power-generation capacity of more than 40 MW could test
the market by means of an Expression of Interest (EOI) for a multi-site procurement to supply
bulk LNG, as well as an FSU or FSRU. A collective approach by power producers within and among
one or more countries would form an ‘anchor demand’ in the region, and would indicate those
parties interested in supplying LNG/LPG under a long-term contract. A cost-effective FSU or FSRU
would substantially reduce the overall cost of delivered LNG if it becomes available.
Policy frameworks would need to be developed in order to allow and regulate for LNG importation
and use in those countries where there is realistic potential for LNG substitution.
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8 Research Question 6: Given the development of

renewable energy, what is the likely scenario
for LPG and natural gas in the longer term?
8.1 Context
Globally, individual countries are at differing stages of transition from the use of fossil fuels to
renewable energy. A country’s choice of fuels and its energy market are related to factors such as
its surrounding natural resources, its economy, government incentives for renewables and prices
for carbon emissions, its location and infrastructure, as well as social and cultural values.
With vast supplies of natural gas in many regions, gas development and use has increased and
is likely to continue expanding. Its importance is further highlighted when a carbon dioxide
emissions price is applied to fossil fuels without subsidies. There has been growing recognition
that natural gas can play a significant role as a bridge to a low-carbon future.
8.2 Findings
8.2.1 Stationary Power – Other Renewable Energies
Utilities and IPPs have an increasing number of options in electricity-generating technologies
and associated fuels. The availability of such options is a benefit to the sector, but it also
makes decisions about future investments challenging. For many stationary power applications,
renewables and energy efficiency appear to be increasingly sound long-term investments.
The use of coconut oil in stationary power, which is now proven in Vanuatu, offers a genuine
alternative to diesel for some small-island power-generation systems. Although this application
is not widespread, the technical barriers to expanding coconut-oil power generation to other
medium- and high-speed diesel engines appear to be relatively minor. This fuel is unique:
it can be substituted for diesel and/or HFO in extremely high quantities (up to 100% in base-
load operation), can be produced locally, has regional employment benefits, is renewable, and is
cheaper than diesel in the Vanuatu application at the time of writing this report.43
For many small Pacific countries in which LNG and/or LPG are generally expensive compared to
diesel, an aggressive strategy of using renewables, energy storage, and energy efficiency (both
supply side and demand side) may be the most viable approach to reduce overall fuel costs.
8.2.2 Transport Sector – Hybrids

In terms of alternative fuels for the transport sector, there are other additional transport
technologies that could reduce overall fuel expenditure for PICTs and ultimately be more cost
effective than LNG, LCNG or CNG. These include hybrids, which are now very common and reduce
fuel use by up to 30%. Hybrids can be used in private vehicles, taxis, buses and light commercial
trucks. As with any alternative energy technology, an individual purchaser would need to weigh
the additional capital cost of the hybrid against future fuel savings.
Fiji has provided exemptions to import duty on hybrid vehicles, and this has led to the desired
market response with an increase in hybrid vehicle use.
43 Personal communication: UNELCO, December 2014.
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8.3 Issues
At the present time, solar and wind energy, hydropower and coconut oil are providing cost-
effective reductions in diesel and HFO use across the Pacific, particularly in electricity generation.
The beneficial feature of solar PV systems is that they can be deployed in virtually any size, are
silent, are emission-free during operation, and can be located close to urban areas. Governments
and utilities, third-party financiers, IPPs and donor agencies could structure graduated capital
programs that make solar PV installation programs attractive. However, it is important to note
that this is curtailed by the lack of technologies for managing grid stability and energy storage
with high penetrations of PVs.
One of the concepts tested in this study is whether diversifying fuel sources with gas would
improve energy security in the region. This study’s findings suggest that using LNG and/or LPG
would be an expensive way to provide a strategic fuel reserve, although some additional energy
security is achieved through fuel diversity. If a strategic fuel reserve for PICTs is sought, other
options to be considered might include:
nn holding strategic reserves of diesel somewhere in the region (diesel tanks are much cheaper
than LNG or LPG tanks)
nn continuing to pursue a renewable-energy strategy that will extend the effective holding days of
the existing fuel storages at import terminals and power generation sites, and
nn introducing fuel flexibility to power generation systems that could enable the use of LPG in
emergency situations. LPG does not currently appear to offer any cost advantages for base load
operation, but could provide emergency backup to some systems.
8.4 Conclusions
Renewable energy is expanding in PICTs. It currently totals around 25% of the annual electricity
generated by public utilities. The most significant impact of renewables has been for those
utilities where access to reliable hydropower is available (e.g. Fiji, New Caledonia and PNG).
Some PICTs have made significant wind-power investments. For example, in 2011 Tahiti (French
Polynesia) used hydropower to generate over 25% of its electricity needs.
The introduction of LPG and LNG does not represent a barrier to the pursuit of sustainable and
renewable energy systems for power generation where these are viable. Rather, they represent
options for countries to diversify their sources of energy and possibly capitalise on potential price
disruptions and technical developments in global energy commodity markets.
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9 Research Question 7: How can the findings of

this study be applied or developed?
9.1 Context
The development of gas markets in the Pacific could require substantial multi-million-dollar
investments in infrastructure, and involves technical and commercial risks that need to be
minimised to encourage the private sector to invest. Although not every risk can be mitigated,
international development agencies offer a range of products and services to assist private-sector
and government investments in infrastructure.
Some of the specific products offered include loans, credits and grants, interest rate and currency
swaps, partial risk guarantees, partial credit guarantees, technical assistance, political risk
insurance (expropriation, transfer restriction, breach of contract, war and civil disturbances), and
sub-sovereign guarantees without government counter-guarantees.
9.2 Findings
9.2.1 Policy Considerations
The political, social and commercial environment in each PICT is unique and this study is not in
the position to make recommendations for individual governments. Instead, it offers a number
of areas that governments may consider in determining policies for their countries. These are
summarised below.
Using gas to improve fuel diversity

If PICTs want to diversify their fuel options, LPG and LNG could be helpful.
Providing education on gas

Political support and increased take-up by the community could be encouraged by the
presentation of the report’s findings at industry conferences/seminars where Pacific government
representatives are in attendance. Alternatively, industry can attend conferences in the region
(e.g. the PPA’s annual meeting).
Using commercial Expression of Interest (EOI) processes for specific or pilot projects
Industry consultation workshops highlighted the importance of pilot projects in reducing the
real or perceived risks associated with the introduction of new technologies and concepts. Based
on the findings in this study, there are potential candidates for a pilot project that could be
considered relevant in the Pacific. PICT governments or the private sector could test the market’s
interest in specific applications by using a formal EOI process. It would be very important to
include details of risk mitigation products offered by the World Bank (as noted above) or others to
encourage broad supplier interest.
Considering air quality and greenhouse gas emissions.

Participants in the industry workshops in this study stressed that it would be very challenging to
supply LNG at a price lower than the delivered price of HFO in power generation, and that any
policy position (e.g. control of particulates and other emissions) that limits HFO use would make
a country a more attractive investment opportunity. For example, Hawaii’s interest and moves
73
towards LNG were justified by (a) strong EPA guidelines on emissions; (b) the existence of a gas
network that uses high-priced Syngas (~USD 40/MMBTU; and (iii) the availability of cost-effective
LNG from the West Coast of North America. However, this has now been superseded by the policy
drive towards renewables.
Improving the distribution network for LPG

Participants in workshops in this study confirmed that the logistics of bulk LPG supply to PICTs
was generally good, but the distribution of LPG within a country suffered from poor economies
of scale and could be expensive for various reasons. Improving the distribution network for LPG
would help improve the supply chain and delivered cost of LPG to consumers.
Incentivising and regulating LPG markets

Whether or not residential/commercial LPG markets and transport LPG markets are developed
separately or in parallel, they need to be incentivised and regulated carefully. This is primarily
because potentially unsafe practices can develop with ‘leakage’ from automotive markets into
residential use, and perverse economic outcomes could occur in either the residential/commercial
or transport sector.
Providing tax incentives

The competitiveness of LNG and/or LPG use could be improved by ensuring that duties and taxes
are not applied to the importation of gas, gas vehicles, gas appliances, etc. Therefore, governments
would need to be involved and to understand the longer-term benefits for the economy.
Removing subsidies on other fuels

Indonesia’s innovative strategies for LPG offer lessons that could be transferred to the Pacific.
PICTs governments could consider:
nn removing subsidies on kerosene
nn improving swap incentives for LPG cylinders (e.g. provide microfinancing to develop a cylinder
swap system), and
nn introducing improved cylinder designs: fibreglass makes them lighter (easier to transport), and
the liquid level is visible through a sight glass (providing confidence to users about how much
they have used).
Leveraging existing work by others on policy options

The Global LPG Partnership has assessed the success of various policy scenarios for LPG use in
numerous countries. Appendix J illustrates examples from Brazil, Morocco, India and Indonesia.
This and other LPG industry associations would be a valuable resource for any PICT considering
stimulation of its LPG sector.
9.3 Conclusions
The price of fuels is critical to investment decisions on fuel conversion but the market is highly
volatile. End-users should understand the long-term price trends for various fuels, as well as
future fuel supply-and-demand scenarios, and make investment decisions on this basis, rather
than on present-day cost and demand. It is recommended that PICTs develop a watching brief
on the world’s bulk LNG and LPG markets to identify potential oversupply conditions and price
anomalies. SPC could potentially perform this service as part of its fuel-price monitoring services.
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10 Overall Conclusions
10.1 Expanding Use of LPG

10.1.1 Feasibility and Cost Factors
As it is already in use in many PICTs, expanding LPG is viable and will deliver significant health
and environmental benefits. There are some constraints – including current higher cost relative to
other fuels, cultural attachments to biomass and kerosene for cooking, and technical limitations
for use in power generation. Even so, it benefits from being relatively easy to ship, transport
in-country and store. In addition, infrastructure, distribution and retailing systems are well
established in many countries.
10.1.2 Application in the Transport Sector

Considering the size of the transport sector in the PICTs, increased use of LPG as fuel is an
important area for further development. Fiji has demonstrated that adoption of LPG for land
transport can result in developing economies of scale and increased competition to deliver lower
prices for household LPG. Similar opportunities exist in other PICTs. Governments could consider
subsidies or incentives to drive LPG uptake and could take a lead in introducing it to government
vehicles. Based on commercial technology already available in Australia, experimental work is
currently being conducted in Fiji (by BlueGas with University of the South Pacific involved in
verifying the results) on use of LPG in heavy vehicles and blending of LPG with other fuels in
electricity generation.
10.1.3 Stimulating Demand for LPG

There are also other ways to stimulate demand for LPG – both in domestic and commercial
settings, including:
nn providing grants or microfinance initiatives for early market uptake of LPG
nn organising information campaigns on LPG use for both domestic and commercial applications
nn introducing subsidised cylinder exchange/deposit schemes
nn adopting LPG in schools, hospitals, hotels and via other business customers
nn developing a niche use for LPG in commercial air conditioning systems, and
nn supporting or providing training of installers, contractors and building managers to operate
LPG appliances.
This would not only directly stimulate use of LPG, but it would also grow the capacity of suppliers,
agents and depots and expand the secondary market through reduced overall costs for individual
domestic customers.
10.2 Potential for Introduction of LNG

10.2.1 Feasibility and Cost Factors
The research in this report shows that sufficient volumes of LNG are available on both sides of
the Pacific to introduce and service a natural gas market for PICTs. Locations for these volumes
include the east coast of Australia (Melbourne, Gladstone), PNG (Port Moresby or other locations)
and North America (Vancouver). LNG can be delivered using bulk ships as small as 12,000 m3 or in
20’ or 40’ ISO containers.
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LNG prices vary between regional markets and over time. Oil-linked pricing is dominant in Asia,
and gas-linked pricing is dominant in North America. LNG pricing relative to oil has worsened
in recent years, but the market dynamics are complex and may change, with a potential supply
overhang in the next few years. At the time of writing, LNG prices (ex-LNG terminal) were around
USD15/MMBTU (linked to oil) in Asia, and around USD7–9/MMBTU (linked to gas) in Vancouver.
The Vancouver pricing is significantly cheaper than delivered prices for diesel and somewhat
cheaper than HFO. It is representative of the potential disruption that might occur in world LNG
markets if sufficient capacity is introduced through the use of gas-linked pricing.
LNG distribution requires significant new capital investment in ports, storage facilities, in-
country distribution networks, and equipment conversion. This results in much higher storage
and transport costs per unit of energy delivered than diesel, gasoline and LPG. For these reasons,
it is not a fuel that should be stored ‘just in case’ it is needed. Instead, the research in this report
has shown that LNG is best used in a ‘baseload’ application in order to justify the infrastructure
investment and adequately recover costs. The high storage and distribution costs contribute to a
delivered cost that varies across PICTs in terms of its competitiveness with incumbent fuels.
These high investment and distribution costs present a barrier to investment and require that
the base FOB price of LNG be at a significant discount to diesel, HFO or gasoline. Market price
fluctuations in all fuels present another challenge for comparing the merits of fuel investments44.
In addition, its introduction would require the development of new skills and regulations, as well
as extensive marketing to ensure adequate demand.
To be delivered cost-effectively, this study finds that LNG would have to be shipped to the region
in bulk. Small-scale bulk ships are currently available for this purpose. If they are fully utilised
throughout the year, shipping costs would represent around 10% of the delivered cost of LNG. The
additional costs to ship LNG from the cheaper Vancouver source to the Pacific would probably be
justified by the lower LNG prices available there (LNG in Vancouver is USD6–8/MMBTU cheaper
than Australian sources).
10.2.2 LNG for Stationary Power Applications

If LNG is introduced to a new market in the Pacific, it is initially best suited to a limited number
of stationary power applications that are geographically concentrated in a few areas around sites
and/or major ports. Not including the known opportunity in Guam, the other main opportunities
appear to be:
nn New Caledonia’s nickel smelter (~160–200 MW of power generation)
nn Fiji’s current and future mining sector (~120 MW of power generation), and
nn French Polynesia due to its relative proximity to Vancouver’s LNG markets and its relatively
high HFO price.
An alternative suggested in industry workshops is to focus on an economic zone where LNG could
be used by means of a new gas pipeline network to displace existing fuels. These projects would
need to justify the upfront investments in infrastructure, whereupon secondary markets could be
developed over time, such as LCNG, CNG and LNG for transport and industrial/commercial use,
which generally use much smaller volumes per individual application.
It may be viable to send ISO containers of LNG from a regional hub to subregional islands once
centralised storage was established, but it is highly unlikely that the long-distance shipping of
ISO containers of LNG will be viable. It is worthwhile to note that Hawaii recently imported a trial
run of LNG in ISO containers, but in January 2015 it called for tenders for bulk delivery.
44 Fuel-price forecasting was not under the scope of this study.
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10.2.3 LNG for Transport Sector

Compared to LPG, the application of LNG for transport appears less probable at this stage. There
are not likely to be any large-scale transport operators that could singly justify the required
investment. It would be better for transport operators to wait until a regional LNG hub is
developed (if this occurs) and then investigate its potential as a secondary use in transport.
Therefore, in the longer-term, increasing LNG and LCNG for transport could be viable in all or
some of the following circumstances:
nn centralised LNG infrastructure is installed in the country on the back of an ‘anchor demand’,
such as a large power station or economic zone development, and LNG for transport could
subsequently be developed
nn if new vehicles are purchased directly as dual-fuel or gas-only, the marginal cost needs to be
relatively small compared to the expected savings in fuel costs
nn trucks operating on LNG would need to travel a minimum distance of 200,000 kms per year
with LNG 30% cheaper than diesel to justify the additional costs of running on LNG
nn the delivered cost of LNG or LCNG needs to be cheaper than alternatives (diesel, gasoline, LPG)
with a high likelihood over vehicle life
nn there are skilled labourers to maintain and operate the equipment
nn there are high safety standards that can be enforced for operation and maintenance of vehicles
running on LNG or CNG, and/or
nn fuel diversity and LNG use are consistent with regional government or utility policies.
10.3 LPG and LNG for Power Generation

The use of LPG in power generation has an advantage over LNG in the sense that the supply chains
and infrastructure already exist. However, LPG has historically been a more expensive option than
diesel. The key additional circumstances under which use of LPG for power generation would be
viable are:
nn if it can be shown that diesel+LPG blends operate with reliability
nn if the new generators installed are designed to run on 100% LPG, and/or
nn if long-term delivered LPG pricing to the engine inlet can be secured at a discount to diesel,
HFO or LNG.
As indicated above, although LNG for power generation in PICTs is technically feasible, it faces
many commercial challenges. Even so, the use of LNG in the short to medium term for power
generation could be viable if all or some of the following circumstances occur:
nn an individual, or a collection of, medium to large power station(s) (>40 MW in aggregate), such
as those in Guam, New Caledonia, Fiji, and French Polynesia, can be found to justify dedicated
small-scale bulk shipping and storage facilities and attract competitive LNG pricing
nn higher national emissions standards require the substitution of HFO and diesel
nn prospective power stations have no realistic prospects over the coming 10–15 years to use
cost-effective renewable energy such as solar photovoltaics or coconut oil on a large scale
nn the large capital cost of LNG infrastructure is not a barrier and the end-user has a sufficient
credit rating (or credit risk guarantees) to underwrite the contract for LNG off-take over a long
term
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nn the contract for LNG supply can be entered for more than 10 years
nn new engines or boilers are planned and their conversion to dual fuel is relatively ‘low cost’
compared to the expected savings in fuel costs
nn the delivered cost of LNG can be confirmed as competitive with alternatives (e.g. diesel, HFO,
coal) with a high likelihood over the contract timeframe
nn there is potential for secondary use in industry and/or transport
nn there are skilled labourers to maintain and operate the equipment and maintain high safety
standards
nn using LNG is considered as a means of improving fuel security through energy diversity
nn fuel diversity and LNG use are consistent with regional government or utility policies, and/or
nn power-generation efficiencies are not severely penalised by using LNG instead of the incumbent
fuel.
In the near term, utilities and IPPs could benefit from ensuring that future generation investments
incorporate multi-fuel capability to give them as much flexibility as possible in future fuel choices.
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11 Recommendations and Next Steps
Although many additional commercial, technical, policy and environmental factors need to align
for a fuel transition to occur, the following recommendations can be made. These require a
relatively low investment of time and resources.
11.1 Expansion of LPG

The study outlines four recommendations in regard to LPG that would help a PICT to increase
LPG supply and position it for further growth.
1 The transition to LPG from biomass and kerosene for cooking be accelerated, given that it
has positive documented health and environmental benefits. This could include assessing
the need in some PICTS to reduce the import duty and tax for LPG relative to household
kerosene (given it is subsidised in some PICTs), supporting subsidised cylinder exchange/
deposit schemes, microfinance initiatives or other initiatives designed to reduce health risks
(particularly for women), environmental impacts and overall costs for individual domestic
customers and some commercial enterprise as well.
2 PICT governments consider approaches for developing small piped LPG networks in urban
areas to supply LPG for cooking and other purposes. This approach would help to improve
economies of scale and create centres of demand for future LNG substitution.
3 PICT governments consider developing LPG options for the transport sector. In addition to
providing a cleaner burning fuel, the increased demand may improve economics for LPG
across the region. Applicability may vary between PICTs, but governments could consider
instigating a two-phase development of five years each. In the first phase, new transport
sector vehicles can be encouraged through a mix of financing and tax incentives with
government fleets being an early example. The second phase could begin about two years
later and target existing vehicles. Older vehicles could be replaced or converted first, with
progressive targeting of vehicles. For example, the first year can address ages over 10 years,
the second year can focus on 8-10 years, and so on. Current oil prices would be a factor in
government decisions and the ‘take-up’ rate and timing of these developments.
4 PICT governments consider introducing appropriate incentives for private sector and other
stakeholders to increase their LPG import and storage capacities to facilitate increased LPG
usage. Assuming that LPG use is encouraged to grow, it may be possible to cost-effectively
expand LPG use with little additional investment. The planning regulations and activities
for any LPG storage and distribution infrastructure should take into account this projected
growth.
11.2 Potential Introduction of Natural Gas

5 Relevant end-users with an aggregate power-generation capacity of more than 40 MW assess
the economic viability of importing bulk LNG, including using FSUs or a FSRU. A collective
approach between power producers within and between countries could result in an ‘anchor
demand’ in the region, and would indicate the parties interested in supplying LNG/LPG under
a long-term contract. A cost-effective FSU or FSRU would substantially reduce the overall cost
of delivered LNG if it becomes available.
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6 Governments develop policy frameworks on LNG import and use in those countries where
there is realistic potential for LNG substitution.
If the market conditions for cost-effective supply of LNG to one or more PICTs are achieved, the
nn an individual power station, IPP, government, gas importer or consortium could enter into a
infrastructure is established in a country on the back of the ‘anchor demand’ in power
generation.
11.3 For Both LPG and Natural Gas

7 Power-generating utilities and IPPs consider investing in multi-fuel and gaseous fuel
injection capability (LNG/natural gas, diesel, HFO, LPG) when buying new generators in
relevant countries. This offers maximum flexibility in future fuel choices with a relatively
small incremental cost (likely to be <5% of the power generator’s capital cost).
11.4 Fuel Pricing

8 SPC and PPA develop an ongoing ‘watching brief’ on the world’s bulk LPG and LNG markets
to identify potential oversupply conditions and price anomalies and keep Governments and
private sector groups informed of emerging opportunities.
11.5 Next Steps

This report will be distributed to development partners, governments and industry. The
recommendations and activities mentioned above provide some suggestions towards making
decisions about the technical and economic viability of increased gas use in PICTs. They do not
represent a barrier to the continued pursuit of sustainable and renewable energy systems for
power generation where viable. Rather, they may prepare countries to capitalise on potential
price disruptions and technical developments in world fuel markets.
For social, environmental and economic reasons, PICTs need to reduce their reliance on
imported liquid fossil fuels and develop alternative renewable energy sources. Gas and other
new approaches may broaden access to energy for rural and remote areas, and provide cleaner,
cheaper and more reliable energy for power generation, industry and households. Such change is
vital for the region’s long-term future.
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Appendix A: List of People Consulted/Involved in Study
In addition to people mentioned specifically in the Acknowledgements section at the beginning

of the report, the following organisations and individuals are thanked for their participation and
support:
Table A.1. List of People Consulted/Involved in Study
Contact Name Gender Position Organisation Country

Michael Lani ‘Ahokava M Generation Manager Tonga Power Tonga
David Aidney M Managing Director Williams and Gosling Limited (Logistics) Fiji
Solomone ‘Aliate M Terminal Manager Tonga Power Tonga
Togaro Asiba M Group Manager, Business PNG Power PNG

Marketing and Sales
Sonik Barot M Product Manager, CNG Atlas Copco Australia
Mahdjouba Belaifa M Department Head, Gas Exporting Countries Forum Secretariat (GECF) Qatar
Energy and Gas Market
Analysis Department
Nicholas Bennani M Country Manager Exxon-Mobil New

Caledonia
Hasso Bhatia M Chief Executive Officer Utilities Regulatory Authority Vanuatu

(CEO)
Johnson Binaru M Director General Ministry of Infrastructure and Public Utilities Vanuatu
Steve Blackburn M General Manager, Project PNG Ports Corporation PNG

Management Unit
Tim Bodell M Engineering Adviser, American Samoa Power Authority American

Technical Services Samoa
Michael Carmody M Director and CEO Gas Energy Australia Australia
Gordon Chang M Executive Officer Pacific Power Association Fiji
Felise Sam Chong M Country Manager Origin Energy Samoa
Chris Clarke M Group Manager Asia Origin Energy Australia

Pacific LPG
Frederic Clos M General Manager Swire Shipping (container logistics) New

Caledonia
Ledua Colati M Power Generation Pernix (Fiji) Limited Fiji

Manager
Ron Cox M Vice President, Power Hawaiian Electric Company USA

Supply
Rt. Hon. Lord Dalgety M Regulator Electricity Commission, Sikotilani Kingdom of

(Q.C.) Tonga
Nelson de Jesus M Director of Downstream Autoridade Nacional de Petroleo (ANP) Timor-Leste
Alex Dronoff M General Manager, LNG BOC Australia
Mark Dunn M General Manager Origin Energy Vanuatu
Michel N. El-Rahi M General Manager, Kinoya Pernix (Fiji) Limited Fiji

Power Station
Lorena Estigarribia F Project Officer PCO Australia
Pavlos Evangelidis M Head of Delegation Delegation of the European Union for the Pacific Solomon
Islands
A-1

Alex W. Evans M Chairman, Operating The Global LPG Partnership USA
Committee
Brad Evans M Commercial Manager - APA Group Australia

Projects
Gerard Fae M Senior Infrastructure World Bank PNG

Specialist,
Energy and Extractives
Global Practice
Hakaumotu Fakapelea M Port Master Ports Authority Tonga

(Capt.)
Ringo K Fa’oliu M CEO for Infrastructure Ministry of Infrastructure Tonga
Ajith Fernando M GM Homegas Homegas Tonga
Asofa Fereti M Director of Transport Government of Tokelau Tokelau

and Support Services
Philippe Fetique M General Manager, Alizes Enérgie New

Generation Caledonia
Aldo Flores M Secretary General International Energy Forum (IEF) N/A
Nikolasi Fonua M Strategic Development Tonga Power Tonga

Manager
Peni Fukofuka M LPG Manger Tonga Gas Tonga
Martin Garood M New Zealand Ministry of Foreign Affairs and Trade New Zealand
Anthony Gilbert M General Manager Elgas Midstream Australia
Ashoka Gore M Gas Power Generation Geogas Trading Australia
Kate Graham F Analyst Oceangas Services Australia Pty Limited Australia
Tendai Gregan M Energy Specialist World Bank Australia
Richard Hagemeyer M President Agmark Logistics Group USA
Merinda-Lee Hassall F Development Manager, New Zealand Ministry of Foreign Affairs and Trade New Zealand
Energy, Sustainable
Economic Development
Division
Julie Hinkle F Finance General Hawaiian Electric Company USA

Manager, Operations
Soane Viane Hoatau Head of Department Maritime Affairs, Ports and Sea Beacons Wallis &
Futuna
Zheng Jianyi M Senior Executive, Pavilion Gas Singapore

Corporate and Business
Planning
Delton Jones M Economic Advisor Economic Development Division, SPC Fiji
Michael Kelly M Deputy Managing World LP Gas Association France

Director
Kamleshwar Khelawan M Senior Energy Specialist World Bank Australia
Bob Koeppen, (Jnr) M Vice-President, South Pacific Petroleum Corporation Guam

Commercial/
Administration
John Korinihona M Director of Energy Ministry of Mines and Rural Electrification Solomon
Islands
Carson Korowa M General Manager South Pacific Oil Solomon

Islands
A-2

Parkop Kurua M Senior Portfolio Independent Public Business Corporation PNG
Manager
Atishma Lal F Project Information Economic Development Division, SPC Fiji

Assistant
Mosese Lavemai M General Manager Ports Authority Tonga
Jesús Laviña M Head of Section for Delegation of the European Union for the Pacific Fiji
Infrastructure and
Natural Resources
Bernard LeClerc M Country Manager TOTAL Pacifique New

Caledonia
Peter Lee M CEO Fiji Gas Fiji
Capt. Latu Lui M Operations Manager Pacific Forum Line, Tonga Tonga
Kelele Lupi Tonga Acting Director for Government of the Kingdom of Tonga Tonga
Marine and Ports
Terry Mael M Petroleum Officer Department of Energy Vanuatu
Christopher Maingu M Maritime Database Economic Development Division, SPC Fiji

Officer
(Utu) Abe Malae M CEO American Samoa Power Authority American

Samoa
Sev Maso M Advisor Independent Public Business Corporation PNG
Anthony Maxwell M Senior Energy Specialist Asian Development Bank Sydney
Renato Mele M Head of Delegation Delegation of the European Union for the Pacific Fiji
Greg Morris M Country Manager Namosi Joint Venture Fiji
Bastian Morvan M Chef du service de Direction de l’Industrie des Mines et de l’Énergie de New
l’énergie Nouvelle-Calédonie (DIMENC) Caledonia
Lui Naisara M Director–Transport Ministry of Works, Transport and Public Utilities Fiji
Planning
Peceli Nakavulevu M Director Department of Energy Fiji
Papali’l Anthony M General Manager Samoa Shipping Corporation Ltd. Samoa

Nansen
Suraj Narayan M General Manager–Power Wartsila Australia

Plants, Australia &
Oceania
Sriram Naraynaran M Vice President SLNG Corporation Singapore

(Commercial)
Michael Bootii Nauan M Secretary for Transport Ministry of Communication, Transport & Tourism Kiribati
Development
Warring Neilsen M Director of Government Gas Energy Australia Australia

Relations
Ngatokorua Ngatokorua M Senior Maritime Officer Ministry of Transport Cook Islands

(Jnr)
Uchenna Onuzo F Energy/Transport Economic Development Division, SPC Fiji

Economist
Tadayuki Ogawa M Senior Advisor Japan International Cooperation Agency Japan
A-3

Pooja Pal F Administrative Assistant Economic Development Division, SPC Fiji
- Energy
Mark Pardoe M Commercial Shipping South Seas Shipping Vanuatu

Manager
Hasmukh Patel M CEO Fiji Electricity Authority Fiji
Sitalingi Payne M Maritime Port Security Economic Development Division, SPC Fiji
Advisor
Phil Pilippo M Secretary for Transport Government of Marshall Islands Marshall

& Communication Islands
Taasi Pitoi M Director Marine and Port Services Tuvalu
Taukave Poolo M Assistant Secretary for Government of Tuvalu Tuvalu

Transport
Harvie Probert M CEO Fiji Gas Fiji
Ajai Punja M Managing Director Petroleum and Gas Company Ltd Fiji
Nakul Raheja M Marketing Manager BG Gas Marketing Singapore Singapore
Saunak Rai M Vice President, Norgas Carriers Singapore

Operations and LNG
Business Development
Brian Rapson M Strategic Business National Petroleum Company PNG PNG

Advisor
Wu Mengh Siem M New Business Pavilion Gas Singapore
Navneet Sharma M Business Development Fuelgarden LNG AS Norway

Manager
Michael Sheridan M Finance Director Horizon Oil Australia
Ratnesh Singh M National Aftersales Niranjans Autoport Ltd (Hino dealer) Fiji
Manager
Gary Smith M CEO Golar LNG Belgium
Gregg Soweni M Business Manager, Puma Energy PNG

Southern Region
Jakob Stampe M Managing Director Hoegh LNG (floating LNG) Singapore
Robert Sumantri M Consultant Gravifloat Singapore
Jeremy Sutton M General Manager– Swire Shipping Singapore

Asia Trades
Omirete Tabureka M Ship Safety Audit Economic Development Division, SPC Fiji
Advisor
George Tanevski M LPG in Pacific Origin Energy Australia
Paula Taufa M Country Manager–Tonga Pacific Energy Tonga
A-4

Evangeline Taunao F Senior Portfolio Independent Public Business Corporation PNG
Manager
Isikeli Taureka M Executive VP Interoil PNG
Josephius Tiobech M Deputy Director RMI Port Authority Marshall

Islands
Eleni Tokaduadua F Director Department of Environment Fiji
Alan Townsend M Senior Energy Specialist World Bank USA
Caroline Tupoulahi- F Research and Economic Development Division, SPC Fiji

Fusimalohi Information Adviser,
Economic Development
Division
David Tyler M Director World LP Gas Association Australia
John Van Brink M General Manager Tonga Power Tonga
Vore Veve M Director of Energy Department of Petroleum & Energy Tonga
Brian Vickers M Group Manager,Technical Origin Energy Australia

Services
Frank Vukikomoala M Energy Database Officer Economic Development Division, SPC Fiji
Kemp Wade M Director of Maritime Ministry of Transport, Nauru

Affairs
Government of Nauru
Loh Wei M General Manager SLNG Corporation Singapore

Development
Jack Whelan M Secretariat Coordination PCO Australia

Officer
Jason Willoughby M Managing Director, Sales GE Australia

and Project Finance
Christina Yu F Project Associate The Global LPG Partnership USA
Eddie Yuen M General Manager Williams and Gosling Limited (Logistics) Fiji
A-5
Appendix B: Some Regional Resources
Agreement/Framework/Policy Description Website Address

Framework for Action on Energy Security Regional blueprint for the provision of http://www.spc.int/edd/en/document-
in the Pacific (FAESP): 2010–2020 technical assistance to the energy sectors download/viewdownload/11-reports/360-
of PICTs. energy-framework-final
Implementation Plan for Energy Security A five-year plan for pursuing the vision, http://www.spc.int/edd/en/document-
in the Pacific (IPESP) (2011–2015) goal and outcomes of FAESP download/viewdownload/11-
reports/2173-implementation-plan-for-
energy-security-in-the-pacific-2011-2015
Pacific Regional Data Repository This database is designed to support http://prdrse4all.spc.int

Pacific governments working in the energy
sector (and their development partners) by
facilitating access to up-to-date, reliable
energy data and project information
B-1
Appendic C: Fuel Substitution Potential in Fiji and

Tonga: Hypothetical Scenarios
Two scenarios have been developed for this report to identify and communicate in greater detail
the potential for substituting gaseous fuels in the energy markets of PICTs. For this purpose, Fiji
and Tonga have been selected. Optimistic and pessimistic scenarios are priced and developed for
purposes of considering fuel substitution in their power and transport sectors. Both scenarios
assume that LNG or CNG has already been made available in the country and that CNG is available
at the same delivered price as LNG, since the additional infrastructure for CNG is minimal in
comparison to the bulk infrastructure and the shipping and commodity costs associated with
delivery of LNG to a country.
Fuel Substitution Potential in Fiji

Country Fuel-Use Overview
When considering the potential for substituting Fiji’s fuels for gaseous products, we excluded (a)
aviation kerosene because it has no real substitution potential with gas, and (b) re-exported fuels
because they do not represent a country’s genuine fuel use.
Table C.1. Fuel Use Breakdown in Fiji
Fuel Volume p.a. Energy Equivalent Wholesale Unit Wholesale Value

(MMBTU) Price (USD/Unit) (USD)
Heavy Fuel Oil - Power Generation 41 ML 1,544,128 0.91/L USD37m
Diesel – Power Generation 35 ML 1,307,143 0.96/L USD34m
Diesel – Land Transport 68 ML 2,479,351 0.96/L USD65m
Diesel – Maritime Transport 74 ML 2,699,640 0.96/L USD71m
Diesel – Industry and Construction 76 ML 2,778,254 0.96/L USD73m
Unleaded Petrol (gasoil) 69 ML 2,369,050 0.92/L USD63m
LPG – Household 7,200 T 341,072 1.72/kg USD12m
LPG – Other 12,800 T 606,349 1.72/kg USD23m
Kerosene for Cooking and Other Use 2.5 ML 88,005 0.95/L USD2.3m
Biomass Use for Cooking 8,000 TOE 317,466 - -
TOTAL 14,530,458 USD380m
Note: Excludes aviation, kerosene and re-exported fuels
C-1
Focus of Scenario
Although many uses of LNG, CNG and LPG are possible, the focus of the scenario is on the potential
uses that (a) have existing successful applications, (b) are most repeatable within and outside Fiji,
and (c) can be delivered in a reasonable timeframe (<5 years) in the Fiji context, specifically:
1 LNG in publicly and privately-run large power plants, where:

nn engines are able to be converted to either dual fuel or gas-only using proven OEM-supplied
and warranted technologies, or
nn new equipment, such as gas engines, micro gas turbines, or large gas turbines, can be
installed.
2 LNG or CNG in bus and truck transport fleets, where:

nn a hub-and-spoke transport system from a depot allows centralised fuel storage for use in
the vehicles
nn gas or dual-fuel engines can be retrofitted to the existing fleet, and
nn fleet turnover allows new vehicles to be brought in that are gas- or dual-fuel-powered
because retrofitting is costly.
3 LNG in large marine vessels, where:

nn engines can be converted to either dual fuel or gas-only using proven OEM-supplied and
warranted technologies
nn vessel types are of a category with high turnover, and there is typically high-quality
maintenance on engines, for example, passenger ferries used in the tourism industry.
4 LNG/CNG use for private vehicles to displace ULP, where:

nn vehicles can be converted
nn regional centres may act as a focal point and reduced vehicle range is not problematic.
Note: LPG use in cooking to displace kerosene and biomass has been excluded from this study
because (a) there appears to be no market failure due to the existence of competitive commercial
operations in LPG sales, marketing and distribution across the Pacific; and (b) there is a plethora
of studies on why using LPG is better for householders, in which both formal and anecdotal
evidence suggests that, although there is high proportion of rural populations with low GDP per
capita, a wide variety of cooking fuels will continue to be used, including biomass and kerosene,
for cost, cultural, and practical reasons.
LNG in Publicly and Privately-Run Power Plants

Diesel used in Fiji’s electricity sector is currently dominated by (a) Fiji Electricity Authority-
operated power plants, and (b) one large gold mine that operates its own power plant and
network. Table C.2 shows the currently installed power stations and associated fuel consumption.
C-2
Table C.2. Power Stations and Associated Annual Fuel Consumption in Fiji
PICT Power Island Annual Fuel Consumption Energy Equivalent (MBTU)

Station (ML)
ADO/IDO IFO/HFO ADO/IDO IFO/HFO
Fiji* Total Fiji 35.71 41.07 1,306,610 1,634788
Kinoya Viti Levu 14.56 26.76 532,622 1,065,239
Korovou Viti Levu 0.01 522
Vuda Viti Levu 2.10 14.31 76,841 569,549
Nadi Viti Levu 0.81 29,561
Sigatoka Viti Levu 3.23 118,244
Deuba Viti Levu 1.02 37,441
Rakiraki Viti Levu 1.17 4,2970
Qelelola Viti Levu 0.04 1,524
Labasa Vanua Levu 7.25 265,266
Savusavu Vanua Levu 2.68 98,218
Levuka Ovalau 2.83 103,399
Fiji: Private Gold Mine 23.8 873,717
The focus of this scenario is Kinoya since it is the largest diesel/HFO power station owned by the
Fiji Electricity Authority, and therefore has suitable fuel demands in order to demonstrate some of
the issues associated with fuel substitution. Table C. 3 shows the specific generator-engine types
installed at Kinoya. Figure C.1. shows an image of the Caterpillar CM32s.
C-3
Table C.3. Engine Types Operating at Kinoya Power Station
Engine Year Qty Capacity MWh Load Fuel type Notes on ability to be converted
(MW) p.a. Factor
(2014)
Caterpillar CM32 2005 4 7.45 61,796 24% Diesel Can possibly be converted to run on
70% LNG
Wartsila W38 2001 2 10.3 117,355 65% HFO None around the world has yet been
converted to dual fuel
TOTAL Current 6 50 179,151
Wartsila W20B32 2015 4 8.75 HFO HFO specification, but can run on
(being diesel or be converted to run on 99%
installed now) LNG and Diesel at a cost of approx.
USD1.0–1.5m per engine
Figure C.1 Kinoya: Caterpillar Engines
(Source: Pernixgroup.com)
Kinoya Power-Station Assessment

As mentioned in this report and acknowledging the broader market and regional supply
challenges of bringing gas supply to PICTs, the actual practical feasibility can still be determined
in the end by site-specific constraints. Table C.4 outlines the key parameters and specific potential
in terms of fuel substitution at the Kinoya Power Station.
C-4
Table C.4: Hypothetical Scenario for Kinoya Power Station LNG Fuel Conversion
Item Description
Diesel Power Station Kinoya, Fiji
Diesel Power Generation Installed Capacity (MW) 50 MWe across 6 engines
Annual Electricity Generated from Diesel and HFO (MWh) 179,000 MWh p.a.
Scheduled when hydropower output is low
Load Factor HFO engines = 65%

Diesel engines = 24%
Specific Fuel Costs HFO = USD 17.74/MMBTU

Diesel = USD 23.54/MMBTU
LNG in ISO containers = USD 32.22/MMBTU
LNG bulk shipped = USD 21.48/MMBTU
Engine Efficiency On HFO or diesel = 40% (assumed)

On LNG (dual fuel) = 38% (assumed)
LNG Substitution 99% of HFO

70% of diesel
Fuel Use Prior to LNG = 1,594,381 MMBTU

Using HFO ,diesel, LNG = 1,678,296 MMBTU
Cost of Fuel Used in Generation Prior to LNG = USD31.4m

Using LNG in ISO = USD48.2m (from
Melbourne)
Using LNG in bulk = USD32.2m (from Vancouver)
LNG ISO Container Solution Details 386 ISO containers in a 3-month rotation between
Melbourne and site
27 deliveries of 40’ ISO containers per week
% Fuel Contributed by LNG 89%
Investment Required in Port and Site Storage or FSRU USD34m

Estimated at USD 5,000/Tonne Stored
C-5
Beyond the site-specific technical challenges at the Kinoya Power Station, the following
commercial and regulatory points should also be taken into consideration:
nn the site is currently operated under a third-party operation and maintenance agreement with
Pernix Group (though this is not seen as a barrier)
nn FEA has just purchased four new Wartsila engines that run on HFO, which is a relatively cheap
fuel for now, making fuel conversion less cost effective
nn there are no current particulate or air-quality regulations with which the Kinoya Power Station
needs to comply and which would penalise the further use of HFO
nn the site is currently being developed to accept the new four Wartsila HFO engines
nn the site has room to install suitable fuel storage for LNG
nn fuel-delivery trucks are received around three to five times per day
nn the site currently has around eight days of fuel storage and the country would rely on further
fuel storage at the port for system security
nn inspection shows that access to the site is good
nn because the new Wartsila HFO power generators are designed to operate instead of diesel
generators, the load factor on the Caterpillar engines is expected to drop significantly
nn overall generation from Fiji’s diesel-power stations is dependent on rainfall and hydropower
output - from 2010 to 2014, the combined output from Kinoya and Vuda ranged from 83,000 to
253,000 MWh/p.a. and is expected to remain variable
nn the power station’s dispatch profile is such that it runs at constant load when dispatched, which
may be around 80% to 100% - this is well suited to gas-engine operations that do not accept
step-loads as well as diesel engines.
In reviewing these parameters, the following conclusions can be drawn from the Kinoya Power
Station scenario:
1 The expected loss in efficiency from the conversion of these HFO or diesel engines to dual
fuel will cause an increase in overall energy use. This would not be the case if new gas
engines with higher design efficiency were installed.
2 The specific cost of LNG shipped in bulk from Vancouver should be more than 20% cheaper
than diesel and would likely provide a good return on investment in diesel-engine conversions.
3 When substituting for LNG, the business case is marginal at current prices.
4 An ISO container solution for LNG is not a viable option at the Kinoya Power Station.
Fiji-Wide Substitution Potential

When considering a broader application of gaseous fuels in Fiji, the highest potential end-use
applications suited to substitution for gas are:
1 Taxi fleets: conversion to CNG, subject to:

nn confirmation of a conversion cost per vehicle of less than USD2,000
nn a delivered cost into the vehicle of LCNG of less than about USD20/MMBTU
nn a reasonable network of LCNG refuelling stations.
2 Truck fleets with hub-and-spoke refuelling operations, subject to:

nn confirmation of a conversion or marginal cost per new vehicle of less than USD30,000
nn a delivered cost into the vehicle of LCNG of less than about USD20/MMBTU.
C-6
Table C.5. Fiji Country Expenditure With and Without LNG and LCNG: Optimistic and Pessimistic Scenarios
Fuel Units Current Fuel LNG Substitution % MMBTU with LNG in Mix $/MMBTU Country Expenditure (approx.)
Use
Optimistic Pessimistic Optimistic Pessimistic Base Case Optimistic Pessimistic

(USD) (USD) (USD)
HFO: Power MMBTU 1,634,788 100% 0% 1,634,788 17.91 $29,279,053 $29,279,053
Diesel: Power MMBTU 1,296,940 100% 25% 972,705 23.66 $30,685,593 $23,014,195
Diesel: Land MMBTU 2,501,241 50% 10% 1,250,620 2,251,117 23.66 $59,179,359 $29,589,679 $53,261,423
Diesel: Marine MMBTU 2,686,518 10% 0% 2,417,866 2,686,518 23.66 $63,563,015 $57,206,713 $63,563,015
Diesel: Industry MMBTU 2,779,157 50% 10% 1,389,578 2,501,241 23.66 $65,754,843 $32,877,421 $59,179,359
Gasoline: Land MMBTU 2,222,931 50% 10% 1,111,466 2,000,638 25.35 $56,351,305 $28,175,652 $50,716,174
Gasoline: Marine MMBTU 22,454 0% 0% 22,454 22,454 25.35 $569,205 $569,205 $569,205
LNG MMBTU 0 6,952,044 1,074,568 21.73 $- $151,067,911 $23,350,358
TOTAL 13,144,028 13,144,028 13,144,028 $305,382,372 $299,486,582 $302,932,781
C-7
3 Power generators operating on diesel, subject to:

nn reasonable conversion costs per engine
nn load factors on the engines greater than about 30%
nn a delivered cost into the vehicle of LCNG less than about USD20/MMBTU
nn a future load profile that is reasonably certain for a minimum of 5+ years.
4 Power generators operating on HFO, subject to issues similar to diesel, but also a price for
delivered HFO greater than the LNG price.
In such a case, the substitution potential for Fiji, as shown in Table C.5, is estimated to have the
following merits in both an optimistic and pessimistic scenario, with:
nn a potential fuel-cost reduction of USD7 million p.a. in a pessimistic scenario, and
nn a potential fuel-cost reduction of USD33 million p.a. in an optimistic scenario.
Supply Chain Optimisation

This study has found that the two main methods of reducing the cost of delivered LNG are: (i)
sourcing supply from the cheapest supply-point possible, and (ii) shipping supply in bulk. In this
regard, bulk shipping of LNG at a scale suited to Fiji’s potential consumption with several discrete
power projects is proven and currently happening in Asia. Shipping of LNG in ISO containers is
also technically possible and could be cheaper than diesel in some of the smaller PICTs, subject
to (i) purchasing a cost-effective ISO container to reduce the amortised container cost over the
life of the container, and (ii) considering a dedicated shipping line for the fuel so the customer
does not pay an excessive premium for shipping of dangerous goods.
There is no barrier to the shipping of ISO containers and the Pacific is serviced well enough
by container ships. LNG storage costs are not overly significant in the delivered cost of LNG to
implementation are likely to be 12+ months (doesn’t make sense, please add missing text), mainly
to allow for conversion of end-use applications from the existing diesel and/or HFO fuel use, but
also to allow for storage systems to be built and installed.
Commercial and Regulatory Considerations

Beyond the economics of markets and associated technical feasibilities, multiple regulatory and
commercial issues must also be considered in creating a new fuel supply chain in the Pacific.
Specifically for LNG and LCNG, consideration should be given to:
LNG storage and handling:

nn container storage at port: there is a need for land/space to store containers in specific areas
classified for dangerous goods (for example, the port in Fiji is already constrained)
nn ISO 40’ container handling: not all ports have the necessary materials handling equipment
nn LNG holding time: because there is a limit of 50 to 90 days of pressurised storage time,
depending on the container design, each container may need to be tracked and any potential
discharge managed.
Technical skills and knowledge:

nn LNG equipment, storage and vaporisation systems are sophisticated and require good technical
knowledge, training and maintenance practices. It could make sense for the existing LPG
suppliers to take the lead in this regard. Anecdotal evidence suggests that PICTs have difficulty in
retaining personnel trained in high-quality maintenance of sophisticated equipment, including
existing LPG and power systems.
C-8
New regulation to be written:

nn It is highly likely that the importation and use of LNG would require new regulations or laws.
Barriers to entry may exist for suppliers, end-users and financiers to enter the LNG market, such
as:
nn there is a large capital cost for import terminals if a bulk solution is selected
nn CNG take-up in vehicles may be hindered by the lack of a pre-existing refuelling network
nn incumbent fuel suppliers are embedded in the market and can engage in aggressive market
tactics to prevent new entrants.

Asset life:
nn This study assumed that ISO containers would last 10 years and land-based storage would last
20 years. Changes to this assumption may alter the findings.

Length of contract:
nn As with any major deal, the length of contract is significant for finance costs and pricing, and
can be a ‘showstopper’ in any negotiation. For deals with utilities, the asset lives are generally
long and would support a longer contract. This may not be the case for the transport sector.
Organic growth in consumption:
nn In the transport sector, any bulk LNG imports would only be supported by very large numbers
of vehicle conversions. Because slow growth in demand would make bulk importation difficult
to justify, this would mean that ISO container deliveries may be too costly to justify any fleet
changeover and a stalemate may occur.
In view of these issues, from a commercial perspective both ISO container and bulk solutions
may make sense in particular circumstances, depending on the financial strength of the parties
involved:
LNG use through ISO containers could be viable at some locations where diesel has a high
delivered cost and low volume. It has some important benefits over bulk shipping:
nn scalability through greater numbers of fuel containers to feed growth
nn no need for a large import terminal; it uses existing transport infrastructure, which reduces the
need for government or private-sector debt, and means a short time to implementation
nn lower cash-flow requirements for local importers, particularly if containers are financed by
larger international shipping companies.
Bulk LNG terminals may be attractive to larger investors as part of a long-term deal with a utility
or IPP based on the conversion of a single engine or power station, if the projected LNG use is
large enough.
Potential Opportunities
Suggestions on how to overcome potential barriers to LNG take-up include focusing on the
creation of an ‘anchor demand’ for LNG in the region:
1 A government-backed utility of sufficient scale could take the lead by converting one major
user (such as a large power station operating on diesel) to LNG. This would create the
necessary economies of scale for bulk LNG delivery to that country. Smaller PICT utilities,
smaller power stations, transport operators, and others in the private sector can then leverage
this demand.
C-9
2 A private-sector power generator with the support of governments (or multilateral

development agencies) could take the lead and create the ‘anchor demand’ in the region.
Support from the government(s) should target potential barriers, such as financial guarantees,
financial support for the private sector to access technical skills and knowledge, investment
in shared storage facilities, assistance in obtaining the appropriate regulatory approvals, and
development of safety and training systems.
3 Group purchasing of LNG within the power or transport sector or among utilities could build
sufficient volume to ship in bulk.
An anchor-demand power system with sufficient size to prompt a bulk LNG shipping solution on
its own is one with demand greater than about 50,000 tonnes (2,750,000 MMBTU) of LNG per
year, and includes Guam, New Caledonia, Fiji, and French Polynesia.
Tonga as a Subregional Destination from Fiji

Tonga’s total energy demand is 14% of Fiji’s. It has a deep-water port and could take bulk LNG
from a tanker with an investment in port unloading facilities. Tonga already receives bulk LPG by
tanker. Table C.6 illustrates an estimated comparison of the delivered fuel prices.
Table C.6. Estimated Comparison of Delivered Fuel Prices in Tonga
Diesel LNG: 40’ LNG: Bulk

Container
Estimated fuel price 26.56 34.78 23.00, which is an estimated, optimistic,

delivered (USD/ theoretical price based on bulk to Fiji plus
MMBTU) additional distance travelled to Tonga (similar
to the way in which LPG is delivered)
Table C.7 illustrates the potential savings in fuel expenditure in Tonga under optimistic and
pessimistic scenarios. Under the optimistic scenario, with high LNG penetration into diesel and
ULP use, and low LNG pricing due to bulk delivery through Fiji, Tonga could reduce its total fuel
expenditure by some USD 1 million per year, or 2%.
C-10
Table C.7. Tonga Country Expenditure With and Without LNG and LCNG: Optimistic and Pessimistic Scenarios
Fuel Units Current Fuel LNG/LCNG Substitution MMBTU with LNG in Mix USD/ MMBTU USD/ MMBTU Country
Use Expenditure
(approx.)
Optimistic Pessimistic Optimistic Pesimistic Optimistic Pessimistic Base Case Optimistic Pessimistic
(USD) (USD) (USD)
HFO - Power MMBTU - 0% 0% - - 17.91 17.91 $- $- $-
Diesel - Power MMBTU 468,357 100% 25% - 351,268 23.66 23.66 $11,081,333 $- $8,311,001
Diesel - Land MMBTU 478,539 50% 10% 239,269 430,685 23.66 23.66 $11,322,232 $5,661,105 $10,190,007
Diesel - Marine MMBTU 71,272 10% 0% 64,145 71,272 23.66 23.66 $1,686,290 $1,517,671 $1,686,296
Diesel - Industry MMBTU - 50% 10% - - 23.66 23.66 $- $- $-
Gasoline – Land and MMBTU 411,303 25% 5% 308,477 390,738 25.35 25.35 $10,426,531 $7,819,892 $9,905,208
Marine
LNG MMBTU 0 817,580 185,508 23.00 34.78 $- $18,804,340 $6,451,968
TOTAL 1,429,471 1,429,471 1,429,471 $34,516,386 $33,803,007 $36,544,480
C-11
Appendix D: PICT Energy Market Breakdown
The fuel market for the PICTs covered in this study has been composed from data available
(ranging in reported years from 2006–2013)* during the research phase of the report, including
a breakdown by sector where data was either directly available or derivable from government
reports or industry consultations (Table D.1). Data sources are referenced within Table D.2.
Table D.1: PICT Energy Market

Fuel Unit A. Samoa CNMI** Cook Fiji French FSM Guam Kiribati Nauru
Islands Polynesia
HFO MMBTU 0 0 0 1634788 2952122 90164 17793347 0 0
ML 0.00 0.00 0.00 41.07 74.16 2.27 446.98 0.00 0.00
Year - - - 2013 2011 2011 2011 - -
Power %
Industry %
Transport %
Diesel MMBTU 3670493 3185261 763238 9263855 6358654 954395 2327756 451252 323490
ML 100.33 87.06 20.86 253.21 173.80 26.09 63.63 12.33 8.84
Year 2013 2013 2010–12 2009–13 2012–13 2010–13 2011–13 2013 2010–12
Power % 40% n/a 37% 14% 21% 55% 11% 47% 70%
Land % 8% n/a n/a 27% 52% n/a 83% 44% n/a
Marine % 46% n/a n/a 29% 21% n/a n/a 9% n/a
Industry % 5% n/a 30% 6%
Gasoline MMBTU 754072 n/a 190761 2245385 2019190 381522 5597792 227689 47577
ML 23.26 n/a 5.89 69.27 62.29 11.77 172.69 7.02 1.47
Year 2010 2010 2009 2013 2010 2011 2013 2010
Land % 99% 98% 30% 71%
Marine % 1% 2% 60% 29%
LPG MMBTU 75794 20895 37897 947421 521081 3804 393907 13627 474
Tonne 1600 441 800 20000 11000 80 8315 288 10
Year 2010 2013 2013 2013 2008 2013 2010 2013 2009
Commercial 70% 64% 5%
Residential 30% 36% 95%
Kerosene MMBTU 3382 71 88005 72869 43145 0 14915 0
ML 0.1 - 0 2.54 2.1 1.24 - 0.43 0
Year 2010 - 2011 2008 2013 2013 - 2013 2012
Biomass MMBTU 323010 484515 504469
Year - - - 2013 - 2000 - 2009 2012
Coal MMBTU
Year
TOTAL MMBTU 4503741 3206156 991967 14502464 11923916 1957545 26112801 1211952 371541
*No standard year available for data capture. Latest available year of reported data has been used between 2006 and
2013 (see Appendix H for detailed references).
**CNMI: Diesel volumes unavailable for sectors other than power, and all gasoline volumes
unavailable at time of writing; RMI: Volumes for gasoline unavailable at time of writing
n/a = not available at time of writing.
D-1
New Niue Palau PNG RMI** Samoa Solomon Timor- Tonga Tuvalu Vanuatu TOTAL
Caledonia Islands Leste
10004324 0 0 2158091 0 0 0 3050317 0 0 0 37683154
251.32 0.00 0.00 47.11 0.00 0.00 0.00 76.63 0.00 0.00 0.00 939.53
2013 - - 2012 - - - 2013 - - - -
49%
37%
13%
8092507 42402 1026116 39068270 1441672 1586637 3574362 4097529 1018168 108738 1298770 88653565
221.20 1.16 28.05 1067.87 39.41 43.37 97.70 112.00 27.83 2.97 35.50 2,423.22
2010–13 2011– 2010 2012–2013 2010–12 2011 2009–12 2013 2013 2011–12 2011–13 -
12
1% 62% 89% 6% 47% 47% 23% 46% 61% 32% -
n/a n/a 9% 28% n/a 26% n/a 47% 2% -
n/a n/a 2% 13% n/a 11% n/a 7% 37% -
37% 53% 16% 20% -
2670652 24019 592288 4562520 n/a 913204 610435 777954 411303 26626 303402 22356391
82.39 0.74 18.27 140.75 n/a 28.29 18.83 24.00 12.69 0.82 9.36 517.13
2010 2012 2012 2012 n/a 2011 2010 2013 2011 2012 2011 -
90% 50% 99% 75% 54% -
10% 50% 1% 25% 46% -
378968 1481 9261 854398 6774 56665 80531 23686 63980 12284 77860 3580788
8000 31 196 18036 143 1196 1700 500 1351 259 1644 75590
2010 2013 2013 2012 2009 2011 2013 2006 2010 2012 2011 -
14% 86% 50% 60% 5-10% 26% 60%
86% 14% 50% 40% 90–95% 74% 40%
0 21 0 1736180 0 23664 21803 104068 11724 6893 40418 2167157
- 0 - 50.05 - 0.68 0.63 3 0.34 0.2 1.17 62.47
- 2013 - 2012 - 2011 2010 2006 2011 2012 2008 -
52045025 605644 3028221 1344530 40376 2481 1756368 60134641
- 2013 2004 2012 2013 2012 2005 2006 2008 2012 2008 -
2168987 2168987
2013
23315438 67923 1627666 100548838 1448446 3185814 7315352 9398085 1545552 157021 3476818 216869037
D-2
Table D.2. PICT Energy Market Data Sources
American Samoa
Power Sector: American Samoa Power Authority. (2014). Email advice on annual volumes, dated
23 September 2014.
All other volumes: Territorial Energy Office. (2012). American Samoa Greenhouse Gas Inventory.
Territorial Energy Office, April 2012. Available at www.asrec.net/wp-content/uploads/2013/09/
GHG-INVENTORY.pdf
Commonwealth of the Northern Mariana Islands (CNMI)

LPG: Geogas trading (2014) Estimation of annual LPG demand. Email dated 30 October 2014.
All other data: EIA (2014) ‘Northern Mariana Islands: Territory Profile and Energy Estimates’. U.S.
Energy Information Administration. Accessed: September 2014. Available at: http://www.eia.gov/
state/?sid=CQ
Cook Islands
Diesel and Gasoline: United Nations. (2010). United Nations Energy Statistics Database: 1990 to
2012. Available at: http://unstats.un.org/unsd/energy/edbase.htm
Kerosene and LPG: Government of the Cook Islands. (2011). ‘Miscellaneous Statistics’. Ministry of
Finance and Economic Management. Accessed: September 2014. Available at: http://www.mfem.
gov.ck/miscellaneous-statistics
All other volumes: SPC. (2009). Cook Islands Country Energy Security Profile. Secretariat for the
Pacific Community (SPC). Available at: http://www.spc.int/edd/en/section-01/energy-overview
Fiji
Biomass: ADB. (2013). ADB Energy Outlook for Asia and the Pacific. Asian Development Bank.
Available at: http://www.adb.org/publications/energy-outlook-asia-and-pacific-2013
Diesel and Gasoline: IRENA. (2013). Pacific Lighthouses: Renewable Energy Roadmapping for Islands:
Fiji. International Renewable Energy Agency. Available at: http://www.irena.org/menu/index.
aspx?mnu=Subcat&PriMenuID=36&CatID=141&SubcatID=353
Kerosene: ADB. (2013). Energy Statistics in Asia and the Pacific (1990-2009). Asian Development
Bank. Available at: http://www.adb.org/publications/energy-statistics-asia-and-pacific-1990-2009
LPG: Probert, H. (2014). Fiji Gas estimations of LPG market size and distribution in Fiji. Fiji Gas.
Meeting in September 2014.
Power sector (diesel and HFO): Fiji Electricity Authority. (2013). Fiji Electricity Authority: Annual
Report 2013. Fiji Electricity Authority. Available at: http://www.fea.com.fj/about-us/company-
information/company-reports/
French Polynesia
LPG: United Nations. (2010). United Nations Energy Statistics Database: 1990 to 2012. Available
at: http://unstats.un.org/unsd/energy/edbase.htm
D-3
Power sector: PPA. (2012). Pacific Power Utilities Benchmarking Report 2012. Pacific Power
Association (PPA). Available at: http://www.ppa.org.fj/
All other volumes: PRIF. Pacific Infrastructure Performance Indicators (draft). Available from PRIF
Coordination Office.
Federated States of Micronesia (FSM)

Diesel: IRENA. (2013). Pacific Lighthouses: Renewable Energy Roadmapping for Islands: FSM.
International Renewable Energy Agency (IRENA). Available at: http://www.irena.org/menu/index.
Gasoline: United Nations. (2010). United Nations Energy Statistics Database: 1990 to 2012.
Available at: http://unstats.un.org/unsd/energy/edbase.htm
Household kerosene and LPG volumes: Government of the Federated States of Micronesia. (2013).
FSM Household Income Expenditure Survey (Preliminary Results 2013). Office of Statistics, Budget
& Economic Management, Overseas Development Assistance & Compact Management (SBOC)
LPG : South Pacific Petroleum Corporation (SPPCorp). (2014). Volume estimations based on actual
volumes through the first 9 months of 2013. Email dated 22 September 2014.
Guam
Gasoline and Diesel: Guam Energy Office. (2013). Transportation Petroleum-Use Reduction Plan.
Available at: http://www.guamenergy.com/outreach-education/guam-energy-task-force/
LPG: Guam Energy Office. (2011). Guam Initial Technical Assessment Report, April 2011. Available
at: http://www.guamenergy.com/outreach-education/guam-energy-task-force/
Power sector (diesel and HFO): PPA. (2012). Pacific Power Utilities Benchmarking Report 2012. Pacific
Power Association (PPA). Available at: http://www.ppa.org.fj/
Kiribati
Biomass: SPC. (2009). Kiribati Country Energy Security Profile. Secretariat for the Pacific Community
(SPC). Available at: http://www.spc.int/edd/en/section-01/energy-overview
All other volumes: Kiribati Energy Office. (2013). Data obtained in person from office by SPC
representative on mission throughout September 2013.
Nauru
Biomass, Kerosene, LPG, Gasoline and Diesel: IRENA. (2013). Pacific Lighthouses: Renewable Energy
Roadmapping for Islands: Nauru. International Renewable Energy Agency (IRENA). Available at:
http://www.irena.org/menu/index.aspx?mnu=Subcat&PriMenuID=36&CatID=141&SubcatID=353
Power sector (diesel): PPA. (2012). Pacific Power Utilities Benchmarking Report 2012. Pacific Power
D-4
New Caledonia
Diesel: ENERCAL (2012) Rapport d’activités – statistiques 2013-2013. Available at: http://dev.
enercal.nc/
Gasoline and LPG: United Nations. (2010). United Nations Energy Statistics Database: 1990 to
2012. Available at: http://unstats.un.org/unsd/energy/edbase.htm
Niue
Gasoline: IRENA. (2013). Pacific Lighthouses: Renewable Energy Roadmapping for Islands: Niue.
Coordination Office. Other Attributed Source: Niue Department of Energy (2011).
Palau
Biomass: SPREP. (2004). Pacific Islands Renewable Energy Project. (PIREP). Palau National Report.
Secretariat of the Pacific Regional Environment Program (SPREP). Available at https://www.
sprep.org/Pacific-Islands-Greenhouse-Gas-Abatement-through-Renewable-Energy-Project/pirep-
documents
LPG: South Pacific Petroleum Corporation (SPPCorp). (2014). Volume estimations based on actual
volumes through the first 9 months of 2013. Email dated 22 September 2014.
All other volumes: IRENA (2013) Pacific Lighthouses: Renewable Energy Roadmapping for Islands:
Palau. International Renewable Energy Agency (IRENA). Available at: http://www.irena.org/menu/
index.aspx?mnu=Subcat&PriMenuID=36&CatID=141&SubcatID=353
Papua New Guinea

Biomass and Kerosene: SPC. (2012). Facilitating Private Sector Participation in the Promotion of
Energy Security in Papua New Guinea, Solomon Islands and Vanuatu – PNG Country Review, October
2012. Secretariat for the Pacific Community (SPC). Available at: http://www.spc.int/
All other volumes: APEC. (2012). APEC Energy Statistics 2010. Asia Pacific Economic Community
(APEC). Available at: http://publications.apec.org/publication-detail.php?pub_id=1354
Republic of the Marshall Islands

Biomass: IRENA. (2013). Pacific Lighthouses: Renewable Energy Roadmapping for Islands: RMI.
SPC. (2009). RMI Country Energy Security Profile. Secretariat for the Pacific Community (SPC).
Available at: http://www.spc.int/edd/en/section-01/energy-overview
D-5
Power sector (diesel): PPA. (2012). Pacific Power Utilities Benchmarking Report 2012. Pacific Power
All other diesel: United Nations. (2010). United Nations Energy Statistics Database: 1990 to 2012.
All other volumes: SPC (2009) RMI Country Energy Security Profile. Secretariat for the Pacific
Community (SPC). Available at: http://www.spc.int/edd/en/section-01/energy-overview
Samoa
All other volumes: Government of Samoa. (2011). Samoa Energy Review 2011. Ministry of Finance
Energy Policy Coordination and Management Division. Available at: www.mof.gov.ws
Solomon Islands
Biomass: SPC. (2012). Facilitating Private Sector Participation in the Promotion of Energy Security in
Papua New Guinea, Solomon Islands and Vanuatu – Solomon Islands Country Review, October 2012.
Secretariat for the Pacific Community (SPC). Available at: http://www.spc.int/
Diesel: SPC. (2009). Solomon Islands Country Energy Security Profile. Secretariat for the Pacific
Community (SPC). Available at: http://www.spc.int/edd/en/section-01/energy-overview
Gasoline: United Nations. (2010). United Nations Energy Statistics Database: 1990 to 2012.
Kerosene: Solomon Islands Government. (2010). Import Statistics FY 2010. Obtained through
Secretariat for the Pacific Community (SPC).
LPG: Geogas Trading. (2014). Estimation of annual LPG demand. Email dated 30 October 2014.
Power sector: Power sector: PPA. (2012). Pacific Power Utilities Benchmarking Report 2012. Pacific
Power Association (PPA). Available at: http://www.ppa.org.fj/
Timor-Leste
Biomass, Kerosene and LPG: World Bank. (2010). Timor-Leste: Key Issues in Rural Energy Policy. The
World Bank 2010. Available at: http://documents.worldbank.org/curated/en/2010/01/13570479/
timor-leste-key-issues-rural-energy-policy
Diesel and Gasoline: ANP. (2013). Autoridade Nacional do Petróleo Timor-Leste - Annual Report
2013. Available at: http://www.anp-tl.org/
Power sector: Guterres, V. F. (2013). ‘Access to Energy in Timor-Leste’. Presented at the Asia-Pacific
Energy Forum. Bangkok, December 17-19, 2013.
D-6
Tonga
Biomass: ADB (2013) Energy Statistics in Asia and the Pacific. (1990-2009). Asian Development
Power Sector: PPA. (2012). Pacific Power Utilities Benchmarking Report 2012. Pacific Power
Other Attributed Source: Ministry of Revenue and Customs (2010).
Tuvalu
Other Attributed Source: Tuvalu Annual Statistical Report (2012)
Vanuatu
Biomass, Kerosene and LPG: PRIF. Pacific Infrastructure Performance Indicators (draft). Available
from PRIF Coordination Office. Other Attributed Source: Department of Customs & Inland Revenue
(2011); and ADB (2013) Energy Statistics in Asia and the Pacific (1990-2009). Asian Development
Diesel and Gasoline: SPC. (2012). Facilitating Private Sector Participation in the Promotion of Energy
Security in Papua New Guinea, Solomon Islands and Vanuatu – Vanuatu Country Review, October
2012. Secretariat for the Pacific Community (SPC). Available at: http://www.spc.int/
D-7
Appendix E: Registered Vehicles and Maritime Vessels
Available data were collated for the land and marine sectors in terms of registered vehicles and
vessels. Tables E.1 and E.2, respectively, provide details on this information.
Table E.1. Registered Vehicles in PICTs
Cars and Motorized Trucks Buses Minibus Other TOTAL

4-Wheelers 2- and
3-Wheelers
American Samoa 8048 73 499 182 8802
CNMI*
Cook Islands 4470 4849 32 95 9439
Fiji 107309 5165 46687 1600 861 8819 161622
French Polynesia*
FSM 7356 96 747 138 0 8337
Guam 96631 2987 7086 720 107424
Kiribati 975 480 163 0 1618
Nauru*
New Caledonia*
Niue 806 30 6 6 0 848
Palau 4091 1335 5426
RMI 1715 37 55 85 0 1892
Samoa 13491 153 1028 293 0 14965
Solomon Islands 468 1898 5297
Timor-Leste 1684 7370 586 20 0 9660
Tonga 4411 62 1285 48 0 5806
Tuvalu 63 598 36 9 45 751
Vanuatu 3974 118 227 834 0 5153
TOTAL 255024 22486 61475 4130 906 8914 347040
*Information requested from relevant authorities but not available at time of report writing.
All vehicle class and numbers data taken from:
WHO (2013) Global status report on road safety 2013: supporting a decade of action. World Health Organization (WHO).
Available at http://www.who.int/violence_injury_prevention/road_safety_status/2013/en/
Except for the following PICTS:
nn American Samoa: Territorial Energy Office (2012) American Samoa Greenhouse Gas Inventory. Territorial Energy Office,
April 2012. Available at www.asrec.net/wp-content/uploads/2013/09/GHG-INVENTORY.pdf
nn Fiji: Fiji Bureau of Statistics (2012) ‘Distribution of Vehicles Registered in Fiji [As at 31 December]’. Fiji Bureau of
Statistics. Available at http://www.statsfiji.gov.fj/index.php/other-statistics/52-other-statistics/transport/126-
distribution-of-vehicles-registered-in-fijias-at-31-december
nn Solomon Islands: Solomon Islands Government (2010) Solomon Islands Population and Housing Census 2009. Solomon
Islands National Statistics Office. Available at http://www.spc.int/prism/solomons/
E-1
E-2
Table E.2. Registered Maritime Vessels in PICTs, Segregated by Class*
PICT Cable Car Cargo/ Chemical Cruise Cruising Dry bulk Fishing General Gas High Military Oil PAX Pleasure Reefer Rescue Research Tug Workboat Total
layer carrier PAX tanker Ship & diving cargo tanker speed tanker craft
American 2 12 6 1 246 3 270

Samoa
CNMI
Cook 1 9 4 12 1 3 4 34
Islands
Fiji 69 7 21 194 10 4 1 2 502 179 2 1 43 2 1037
French 3 12 10 25
Polynesia
FSM 1 12 183 20 1 2 9 2 1 2 233
Guam 1 1
Kiribati 3 9 5 1 2 2 22
Nauru
New 31 31
Caledonia
Niue 13 13
Palau 1 1 1 3
RMI 1 1 2 1 21 32 35 1 12 10 116
Samoa 10 1 118 2 1 7 1 4 144
Solomon 45 12 34 46 38 3 6 28 212
Islands
Timor-
Leste
Tonga 9 2 2 3 2 2 3 23
Tuvalu 6 1 5 4 16
Vanuatu 3 47 6 1 1 10 1 1 70
Total 1 2 159 2 20 22 29 659 153 3 45 4 19 512 513 1 12 5 87 2 2250
All vessel class and numbers data taken from: UNCTAD (2013) Review of Maritime Transport 2013. Available at: www.unctad.org/en/PublicationsLibrary/rmt2013_en.pdf
Except for the following PICTS:
nn French Polynesia: French Polynesia maritime affairs (2013) Obtained from the Ministry of Maritime Affairs. Email dated 1 October 2014
nn Palau: Department of Transport (2013) Email dated 26 September 2014.
Appendix F: Small LNG Ship Specifications
Table F.1. Specifications on Norgas Small-Scale LNG Multi-Gas Carrier
Particulars Capacity
LOA 137.1 m
LBP 127.2 m Cargo Volume 10,000 m3
Beam 19.8 m Deadweight 10,600 tons
Depth 11.5 m
Design Draft 6.7 m

Main Engine MaK7M43C
Speed 16.5 knots
Output 7,200 kW @ 500 rpm
Consumption 27 tpd IFO 380
Drive Geared CPP
Range 12,800 nm
Cargo Tanks 1 x 4,000 m3

1 x 6,000 m3
Design Pressure IMO/USCG5.2/3.8 barg
Min. Temperature -1630C
Max. Density 970 kg/m3 Shaft Generator 1,900 kWe

Auxiliaries 3 x 910 kWe
Discharge Rate 1,000 m3/h
Reliquefaction Plant SINTEF 20 tpd
Gas Combustion Unit Saacke 20 tpd
Nitrogen Plant PSA Type
(Source: Norgas)
F-1
Appendix G: Fortis BC LNG Rate Schedule
The Fortis BC pricing in Vancouver is a published tariff in a rate schedule and is shown below.
Table G.1. Fortis BC Energy Inc. Rate Schedule 46: LNG Sales, Dispensing and
Transportation Service (Summary)
Item Units 2014 ($) 2014 2014

($) ($)
Contract Demand GJ/day 0–35,000 35,000– 100,000 +
100,000
Where on 1 January of a given year each of the aggregate prorated
daily contract demand for all customers and the available LNG
capacity
Equivalent range in tonnes/p.a. T/a 0–636 636–1,818 1,818+
LNG Facility Charge CAD/GJ 3.54 2.73 1.88

An LNG Facility Charge, which is the unit cost per gigajoule (GJ)
to deliver natural gas from the interconnection point to the LNG
facilities, and to produce, store, and dispense all LNG at the LNG
facilities, excluding the electricity surcharge
Electricity Surcharge CAD/GJ 0.88 0.87 0.86

An electricity surcharge, which is the unit cost per GJ for electricity
consumed by the LNG facilities to produce, store and dispense all
LNG at the LNG facilities
Process Fuel Gas % 1% 1% 1%

Compensates for the gas used in the liquefaction process
2014 LNG Spot Charge CAD/GJ $4.67 $4.26 $3.40
Sumas Monthly Index Price CAD/GJ $5.07 $5.0 $5.07

Henry Hub prices–not exactly the same as Sumas location, but Oct
2014 market report indicates market prices are actually lower at
Sumas
Market Factor CAD/GJ $0.10 $0.10 $0.10

Unknown, but indicators are <0.10/GJ
Delivery Charge CAD/GJ $4.42 $3.60 $2.74

(LNG facility charge + electricity surcharge) or (spot charge),
depending on how the LNG is contracted
Commodity Charge CAD/GJ $5.22 $5.22 $5.22

(Qty dispensed + process fuel gas) x (Sumas monthly index price +
market factor)
Premium for <5,000 GJ/day CAD/GJ $0.15 $0.15 $0.15
Premium for <10 year Contract CAD/GJ $0.26 $0.26 $0.26
Total: Small Customer, Short Contract CAD/GJ $10.05 $9.23 $8.37

(Delivery charge + commodity charge + premiums)
Total: Large Customer, Long Contract CAD/GJ $9.64 $8.82 $7.96

(Delivery charge + commodity charge)
Total: Small Customer, Short Contract USD/MMBTU $8.57 $7.87 $7.14
Total: Large Customer, Long Contract USD/MMBTU $8.22 $7.52 $6.79
Note: Amounts in both Canadian dollars (CAD) and US dollars (USD)
G-1
Appendix H: Estimated Annual Fuel Consumption by

Power Station/Utility
PICT Power Station Island Annual Fuel Consumption (ML) Energy Equivalent (MBTU)
American Samoa Total Tutuila 40.56 1483811
Satala Tutuila 19.95 729795
Tafuna Tutuila 20.61 754017
CNMI Total CNMI 87.06 3185261
Saipan Saipan 50.46 1845915
Other 36.61 1339346
Cook Islands Total Cook Islands 8.55 312951
Roratonga Roratonga 7.70 281656
Outer Islands 0.86 31295

total
Fiji* Total Fiji 35.71 41.07 1306610 1634788
Kinoya Viti Levu 14.56 26.76 532622 1065239
Korovou Viti Levu 0.01 522
Vuda Viti Levu 2.10 14.31 76841 569549
Nadi Viti Levu 0.81 29561
Sigatoka Viti Levu 3.23 118244
Deuba Viti Levu 1.02 37441
Rakiraki Viti Levu 1.17 42970
Qelelola Viti Levu 0.04 1524
Labasa Vanua Levu 7.25 265266
Savusavu Vanua Levu 2.68 98218
Levuka Ovalau 2.83 103399
French Polynesia Total French Polynesia 23.53 73.40 860683 2922047
Tahiti Tahiti 73.40 2922047
Outer Islands Marquises 1.81 66165
Tuamotu 1.70 62272
Australis 1.36 49818
Moree 8.09 295794
Bora Bora 8.94 326931
Rangiroa 1.02 37363
Tubuai 0.60 21795
Makatu 0.01 545
H-1
FSM Total FSM 13.36 2.3 488613 90164.21
Chuuk Chuuk 2.3
Kosrae Kosrae 0.41 15038
Pohnpei Pohnpei 8.75 320033
Yap Yap 4.20 153543
Guam Total Guam 7.29 446.98 266554 17793347
Cabras Guam 264.70 10536915
Tanguisson Guam 51.58 2053327
MEC 130.71 5203105
Other 7.29 266554
Kiribati Total Tarawa Atoll 5.74 210133
Bikenibeu Tarawa Atoll 4.11 150437
Betio Tarawa Atoll 1.63 59697
Nauru Total Nauru 6.20 226992
New Caledonia* Total Grande Terre 4.16 266.59 152288 10612385
Doniambo Grande Terre 219.01 8718400
Népoui Grande Terre 47.58 1893985
Diesel plants Grande Terre 4.16 152288
Niue Total Niue 0.71 26132
Palau Total Palau 25.00 914759
Aimeliik Aimeliik 13.78 504156
Malakal Malakal 10.03 367067

total
RMI Total RMI 18.70 684295
Ebeye Ebeye 3.46 126666
Majuro Majuro Atoll 15.24 557629
Samoa Total Samoa 16.99 621407
Fiaga, Upolu 13.83 505910

Tanugamanono,
Vaitele
Savaii 3.16 115497
Solomon Islands Total Solomon Islands 22.14 810156
Total Out-stations 2.21 81016
Lungga Guadal-canal 19.78 723770

(Honiara)
Other Guadal-canal 0.15 5370

(Honiara)
H-2
Timor Leste* Total Timor Leste 76.63 3050317
Hera
Betano
Tonga Total Tonga 12.78 467429
Popua Tongatapu 11.08 405509
Vava’u 2.27 82945
Ha’apai 0.65 23699
‘Eua 0.74 27122
Tuvalu Total Tuvalu 1.81 66371
Vanuatu Total Vanuatu 11.24 411188
Efate Efate 9.67 353621

total
TOTAL 341.55 828.05 12495634 32962567
(ML) (ML) (MBTU) (MBTU)
All volumes estimates derived from data in Pacific Power Benchmarking Report (2012) and the KEMA Energy Efficiency
Studies, unless otherwise noted.
*American Samoa Power Authority (2013); Fiji Electricity Authority (2013); ENERCAL (2013); Electricidade De Timor-Leste
(2013)
H-3
Appendix I: Engine Types in Power Utilities
These data have been sourced from the KEMA Energy Efficiency Studies45, with associated gaps
filled by means of direct correspondence with the power utilities.
Country Site Make Model Number Power (kW)
American Samoa Tafuna Deutz BV 12M 640 4 4750
Satala Caterpillar 3516C 13 1500
CNMI (CUC) Plant 1 Mitsubishi 18V 40/54A 4 7270
Plant 1 Mitsubishi 18V 52/55B 4 13040
Plant 2 GM L20-645-E9 5 2500
Plant 2 GM 20-645-E4 1 2500
Plant 4 GM 20-645-E4 2 2500
Plant 4 GM 20-645-E3 1 2600
Plant 4 Cummins Newage Stamford 4 5740

KTA50G3
Plant 4 Cameron DSR-48 1 1500
Plant 4 Nordberg Mfg FS-1312-HSC 2 2200
Cook Islands Rarotonga Island Cummins KTA50-G3 1 850
Rarotonga Island Deutz MWM 12V26N 2 2000
Rarotonga Island MAN Lister Blackstone 2 600

ETSL
Rarotonga Island MAN Mirrlees Blackstone 1 1600

MB 275-8
Rarotonga Island MAN Mirrlees Blackstone 1 1200

ESL 16
Rarotonga Island MAN MAN B&W L9-27/38 1 2700
Fiji Kinoya-HFO Wartsila W38 2 10300
Kinoya-IDO Caterpillar CM32 4 7450
Vuda MAN Mirrlees KV16 2 5740
Vuda Wartsila 18V32LN 2 6000
Vuda MAN Lister Blackstone 1 375

EVS8
Sigatoka Caterpillar 3516 4 1000
Deuba Caterpillar 3516 3 1000
Nadi Caterpillar 3516 2 1000
Rakiraki Caterpillar 3516 2 1000
Korovou Cummins VTA28G 1 550
Qeleloa Caterpillar 3516 3 1000
45 PPA and KEMA (2010) Energy Efficiency Reports for the North and South Utilities. Available at: http://www.ppa.org.fj/publication-report/
I-1
FSM CPUC Caterpillar 3516 3 1000
CPUC Caterpillar D399 PC 1 1600
KUA Caterpillar 3512B 1 1000
KUA Caterpillar 3600’ 2 1500
KUA Caterpillar D398 2 740
PUC Caterpillar 3516 3 1000
PUC Dihatsu 12DS32 4 2000
YSPC Alco 251F 1 2000
YSPC Deutz MWM BV8M640 2 3200
YSPC Cameron White Superior 2 750

40V–SX-12
Guam Cabras Unit #1 TBA Guam–66000 1 66000
Cabras Unit #2 TBA Guam–66001 1 66000
Tanguisson Unit #1 TBA Guam–26500 1 26500
Tanguisson Unit #2 TBA Guam–26,500 1 26500
MEC Unit #8 TBA Guam–44000 1 44000
MEC Unit #9 TBA Guam–44000 1 44000
Dededo CT #1 TBA Guam–23000 1 23000
Dededo CT #2 TBA Guam–22000 1 22000
Macheche CT TBA Guam–22000 1 22000
Marbo CT TBA Guam–16000 1 16000
TEMES CT TBA Guam–40000 1 40000
Yigo CT TBA Guam–22000 1 22000
Dededo Diesel TBA Guam–10000 1 10000

Plant1
Manenggon Diesel TBA Guam–5300 1 5300

#1
Manenggon Diesel TBA Guam–5300 1 5300

#2
Talofofo Diesel #1 TBA Guam–4410 1 4410
Talofofo Diesel #2 TBA Guam–4410 1 4410
Tenjo Unit #1 TBA Guam–4410 1 4410
I-2
Kiribati Bikenibeu TBA Dihatsu–750 2 750
Bikenibeu TBA Dihatsu–1750 3 1750
Betio TBA Dihatsu–1250 1 1250
Nauru TBA Ruston Ruston 2500 4 2500
TBA Paxman Paxman–2000 2 2000
TBA Caterpillar 3516B–1400 2 1400
TBA Cummins Cummins–1500 4 1500
New Caledonia Noumea Cummins KTA-50 10 850
Noumea Cummins QSK 60 1 600
Lifou Cummins KTA-50 1 850
Lifou Cummins QSK 23 1 530
Lifou Cummins QST 30 1 950
Lifou Crepelle 4R26L 2 600
Lifou Wartsila 9L20 1 1400
Lifou Cummins QSK 60 1 600
Niue Caterpillar 700F 4 508
Palau Aimeliik MAN Pielstick 10PC2MK2 4 3270
Malakal Alco Unknown 1 400
Malakal Mitsubishi TAKL 2 3400
Malakal Caterpillar 3516B 2 2000
Malakal Nigata 16V28HLX 2 6250
Malakal Wartsila SR4BGD 3 2000
RMI Ebeye Caterpillar Unknown 2 400
Ebeye Cummins KTA 50 TQ1286E 4 1200
Ebeye Cameron DSR-6 2 1500
MEC Caterpillar 3616’ 1 1500
MEC Deutz MWM BV16M640 2 6400
MEC MAN Pielstick 10PC2VMK 4 3270
Samoa TBA Mirless Mirless–3500 1 3500
TBA Mirless Mirless–4000 1 4000
TBA Mirless Mirless–3000 2 3000
TBA Mirless Cummins–640 2 640
I-3
Solomon Islands Honiara Perkins Perkins–1500 3 1500
Lungga Mirless Mirless–1500 1 1530
Lungga Mirless Mirless–3000 1 3000
Lungga Wartsila Wartsila–4240 2 4240
Lungga Mitsubishi Mitsubishi–4200 1 4200
Lungga Nigata Nigata–4200 1 4200
Tahiti Wartsila 3
Timor Leste TBA
Tonga Popua Caterpillar 3516B 6 2000
Popua Caterpillar CM32 1 7450
Popua Caterpillar PM3516B 1 1400
Tuvalu Funafuti Dihatsu Dihatsu–570 3 570
Funafuti TBA Tuvalu–400 2 400
Vanuatu 1 Cummins QSK 60 5 600
1 Wartsila 6R32 2 800
2 Cummins KTA-50 4 850
2 MAN 9R32L 2 1400
I-4
Appendix J: Global LPG Partnership – Policy

Comparisons
Comparative Table of Developing Countries with High LPG Penetration of Households
Brazil Morocco Indonesia India

LPG % penetration of 95% 95% 85% 50%
households
Cylinder model LPG Marketer owns LPG Marketer owns LPG Marketer owns LPG Marketer owns
branded cylinder branded cylinder branded cylinder branded cylinder
Consumer exchanges Consumer exchanges Consumer exchanges At consumer’s option,
empty for full cylinder empty for full cylinder empty for full cylinder consumer exchanges
at authorized exchange at authorized exchange at authorized exchange empty for full cylinder
point, supplied by point, supplied by point, supplied by at authorized exchange
Registered Distributor Registered Distributor Pertamina (and its point or at home (for an
agents) additional fee), supplied
50% home delivery Low level of home by Marketer or its
delivery Registered Distributor
Monitoring of LPG
connections on web
sites
LPG industry structure Limited number of Limited number of State energy monopoly Three state oil
public and private sector private sector companies controls all major LPG companies sell both
companies assets and primary subsidized and non-
Shared import and distribution (through subsidized LPG
storage assets agents). It is the sole
marketer of domestic Limited number of
cylinders private companies sell
non- subsidized LPG
Autogas (LPG for Not permitted Not permitted Tightly controlled by Permitted only in
transport) state energy monopoly authorized service
(CNG permitted (CNG also not permitted) and available only in stations at unsubsidized
including in flex fuel, its automotive service (deregulated) price
but only in authorized stations
automotive service Some illegal auto
stations) conversions occur using
household cylinders
Price mechanism / LPG Deregulated since Price of LPG for Price is set by the Price for household use
subsidy January 2002 after 40 household use (butane government and revised set by government and
years of subsidies at in 3, 6 and 12kg monthly revised monthly
about 30% of Import cylinders) is set by
Parity Price (IPP) government and revised Subsidy applies to refills Price for industrial use
monthly of 3kg cylinders only is deregulated and
Ex-refinery price is set by unsubsidized
government at slightly LPG price for household
below import parity (-5 users is about 50% of Price for households is
to -10%) Import Parity Price (IPP) about 60% of Import
Parity Price (IPP),
Social safety-net Subsidy does not apply without reimbursement
subsidy for the poor of to industrial users of the deficit incurred by
about 25% of IPP, with importers
LPG vouchers (“bolsa
familia”) Product subsidy being
replaced by a direct
social safety net
payment to the poor as
of Q1-Q2 2015
LPG composition LPG for household Mixing not permitted for LPG for household LPG for household and
and industrial use is a household use (90%+ and industrial use is a industrial use is a 50/50
(whether propane propane-butane mix butane) propane-butane mix propane-butane mix
and butane are kept
segregated, or are Mixing is permitted
allowed to be mixed) for industrial use;
butane price is set by
government (without
subsidy) and propane
price is unregulated
J-1
More information and additional copies
of this report can be obtained from:
PRIF Coordination Office
c/- Asian Development Bank
Level 20, 45 Clarence Street
Sydney, New South Wales, Australia, 2000
Tel: +61 2 8270 9444

Email: enquiries@theprif.org
Website: www.theprif.org

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LPG and Natural Gas

as Alternative Energy Sources for the Pacific

For further information please contact:

PRIF Coordination Office Pacific Power Association Secretariat of the Pacific

Desktop Publishing: Smudge Design.

Summary of Research and Workshop Outcomes

List of Key Acronyms

ADB Asian Development Bank

4.2.1 Technical Viability of Expanding LPG Supply........................................................30

6 Research Question 4: Which Pacific Island Countries and Territories

Appendix A: List of People Consulted/Involved in Study............................................................... A-1

Table 1. Fuel Specifications in this Study........................................................................................... 3

Figure 1. Overall Energy Profile of Individual Countries................................................................. 6

Expanding Use of Liquefied Petroleum Gas

2 one million British thermal units

Potential for Liquefied Natural Gas

Potential for Compressed Natural Gas

Fuel Price Forecasts

Possible Introduction of LNG

Potential Introduction of Natural Gas

For Both LPG and Natural Gas

(v) Next Steps

1.1 Background to Study

1.2 Purpose of Study

1.3 Scope of Study

1.4 Research Questions

1.5 Specifications and Assumptions

Table 1. Fuel Specifications in this Study

Item LPG ADO IDO HFO LNG CNG ULP Kero-

Density (T/kL) 0.55 0.84 Similar to 0.93 0.46 0.79

Atmospheric -161°C -161°C

Sulphur 0-500 ppm 0-3.5% 0-500

Other Vapourises in Vapourises in Disperses in

Other Possible Autogas Distillate No. 6 Fuel Oil

Typical Storage <23 bar <18 bar <300 bar

1.6 Partnership Arrangements

1.7 Data Collection and Consultation Process

1.8 Structure of Report

2.2 Current Fuel Consumption

Figure 1. Overall Energy Profile of Individual Countries

5 excluding aviation fuels

As Figure 2 shows, fuel demand profiles vary significantly among countries.

Figure 2. Total Annual Fuel Demands of PICTs by Fuel Type

80,000,000 6,000,000 Kerosene

2.2.2 Regional Sectoral Profile

70,000,000 31% 30%

50,000,000 20% Coal

Power Res./Commercial Transport Industry

2.1.3 Fuel Use in the Transport Sector

2.2.3 Fuel Use in the Transport Sector

Figure 5. Transport Sector Energy Profile by Country

6 As mentioned earlier, no data were available on the aviation sub-sector.

2.2.4 Residential and Commercial Use

LPG price (USD/kg)

LPG Stoves Kerosene Stoves Cooking using biomass

(Source: SPC SPC

2.3 Public Power-Sector Fuel Use Profile

Figure 8. Public Power-Sector Fuel Use (MMBTU) in PICTs11

(Note: This Figure does not include renewables)