Fiscal board demands NFE formalize pact with third party for gas supply shortfalls

By THE STAR STAFF

The Financial Oversight and Managed Board insisted earlier this week that NF Energía LLC (NFE) must formalize an agreement with an external provider to allow for the delivery of liquefied natural gas (LNG) to Puerto Rico whenever the company is unable to supply it, as stipulated in the existing contract with the Puerto Rico Electric Power Authority (PREPA).

“The contract contains provisions requiring NFE to allow for the delivery of LNG by third parties through NFE’s port facilities when NFE is unable to supply the LNG,” the oversight board stated Wednesday in written remarks.

According to the board, under such circumstances, NFE must formalize an agreement with an external supplier in accordance with the “LNG Tolling Term Sheet” -- a component of the Natural Gas Processing Services Agreement.

The oversight board described this mechanism as a fundamental element of the contract, noting that it was an indispensable condition for the board’s approval of the agreement with NFE.

“The purpose of this requirement was precisely to ensure that Puerto Rico would not be left without access to LNG, regardless of which party -- if any -- was responsible for the supply shortfall. All parties accepted this condition,” the board asserted.

The board’s reassertion of its position follows a multi-week delay in the delivery of liquefied natural gas, which forced the island’s electrical system to rely on diesel fuel to maintain power generation.

According to PREPA estimates cited by the oversight board, the use of this more expensive fuel cost residents and businesses in Puerto Rico some $32 million between Sept. 16 and Oct. 12.

In the board’s view, the recent controversy demonstrates why access to NFE’s infrastructure by alternative suppliers must remain available, even while the parties dispute who was responsible for the supply interruption.

“The provisions of the Tolling Agreement exist precisely to ensure that LNG continues to be delivered -- whether by NFE or a third party -- while any dispute between the parties is being resolved,” the oversight board stated. “These provisions must be honored whenever NFE is unable to fulfill the supply.” 

The contract between PREPA and NFE has been in effect since December 2025 and was approved by the oversight board.

The board also supported the efforts of PREPA and the Public-Private Partnerships Authority to enforce compliance with the contract.

“Puerto Rico must always receive the LNG it needs, which NFE agreed to deliver,” it noted.

The oversight board maintained that ensuring effective third-party access to the facilities is necessary to protect the reliability of the electrical system, foster competition, and avoid preventable additional fuel costs.

As part of the follow-up actions regarding the dispute, the board stated that it will collaborate with the island government to convene the parties involved in gas supply and coordinate measures to prevent further interruptions.

The oversight board also clarified that this process will not limit PREPA’s authority to exercise the rights granted to it under the contract with NFE.