Puerto Rico’s LNG gamble: Oversight board greenlights supply contract amid monopoly concerns
- The San Juan Daily Star
- 5 hours ago
- 3 min read
By THE STAR STAFF
Puerto Rico’s energy future took a pivotal turn last week as the Financial Oversight and Management Board conditionally approved a controversial contract to secure liquefied natural gas (LNG) for the island’s power plants.
The agreement, involving the Puerto Rico Electric Power Authority (PREPA), the Public-Private Partnership Authority, and NF Energía LLC (NFE) aims to supply LNG to the San Juan and Palo Seco generation units and other facilities transitioning to natural gas.
The decision comes after months of scrutiny and heated debate over market competition, infrastructure control, and the island’s vulnerability to supply disruptions. While the revised contract promises billions in savings and improved reliability, it leaves one critical issue unresolved: exclusive access to Puerto Rico’s only LNG-equipped port.
Natural gas is central to Puerto Rico’s plan to stabilize its fragile electrical grid and reduce reliance on costly diesel. But the island’s LNG lifeline runs through the Puerto Nuevo Port in San Juan -- a facility controlled by NFE under a 20-year lease granting exclusive rights to key berthing spaces and operational zones. The arrangement has created what critics call an “operational monopoly,” limiting competition and leaving Puerto Rico dependent on a single supplier.
The stakes are high. Any disruption at the San Juan terminal could cripple electricity generation, threatening homes, businesses and the economy.
The oversight board’s approval is far from unconditional. The island government must:
* Revise the LNG Tolling Term Sheet for clarity.
* Assess the Ports Authority lease with NFE and explore legal avenues to open competitive access to the San Juan terminal.
* Recover costs and enforce penalties for NFE’s past delivery failures, including compensation for diesel expenses and collection of outstanding damages.
Without these measures, the board warns, Puerto Rico’s energy system will remain vulnerable and noncompetitive.
When the original contract surfaced in June 2025, the oversight board flagged numerous concerns: a 15-year term inconsistent with procurement rules, exclusive supply rights for NFE, lack of regasification infrastructure, and risk-heavy provisions shielding NFE from liability -- even in cases of intentional breach.
After consultations with government officials, industry experts, and stakeholders, the revised contract addresses most of those issues. Key improvements include:
* Shorter contract duration.
* Lower minimum purchase volumes.
* A requirement for NFE to allow third-party LNG deliveries if it cannot supply.
* Stronger “deliver or pay” obligations.
* Measures to mitigate conflicts of interest with Genera PR LLC, PREPA’s agent.
The listed changes could save Puerto Rico more than $4 billion in fuel costs and ensure continuity of supply if NFE falters.
Despite progress, the elephant in the room remains: port access. As long as NFE’s exclusivity stands, competitive procurement will be stifled, keeping prices high and options limited. The oversight board acknowledges that a tolling agreement could offer temporary relief, but warns that true market openness requires structural change.
The government now faces a race against time to secure alternative access and enforce accountability, the board noted. Failure to act could lock Puerto Rico into a single-supplier model for years, undermining efforts to build a resilient, cost-effective energy system.
For now, the oversight board said, the conditional approval buys breathing room -- but the island’s LNG future still hangs on a delicate balance between monopoly control and competitive reform.