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Puerto Rico’s government has pulled the plug on contract talks with New Fortress Energy after the island’s federally appointed oversight board declined to approve a proposed $20-billion LNG supply deal, upending years of negotiations and raising questions about the future shape of its energy transition.

According to a report by Hart Energy, the Financial Oversight and Management Board for Puerto Rico withheld support for the contract earlier this month, citing concerns about cost, duration, and long-term fuel dependency. In response, the Puerto Rico government formally canceled negotiations with New Fortress, despite the company’s dominant position in the island’s LNG market.

New Fortress had been in line to supply fuel for the state-owned Puerto Rico Electric Power Authority (PREPA), whose fleet includes aging oil- and gas-fired plants awaiting conversion or decommissioning. The canceled deal was expected to cover LNG imports for a period of up to 25 years, potentially extending New Fortress’s role as the island’s primary gas supplier well into the 2040s.

The collapse of the agreement leaves a significant vacuum in Puerto Rico’s energy planning. According to the U.S. Energy Information Administration (EIA), natural gas, primarily LNG, accounted for approximately 34% of the island’s electricity generation in 2023, with petroleum making up the majority. Although full-year 2024 data is not yet available, analysts at the Institute for Energy Economics and Financial Analysis (IEEFA) had warned that Puerto Rico’s increasing reliance on LNG contracts could entrench fossil fuel use at the expense of federally supported renewable energy goals.

In parallel, the U.S. Department of Energy is preparing to disburse nearly $1 billion in solar and storage funding through the Puerto Rico Energy Resilience Fund. As of July, however, local permitting constraints and utility interconnection delays had slowed the rollout of community-scale renewable projects.

The New Fortress deal had also come under scrutiny for bypassing competitive procurement rules. While the company already supplies LNG to the San Juan combined-cycle plant and EcoEléctrica’s Peñuelas facility, its attempt to lock in a 25-year sole-source contract drew criticism from public interest attorneys and environmental groups. Legal scholars warned the deal could have violated key provisions of Puerto Rico’s energy reform laws.

For New Fortress, which has not issued any public comment on the deal’s breakdown, the canceled contract represents a setback in its bid to expand LNG operations across the Caribbean. The company is still advancing its Fast LNG project in Mexico, with modular floating liquefaction units aimed at flexible export markets, including potentially Puerto Rico. While one cargo was delivered to Puerto Rico in early 2025, no current-quarter shipments have been confirmed. Without a long-term anchor contract, its foothold on the island may be more vulnerable than previously assumed.

Puerto Rico’s Energy Bureau has not announced whether a new solicitation process will follow. With the island’s debt restructuring still underway and federal funding tied to grid modernization, the question now is whether energy planners will reframe the mix around renewables, or seek a scaled-down LNG alternative.

By Charles Kennedy for Oilprice.com