Chatham House Expert says gas-to-shore project must be affordable

Jan 07, 2021 News

– Insists it cannot be seen as “end all”

By Kiana Wilburg

Chatham House Associate Fellow, Dr. Valerie Marcel.

Kaieteur News – In its bid to pursue a gas-to-shore project, the Government of Guyana must first ensure that the venture is affordable says Chatham House Associate Fellow, Dr. Valerie Marcel. During an exclusive interview with other industry stakeholders on Kaieteur Radio’s programme, Guyana’s Oil and You, Dr. Marcel said it is clear from the inception that Guyana did not expect to find as much gas as it did in the Stabroek Block hence there is a common interest among ExxonMobil and its partners along with the government to bring the gas to shore. The industry expert stressed, however, that the big question that has to be answered relates to the affordability of bringing the substantial resource to shore and whether Guyana can have all the relevant mechanisms in place to ensure the project is efficient.
In addition to this, Dr. Marcel said that a gas-to-shore project will still have shortcomings because it would not meet the energy demands of the entire country, especially the needs of persons living in far flung areas. Considering this, she said that Guyana needs to look at the role of renewable projects in the national energy matrix.
In her concluding thoughts, the Chatham House Fellow also said that the project has merit in principle but at the same time, admitted that she is making such a statement without having read or considered the feasibility studies or economics of bringing such a project on board.
Former Minister of Public Infrastructure, David Patterson, was in agreement with the position expressed by Dr. Marcel. His reasoning for supporting such a project was premised on the fact that Guyana has poor power generation capacity and infrastructure in place and therefore needs to find a response to the energy demand that is increasing annually by seven percent. Patterson also noted that the previous government had commissioned several studies which examined the feasibility and practicality of the project. It is important to note, however, that none of these studies which Kaieteur News perused prove that the gas-to-shore project is the most viable option for Guyana based on a comparative analysis done against the costs of renewable projects. None of the studies commissioned also show that Guyana and its future generations would not be burdened with the repayment of exorbitant loans taken to fund the project.
Even as Patterson lent support to Guyana having a gas-to-shore project based on the studies his regime would have commissioned, he insisted that the country needs a holistic debate on all the alternatives available to meet the energy needs of the country.
ENVIRONMENTAL AND ECONOMIC DISASTER
Apart from the views offered by Patterson and Dr. Marcel, two other guests on the programme were quite blunt in their remarks that Guyana should stay as far as possible from the project. In fact, International Lawyer, Melinda Janki, stated that the authorities of the day are actually embarking on a “lunatic project” that is tantamount to courting massive debt.
According to a 2018 feasibility study that was handed to the former APNU+AFC administration, a whopping US$304M is needed for ExxonMobil and its partners to bring natural gas from the Stabroek block to Guyana’s shores. The feasibility study, which was compiled by Energy Narrative, a US-based market analysis firm, states that out of the US$304M, ExxonMobil would be responsible for US$165M, which will be used for pipeline construction costs. The remaining US$139M for the construction of the onshore infrastructure will have to be financed by loans taken by the Government of Guyana. Also, Guyana would still have to pay for the transportation of the gas but that price is currently under negotiations between the PPP/C and ExxonMobil.
Further to her concerns about the increase in debt, Janki had expressed that the nation is supposed to see an Environmental Impact Assessment (EIA) on the project before thought is given to its execution. Considering that the law requires EIAs to be done for projects of this nature, Janki is of the belief that the gas to shore venture in its current state, is illegal.
The lawyer also contended that Guyanese are yet to see a current economic analysis which shows that this project is economically sound for Guyana in the long run as opposed to going the route of renewable energy now. Taking the foregoing factors into consideration, Janki said that the gas to shore project is a foolish proposition.
Tom Sanzillo, Director of financial analysis at the Institute for Energy Economics and Financial Analysis (IEEFA), was quick to agree with Janki as he said Guyana has no evidence to show that it can achieve a financially sound arrangement. In fact, Sanzillo said that the lopsided oil deal for the Stabroek Block deal is testimony to the fact that Guyana is incapable of negotiating the best prices for the pipeline and other infrastructure for the gas to shore project.
The financial expert said that Guyana ought to stay clear of the project or else it risks jumping off the edge of a most dangerous precipice.