Exxon to co-own pipeline and sell Guyana’s gas

Apr 27, 2021 News

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Gas-to-Shore project…

…price still under negotiation—VP Jagdeo

By Gary Eleazar

Kaieteur News – ExxonMobil Guyana, the operator of the Stabroek Block, will be co-owners of the intended gas pipeline from the Liza Destiny since the piece of infrastructure will be paid for out of cost-oil from the oil produced offshore. This will result in a 50/50 ownership between the operator and Guyana.
At least this is according to Vice President, Dr. Bharrat Jagdeo, who yesterday led a special briefing on the proposed gas-to-power project at the Arthur Chung Conference Centre (ACCC).
He was joined by Winston Brassington, the lead person on the Gas-to-Shore working group, who disclosed that contrary to the publicly stated figures, the price tag that the administration is using is some US$900M for the entire project.
Former Energy Minister in Trinidad and Tobago, Kevin Ramnarine, had said that the conservative estimate for the pipeline alone was between US$600M and US$800M.
It was disclosed too yesterday that the negotiations are underway for the price to pay ExxonMobil for the gas that will be provided.
When confronted with the fact that ExxonMobil is still looking at the economic impact on its operations from potentially providing gas to Guyana, VP Jagdeo called the position “commercial gaff” and noted that Guyana was looking to pay just over US$0.03 cents and no more.
He conceded however, that these negotiations are still to be concluded.
Providing an update on the gas project, Brassington told those in attendance that the project was under study since 2016 and that when the current administration took office in August 2020, there were no major decisions at the time.
According to Brassington, the negotiations with ExxonMobil by the current administration commenced in December and that at end of the year the key decisions taken were publicly communicated.
These, he noted, relates to the gas pipeline terminating at the former Wales Estate on the West Bank of Demerara (WBD).
Importantly however, it was noted that the pipeline will not be traversing the Demerara River but rather would be landing at Crane, West Coast Demerara (WCD) before being piped along the communities to Wales.
According to Brassington, the operator has committed to providing the country with an initial supply of some 50 million cubic feet of gas per day.
VP Jagdeo had explained that the company was only looking to commit some 35 million cubic feet daily but the administration managed to secure a commitment for more.
Despite the reluctance on the part of ExxonMobil—taking into account the need to re-inject gas in order to optimise the amount of oil that can be had from the reservoir—Jagdeo claimed that the increase supply would not hinder the operations in the Stabroek Block.
According to Brassington, the 50 million cubic feet will allow for enough gas to power the 250MW power plant.
Despite the fact that several studies such as the Environmental Impact and Social Assessment are still to be completed, the project head nonetheless envisions the project coming on stream by 2024.
This, he said, gives 18 months to complete all of the outstanding studies after which a competitive tender for the construction of the pipeline will be pursued.
He was adamant that while the administration is working with a US$900M price tag for the entire project inclusive of pipeline, the final cost would be determined when the project goes out to tender.
“The entire scope of the project as defined by Exxon has an outer limit of US$900M, this is not just a pipeline, this is the onshore pipeline facility, the gas processing plant and all of the related infrastructure,” he said.
In the breakdown provided, it is envisioned that the cost of the offshore pipeline and Riser would be between US$560M and US$630M. Additionally, the onshore pipeline between Crane and the Wales site would cost between US$80M and US$100M while the Natural Gas Liquids/Gas Plant is estimated at US$120M.
The other cost cited was for ‘infrastructure’ pegged at between US$40M and US$50M.
Addressing what he termed the “outer limit” on the capital costs associated with the project, Brassington told stakeholders, “…we agreed that Exxon would fund the pipeline out of cost-oil.”
On the costs with regards to the generation of electricity, Brassington said that the outer limit considered is three and a half cents per kilowatt hour.
This, he said, together with operation and other costs will still see power being generated at less than half the cost of electricity generation paid by the Guyana Power and Light Inc. (GPL).
It was noted by Jagdeo, however, that this price is still subject to negotiations and has not been finalised as yet.
He said that included in the US$900M figure is the power plant, pipeline and gas treatment plant.
It was noted by Brassington and Jagdeo that while the current administration has not yet completed any of its own independent studies, the ones done between 2016 and 2020 by their predecessors are being used to inform the decisions being taken at present.
According to Brassington, in addition to the savings from using gas, government will also be seeing additional benefits from utilisation of other gases which, he said, would potentially offset the cost of the project.
These however have not been the subject of any studies and VP Jagdeo said they have not looked at revenue streams using other gases, since the focus initially is on using the Natural gas for power generation.

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