ExxonMobil had warned Govt. against using Wales location

Sep 12, 2021 News

….site drives up cost — Cabinet Paper

Kaieteur News – The decision to land a gas pipeline from the Liza I oilfield offshore Guyana on the West Coast of Demerara (WCD) as against the East Coast of Demerara (ECD) has in recent years attracted significant criticisms and according to documentation seen by this newspaper, the decision by the administration has added at least US$72M to the overall price tag for the project.

Head of the Gas-to-Shore working committee, Winston Brassington.

This much was even communicated to the administration by the Stabroek Block Operator, ExxonMobil Guyana, and was relayed to Cabinet when in 2018 it considered the Woodlands location on the right bank of the Mahaica River, ECD.
Guided by a 2017 report that had shortlisted some 10 sites, further refining by ExxonMobil and a team by the Guyana government had found that landing a pipeline at Vreed-en-Hoop and then transporting the natural gas to the Wales estate would not only be more technically challenging but would increase the cost by some US$72M.
According to the Cabinet paper seen by this publication, on October 3, 2017 a meeting was held between the Site Selection Team and ExxonMobil and it was at that time that a new site on the West Bank of Demerara (Vreed-en-Hoop) was introduced by the Ministry of Finance, which extends to the mouth of the Demerara River.
According to the Cabinet paper, this site was proposed based on proximity to and consideration of keeping Patentia in play for further development as an industrial park concept.
Further, it was hoped that Vreed-en-Hoop may also allow for energy to be taken from Kingston with further development along the river bank as well as facilitating shipping on the other side of the river.
According to the documentation seen by this publication however, based on the Pre-screening Report as submitted by ExxonMobil in November 2017, there was a firm preference for the Woodlands site compared to Vreed-en-Hoop, as pipeline landing technical issues were significantly lower, ground elevation appeared better and it had all-round less of an impact on the surrounding communities.
Further, it was found that Vreed-en-Hoop may be a challenging landing location due to the need to manage landing a high pressure pipeline in an area of higher population density and the active river waterway.
In parallel, the Site Selection Team conducted a review of its findings of the two locations, and based on the Report submitted in November 2017, there is a preference towards the Woodlands location.
As it relates to the costs, Cabinet in its paper was notified that regarding Vreed-en-Hoop, capital costs associated with this site indicate an additional incremental development cost (USD$72 million) compared to Woodlands, due to the requirement to connect gas and power supplies to the Wales Estate.
It was noted that the additional Offshore pipeline would cost US$12 million while the Industrial site transmission and pipeline would cost some US$60 million making the WCD venture some US$72M costlier.
ExxonMobil in a confidential ‘Power Plant Location Assessment Update’ that was submitted to the then administration had warned “Additional technical analysis has assessed Vreed-en-Hoop to have $72M US incremental development cost versus Woodlands, due to the requirement to connect power and gas supplies to the Wales Estate.”
The company had warned too that a Vreed-en-Hoop power plant location’s limited land footprint requires pairing with a separate industrial zone and an additional government infrastructure project is required to integrate the Wales location.
It was found that this linkage– Gas/power supplies to Wales estate will be the largest incremental cost. Given the varying considerations at the time, Cabinet was requested to review, consider and endorse the recommended “site of Woodlands as the proposed landing site for the offshore pipeline and development of a natural gas power generation facility with associated industries, based on preliminary studies conducted.”
The current administration has however embarked on a landing site at Crane, a few kilometres from Vreed-en-Hoop to land the gas pipeline before making its way to the Wales Development Zone (WDZ) using an onshore pipeline.
Despite no detailed financial or other studies being completed, the Government of Guyana said it has finalised WDZ as the termination point for the pipeline from the Liza Area in the Stabroek Block, offshore Guyana and as such is seeking private investors or a consortium to be part of the project.
It has since invited private interests calling for joint participation in the proposed gas-to-shore project with the government and Esso Exploration and Production Guyana Limited (EEPGL)—ExxonMobil Guyana.
According to an advertised Expression of Interest (EOI), the government and EEPGL are looking for partners “in designing or utilising the outputs from an NGL (Natural Gas Liquids)/LPG (Liquified Petroleum Gas) facility and related facilities.”
This includes, according to the Ministry, design, construction, and financing of a power plant fuelled by natural gas, where the power will be delivered into the Guyana Power and Light’s (GPL) distribution grid. This is in addition to industries that can utilise natural gas for, “Natural gas driven developments and growth.”
That plan, the Ministry said, must include a description of the proposed project, details on land required and related infrastructure, required quantities of gas and electricity (capacity [MWhr] and energy [kWhr]), with information on expected pricing, volumes, and ability to manage potential variable gas flows.
The Ministry in its invitation noted too, that the decision on Wales was taken after extensive evaluation of multiple sites with ExxonMobil Guyana Limited (EEPGL).
The WDZ encompasses over 14,000 plus acres of land of which approximately 1,300 acres will be set aside for heavy industry/gas-related investments.
The project, according to stakeholders, is expected to see some 27 kilometres of pipeline being buried from the Crane, WCD location to Wales, in addition to some 200 plus kilometres of pipeline from the Stabroek Block where the Liza Destiny Floating Production Storage and Offloading Vessel is located.
According to the administration, WDZ will be the location for the termination of the gas-pipeline measuring over 225 km from the Liza Area.
Additionally, it will involve the establishment of a gas-processing plant (GPP) and a Natural gas liquids facility (NGL) capable of producing at least 4,000 bbl./day, including the fractionation of liquefied petroleum gas (LPG).
The private partners will also be expected to take part in the operations of the establishment of a power plant to generate 150 MW, with an additional 150 MW as a second phase in addition to the establishment of an industrial park comprising industries that can utilise gas, steam and/or electricity.