The pipe dream

Jan 22, 2022 Features / Columnists, Peeping Tom

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Kaieteur News – Guyana is pursuing a pipe dream. The agreement, which was signed last Thursday in Suriname, between the presidents of Guyana, Suriname and Brazil to promote an energy corridor, represents a form of political daydreaming.
The plan is too ambitious for Guyana’s government. And both Suriname and Brazil are not likely going to tie their energy security to a plan which involves high interconnection costs and trading in energy.
Brazil does not need to buy any energy from Guyana. It has the means to meet the demand of its northern states of Amapá and Roraima. The energy needs of these two states are indispensable towards any possibility of trading energy.
But why would the northern states of Brazil buy energy from Guyana when the cost of that energy will be super expensive given the high cost of projected future generation and the great distance between where Guyana’s energy is expected to be generated and those northern states?
Brazil is already making plans to satisfy the energy needs of these two northern states. Amapá States stands to benefit from major investments in the energy sector. About US$36M is likely to be invested this year in Amapá in transmission lines.
Brazil is therefore progressing with its plans to meet the energy needs of this state and is not likely to want to buy or to see any energy from or to Guyana and Suriname. While Amapá was plagued with blackouts in 2020, that situation is going to be resolved later this year with the holding of two major investment auctions aimed, in part, at ensuring energy security in that state.
Last September, the Brazilian government green-lighted plans to connect the remote Roraima State to the national grid. This means that the State will soon be able to receive power from the national grid.
In the case of Suriname, it faces a deep economic crisis which will require greater attention from the government. Already it is looking towards a debt management plan to help offset its debt crisis. Fixing its debt problems may require having to defer the sort of investments needed to realise this energy corridor.
Had Guyana been following these developments, all this talk about an energy alliance and an energy corridor with Brazil and Surinamese would have been scrapped. Guyana hopes to generate energy from its gas reserves. It needs to sell this energy which will exceed local demands. As such it has latched on to a 2016 study, which has now become outdated, which speaks about creating a Arco-Norte Interconnected System linking Guyana, Brazil, Suriname and French Guiana.
This idea was the brainchild of the Inter-American Development Bank which funded a study in 2016. This study was done in collaboration with the Guyana Energy Agency (GEA). Ironically, no representative of the GEA was pictured in Guyana’s delegation during the talks between the President of Guyana and the presidents of Suriname and Brazil.
Although the visit was cancelled, the Brazilian President was scheduled to pay a one-day official visit to Guyana yesterday and he was likely to have addressed the plans which were discussed in Suriname on Thursday.
But afterwards what was expected? This year is an election year in Brazil and when the Brazilian President returns home, he will have more important priorities than dealing with the Arco Norte energy system.
Brazil is already far ahead of both Guyana and Suriname in terms of using renewables. In fact, in both Roraima and Amapá, the sources of energy include biomass and hydro. Guyana’s main energy source remains fossil fuel.
Guyana is looking to tap its abundant gas reserves and to secure markets for the energy generated from natural gas. However, the Arco Norte baseline study had highlighted Guyana’s hydroelectric potential as a source of energy to be traded.
The development of Guyana’s hydroelectric potential requires massive investment. And as was evident with the Amaila Falls Hydroelectric Project, political considerations are equally important. The one-seat majority of the government will not lend itself to providing the required comfort for investors who will be fearful that should there be a change in administration, as there was in 2015, the new government will balk at the projects.
Arco Norte is all a pipe dream. Nothing will come of it. Guyana has a better chance of getting a road to Brazil and a bridge link to Suriname than it does about an energy corridor.
Arco Norte is too big for a country like Guyana. And it is much too ambitious for Suriname. And the Brazilians know this all too well.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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