Feasibility hinges on price Exxon charges on gas - IDB report

Feasibility hinges on price Exxon charges on gas – IDB report

Apr 04, 2022 News

US$900M Gas-to-Shore Project…

Kaieteur News – Back in 2018, the Inter-American Development Bank (IDB) had partnered with the State to conduct a feasibility study of the planned US$900M offshore natural gas pipeline.

Vice President, Dr. Bharrat Jagdeo

The primary objective of the study, which was executed by Energy Narrative for US$70,000—an international entity that provides strategic market analyses and advice was to determine the overall feasibility of transporting natural gas from offshore Guyana, building an Natural Gas Liquids (NGL) separation plant and a Liquefied Petroleum Gas (LPG) production plant to market the liquids from the natural gas stream, as well as building a new electricity generation station to use the remaining dry natural gas. (See link for report: https://nre.gov.gy/wp-content/uploads/2021/04/Feasibility-Study-for-Guyanas-Offshore-Natural-Gas-Pipeline.pdf)
According to the study, the project’s financial feasibility hinges on the price of natural gas that will be negotiated between the Government of Guyana and ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL). The consultant was keen to note that in this negotiation, EEPGL’s priority will be to secure a price for the natural gas and LPG that will provide the greatest return on investment. At the same time, the report said the Government of Guyana’s priority is to minimize the cost of electricity generated with the supplied natural gas. It therefore means that a careful balance needs to be struck to ensure Guyana is not saddled with paying for gas at a price that only provides the greatest return to Exxon’s affiliate.
It is important to note however that the discussion in this regard is still ongoing. Yet, Vice President, Dr. Bharrat Jagdeo has categorically stated that the project is economically viable and a “no-brainer” at that.During a press conference that was held last year February, Jagdeo had said once the proposed gas-to-shore project comes on stream, Guyana’s electricity costs could be reduced from 30 US cents to six, or even three US cents per kilowatt hour (kWh). Jagdeo was keen to highlight the significant cost reduction as he noted that some critics have said that the project is not feasible without even doing a feasibility study. The official said that when one considers the massive cutback in costs, the gas-to-shore project is “a no-brainer.”
While the numbers are still being worked out for other aspects of the project, the Vice President said that the pipeline could cost US$500M to US$800M while the power plant could be approximately US$300M. The latter would be financed by the government while ExxonMobil would stand the costs for the pipeline. As for cost to transport the gas via the pipeline from the Liza Phase 1 project, Jagdeo said he is hopeful to have this at zero but for the time being, the numbers stand at six to three US cents per kWh. It would be reduced once the repayment for the pipeline is made. This he said could take about four years.
As for the location of the landing of the pipeline, Jagdeo told members of the media that Wales was determined to be the most suitable location given the low population density and the fact that it is less costly than the previous sites proposed by the APNU+AFC regime. Those sites were proposed to be in the areas of Clonbrook, New Amsterdam and Sophia. Jagdeo had said too that the government took the decision to not have the gas project on the East Coast since there are a number of chemical storage plants being established in the said area. He had said that having the two in the same region could spell disaster.
Further to this, the Vice President had assured the nation that four studies on the project’s impact on the environment would be conducted and released in the interest of transparency. He had said too that a master plan is being mapped out to determine where at Wales the pipeline would be landed and where the power plant would be situated. Depending on the type of plant used, the government would determine what industries would be developed in the area which would best make use of steam that may or may not be produced by the plant.