Guyanese paying for gas pipeline, but in the dark on selection of contractor – Yog Mahadeo

Aug 02, 2022 News

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By Davina Bagot

Kaieteur News – For a government that boasts of transparency and accountability, these two important pillars are grossly lacking, especially in the local management of the oil and gas sector.

This is the view of Dr. Yog Mahadeo, a founding member of civil society organization, Article 13. Mahadeo, a stern activist for transparency, has flagged the fact that Guyanese will be paying for a US$1.3 billion pipeline to transport natural gas from the Liza One and Two fields in the Stabroek Block, to Wales on the West Bank of Demerara; however, the oil company, ExxonMobil has moved to award the contract for these works, all behind closed doors.

It was last week that Subsea 7 and Van Oord, two international companies were awarded the job. Subsea 7, according to its website, specializes in subsea engineering, construction and services mainly for the offshore energy industry. The company is registered in Luxembourg with its headquarters in London. Meanwhile, Royal Van Oord is a Dutch maritime contracting company that specializes in dredging, land reclamation and constructing man made islands.

Mahadeo explained in an exclusive interview with Kaieteur News yesterday that the oil company has not only chosen a firm to conduct the works without the knowledge of Guyanese citizens, but has also done so without first attaining the approval required by the Environmental Protection Agency (EPA).

He was keen to point out that the 2016 Production Sharing Agreement (PSA) allows for the cost of production and cost of disposal of the gas to be deducted from Guyana’s oil, meaning that the US$1.3 billion project will actually be funded by Guyana; yet the citizens are completely unaware as to whether the project was tendered or given to a hand-picked contractor.

The activist told Kaieteur News that while he believes the project can bring significant savings to Guyana in terms of its fuel import bill, he is concerned about Guyanese not having a say on the company being selected to lay the pipeline on behalf of ExxonMobil.

According to Section 12 of the PSA, which caters to associated and non-associated gas in the Stabroek Block, all costs incurred by the developer shall be recovered.

At Section 12.1 (f) “All costs and expenses incurred by the contractor in the production, use and/or disposal of the Associated Gas of an Oil Field as stipulated in Article 12.1 and those incurred in carrying out any feasibility study on the utilization of the excess associated gas shall be charged to the Development Cost of the Oil Field and shall be recoverable contract costs…” It goes on to say however that “…all costs incurred by the government for the infrastructure and handling of excess associated gas which are not included in an approved Development Plan shall be at the sole risk and expense of the government and will not affect the amount of cost oil and profit oil due to contractor.”

To this end, he explained, “There are many factors that beg for full disclosure on all aspects of the project like the full costs of the plant and the costs involved in transforming the current power systems to generate and distribute the projected 300 megawatts of electricity.”

Mahadeo noted that the public must keep in mind that the cost to upgrade the current national grid is separate from the gas delivery project and must be analyzed from a non-political perspective.

Notably, he shared, “We know already that the initial prices touted for the total gas-to-shore project started at US$400 million and has already tripled. The extrapolated full cost of the project could well be surpassing the US$3 billion mark.”

As such, the activist pointed out, “I support the gas to energy project, but like Amalia, we ask – what is the total cost, inclusive of transmission and distribution. And like everything else with the current government, we wonder, how much of these funds will be lost due to political directives, political patronage and corruption. The project is a good one, but it rests upon a rotten and exploitative contract, as well as a Government that is willing to let the oil companies and other favoured “investors” rape our country’s resources.”

The government is pursuing the second aspect of the Gas to Energy project, which will see a Natural Gas Liquids (NGL) Plant- to treat and separate the gas- and a power plant to generate electricity being constructed at Wales.

Presently, that aspect is going through the tendering process. As it relates to the environmental permits, Vice President, Bharrat Jagdeo has explained that an application has been submitted to the EPA and is currently being vetted. About three weeks ago, he said that the regulator will decide whether an Environmental Impact Assessment (EIA) will be required or not. Exxon has already submitted an EIA for its part of the job.

 

 

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