Govt. seeking advisory services, negotiation support for Gas-to-Energy project 

Aug 31, 2022 News

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Kaieteur News – The Government of Guyana has issued a Request for Proposals, seeking expert advice on the upcoming Gas-to-Energy project that could cost Guyana over US$2 billion.

According to the notice published on the Ministry of Natural Resources (MNR) website, part of its budgetary allocation this year will be spent on the procurement of consultancy services for ‘Legal and Commercial Advisory Services and Negotiation Support’ for the massive project.

“As the Cooperative Republic of Guyana moves into a new chapter of history as a petroleum producing nation, sustainable development lies at the core of the Government of the Cooperative Republic of Guyana’s (GoG’s) goals for the sector. Being keenly aware that petroleum is a non-renewable resource, considerations related to its extraction and conversion into financial capital highlight the requirement and responsibility to ensure that the resource is prudently managed…the GoG is committed to ensuring that this framework allows both present and future generations to reap the benefits,” the Ministry said.

In the 28-page document, the MNR noted that the successful client will be tasked with reviewing the existing legal and regulatory framework for the petroleum sector, integrated policy directives, and concluded deliverables regarding project development. These include but are not limited to the existing petroleum legislation, Petroleum License, the Liza Production License and Heads of Agreement between the Government and Esso Exploration and Production Guyana Limited (EEPGL/ExxonMobil Guyana).

Also among the successful consultant’s job description is to review the draft Gas Supply Agreement submitted by the Stabroek Contractor, provide detailed legal opinion, comments and advice, support the Ministry’s engagements with the contractor during the negotiations stage and document the review process and outcomes.

Consultants have until September 13, 2022 to submit their proposals to the Chairman of the National Procurement and Tender Administration Board (NPTAB).

The duration of the consultancy is expected to be 45 days, commencing around October 10, 2022.

The Government pointed out that the successful candidate should be an internationally recognised firm with prior experience completing similar assignments and comprise a pool of skilled professionals. To this end, the core team should include a lawyer specialised in petroleum law with at least 15 years of experience, a lawyer with a minimum of 12 years of experience in the development of gas sales agreement and gas transportation agreements  among others,  as well as a lawyer with a minimum of 12 years experience in Health, Safety and Environment Law. Meanwhile, the negotiations expert should have at least 12 years of experience as well.

In his latest predictions, Vice President Bharrat Jagdeo said that the Natural Gas Liquids (NGL) Plant and power plant to be set up at Wales on the West Bank of Demerara can cost about US$700 million based on the proposals it had received. In the meantime, ExxonMobil Guyana has said that the pipeline aspect of the project could cost US$1.3 billion.

The project is expected to slash electricity costs by 50 percent the VP said.

He explained, “We are doing estimates. We are saying US$1 billion now for the pipeline. That is where we run the numbers. So assuming it comes in at US$900 million, then if it comes in that will come down; the US$1.6 cents will come down to about US$1.4 cents so it comes down lower. If it goes to US$1.1 billion, it may go to US$1.7 cents…that’s just the pipeline part…then if you estimate the power plant and the NGL facility to be about US$700million… that will add another one point something cents per kilowatt hour.”

To this end, he reasoned that if one were to consider estimates for paying for the pipeline, NGL and power plant, it can come down as low as four cents or about five cents per kilowatt hour (KWH). He said this would be paid back over 20 years as Exxon would be paying for the pipeline.
He noted that while the five US cents per kilowatt hour may be the cost to generate the electricity, another five cents may be lost in the transmission and distribution of the power, which could take the final price for the sale of the electricity to about 15 US cents, after adding five US cents as profits for the company. Currently, electricity is generated and sold at 30 US cents per KWH.

The GTE project will involve capturing associated gas produced from crude oil production operations on the Liza Phase 1 (Destiny) and Liza Phase 2 (Unity) Floating, Production, Storage, and Offloading (FPSO) vessels, transporting approximately 50 million standard cubic feet per day.

The combined offshore and onshore pipeline system is targeted to be ready to deliver rich gas by end of 2024, and the NGL Plant is targeted to be operational by mid-2025. The project has a planned life cycle of at least 25 years.

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