‘Guyanese must see gas-to-energy contract before Govt. signs on’- stakeholders

Sep 06, 2022 News

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…say country must know interest rates upfront, if more tax holidays will be given

By Davina Bagot

Kaieteur News – In an existing and binding contract between Guyana and American oil major ExxonMobil, the world agrees that the country was cheated. To avoid a similar fate in the agreement- to transport natural gas from the Liza Fields in the Stabroek Block to Wales- stakeholders in Guyana believe citizens should see the contract before Government attaches its signature, especially since they will ultimately be required to repay the project costs, likely to reach US$2 billion.

Economist Ramon Gaskin for example, in an exclusive interview with this newspaper on Monday argued that the Gas-to-Energy (GTE) project to date has been shrouded in secrecy. It must be noted that government is yet to host a Press Conference to engage the media on the subject, while interested stakeholders too have not been allowed an opportunity to share their concerns or suggestions regarding the project, except at brief consultations hosted by Exxon on the environmental aspect of the project.

To this end, Gaskin said, “They started on this project without telling us what the project is all about. They talking about over US$1 Billion for a pipeline alone but who owns this thing? Who is going to make the profits? All this we need to know but they started working on this without telling us the facts and that’s the problem.” Despite not having the blessings of the Environmental Protection Agency (EPA) to commence the massive venture, Exxon has already awarded two contracts to lay the 12 inch pipeline and provide engineering, procurement, construction and installation of subsea risers respectively.

“Guyanese don’t know anything but they have started doing work already on it. What’s the interest rate? Who’s going to make the profits? Who’s going to pay the taxes? We don’t know nothing at the present time,” the activist argued.

To this end, he told Kaieteur News that the agreement should be made public so Guyanese can understand for themselves if the project is indeed feasible. According to him, “It should be made public so people can know if this thing makes any sense because as I see it right now, the gas to shore deal don’t make any sense to this country altogether, because over US$1 billion for this pipeline, who is going to pay for it with couple megawatts to power and to go where? On top of Amaila? All of this makes no sense to me and we should put a halt on all of it until we could figure out what’s going on with the feasibility of it and with the financing of the project. When we get that then we can read it and see what it is.”

Gaskin believes that the Government should not sign any agreement with the oil company for this project until Guyanese become privy to the details of the arrangement. “They should not sign nothing unless we see what it is they are planning to do. Who is going to get the profit from this thing? Who is going to pay the taxes? Is this thing tax free? There’s so much secrecy involved in this thing and we should out an end to it until we find out what is going on,” he concluded.

Similarly, Attorney-at-Law, Elizabeth Deane-Hughes in an invited comment explained the importance of the document being revealed to the Guyanese public. She pointed out that the 2016 Exxon contract was published by the former Coalition administration, which allowed for the flaws to be exposed. As such, she believes that it is important for this new agreement with the same oil company to be properly vetted. “Just like the PSA was made public, Guyanese would need to see this document to understand what it is, so we know clearly what position we are in. If that PSA was not made public, we wouldn’t even begin to understand the depth of the contractual arrangement we are in, hence all of this fever right now to have it changed and to have a new model PSA put in place. So without that agreement we would have no idea what contractual arrangements are and what we are going to be liable for or not liable for so I absolutely believe that it needs to be public.”

Also weighing in on the need for the GTE agreement to be made public was Transparency Advocate, Dr. Yog Mahadeo, who shared three reasons for his position. Firstly, he said that to ensure there is transparency in the management of the gas resource, the contract should reach the Guyanese public.

“Secondly we have had the oil contract itself done in the dark of the night and Guyanese had to wait so long before we could’ve seen that contract. Now that we have seen it, they are saying it’s too late down the road so the Government should learn,” Dr. Mahadeo reasoned.

He insisted that the administration should learn from the mistakes made by the former Government and let there be full disclosure.  On another note, the activist explained that failing to make the agreement public would equate the two political parties to each other where contract management is involved. According to him, “The first set did it where they took the contract at the ninth hour or the eleventh hour to Parlaiment and Gail Teixeira and another one complained about the lateness of presentation to Parliament and so forth.” Therefore, he said it would be necessary to get the National Assembly involved on this major deal.

The GTE project

Esso Exploration and Production Guyana Limited (EEPGL)- Exxon’s subsidiary that will be undertaking the project- has revealed that a minimum of 50 million standard cubic feet of gas per day (mmscfd) will be transported through the pipeline by 2024 and that the pipeline would have a maximum capacity of 130 mmscfd.

The project will encompass three major aspects, that is, the pipeline to transport the gas to Wales, the Natural Gas Liquids (NGL) facility that will treat and separate the gas and the power plant to generate the electricity. So far, Guyanese have been told that the pipeline aspect, which is being pursued by US oil major ExxonMobil, will cost around US$1.3 billion. Even this is expected to increase when Exxon closes critical contracts for same.

Vice President Bharrat Jagdeo had shared, “We are doing estimates. We are saying US$1 billion dollars 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.” VP Jagdeo said 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 to about five cents per kilowatt hour. He said this would be paid back over 20 years. He was keen to note 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 US$15 cents, after adding five US cents as profits for the company.

 

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