Norton calls for updated feasibility study for gas-to-energy project

Sep 08, 2022 News

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…says Guyana could be left with another Skeldon factory, Fiber-optic cable

By Davina Bagot

“There is no way that you should be spending hundreds of millions of US-dollars without the appropriate feasibility studies and without an updated analysis based on the changes that have occurred. If this project is going to cost nearly twice as much, I believe it is pretty clear that we need to have the appropriate studies to justify the spending”- Economist, Elson Low

Kaieteur News – Leader of the Opposition (LOO), Aubrey Norton has warned that the People’s Progressive Party (PPP) must not be allowed to enter into an agreement with oil giant ExxonMobil for the Gas-to-Energy (GTE) project without the nation first seeing an updated feasibility study and the deal to which the country will be accepting.

He made his position clear during his weekly Press Conference on Tuesday in response to a question from this newspaper. The LOO believes that if the administration is true to its mantra of “transparency and accountability” then it would ensure that the relevant documents are made public. Norton reasoned, “Remember the Government is managing the resources of the people. The Government doesn’t own any resource. The Government doesn’t have total authority over what happens. The Government is elected by the people to manage the state which belongs to the people and therefore the Government should be accountable to the people and I see no reason why they should not make it public so that we can claim some form of good governance.”

Moreover, he explained that the PPP Government holds a very “unpleasant” history where project management is concerned. He reminded, “The Bharrat Jagdeo Government went into a Skeldon factory (project)- there was no proper feasibility study and you know the outcome. Millions of US dollars were wasted. Now do we want to continue wasting money in a way that it could be prevented? If there are proper feasibility studies we will know whether the project is feasible or not and whether it can achieve its objectives. If there isn’t a proper feasibility study we will end up in the same position we ended up with the fiber-optic cable, in the same position with the Enmore packaging factory, in the same position with the Skeldon factory, and in the same position with Amaila Falls.”

The Opposition Leader argued that the incumbent administration has an “arbitrary” attitude when it comes to projects however in the absence of the requisite studies Guyanese would be left without any safeguards to protect their resources. To this end, he shared, “I think any reasonable Guyanese- and most Guyanese are- will agree that there is need for a feasibility study and there is need for exposure to ensure transparency and accountability.”

Feasibility of GTE project

Weighing in on the subject matter also was Economist Elson Low, who is a member of the Opposition’s Oil and Gas Committee. Low pointed out that an initial study which was used to calculate the feasibility of the Gas-to-Energy project had a specific price tag which has to date increased by hundreds of millions of US-dollars.

Describing the significant jump in the price of the project as “wholly absurd” the Economist went on to explain, “The point being- and this is something I think all Guyanese would agree with- there is no way that you should be spending hundreds of millions of US dollars without the appropriate feasibility studies and without an updated analysis based on the changes that have occurred.”

He added, “If this project is going to cost nearly twice as much, I believe it is pretty clear that we need to have the appropriate studies to justify the spending.”

Hundreds of millions more?

Back in 2018, the Inter-American Development Bank (IDB) had partnered with the State to conduct a feasibility study of the planned natural gas pipeline. 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)

Notably, a table was used in that report that was sourced from ExxonMobil, in which the oil company said the pipeline would cost US$478 million. Four years later, Exxon now estimates that the structure could cost Guyana US$1.3 billion. In its Environmental Impact Assessment (EIA) for the project which was submitted in April of this year, Exxon explained it has not yet made a Final Investment Decision (FID) on the project, and is continuing to evaluate cost considerations during the project development process. But for the time being, it said the current project cost estimate is approximately US$1.3 billion, warning too, “a higher certainty cost estimate will be developed after receiving and negotiating all major contracts.”

On the other hand, Vice President Bharrat Jagdeo explained that the Government is currently doing estimates for the Natural Gas Liquids (NGL) Plant and the power plant to generate some 300 megawatts of electricity for the country. These two facilities, he said, can cost Guyana an additional US$700 million.

The pipe line aspect of the GTE project will be funded through cost oil, which is recoverable by ExxonMobil. However, the NGL and the power plant will be funded by the state, which Guyanese will fund through their monthly electricity bills over a 20- year period. VP Jagdeo has estimated that five US cents per kilowatt hour may be the cost to generate the electricity, while 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. This, he assured, will reduce the cost of electricity for consumers by 50 percent.

 

 

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