Natural gas projects more costly than renewables – Oct 2022 UN report 

Oct 27, 2022 News

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By Renay Sambach

Kaieteur News – A new United Nations (UN) report revealed that pursuing natural gas projects in the Latin America and Caribbean (LAC) region is costlier than transitioning to renewable energy.

At the launch of the report, on Tuesday, October 25, 2022 Juan Bello, Head of the United Nations Environment Programme (UNEP) in his effort to persuade countries to stop the expansion of natural gas projects said, “Stop feeding the biggest threat we are facing as human kind…”  Bello also warned LAC countries of the implications of the exploitation of natural gas and urged them to transition to renewable energy which is a better ‘cheaper’ option for the region.

In making its case, the authors of the UNEP’s report titled, ‘Is natural gas a good investment for Latin America and the Caribbean?’ assessed the implications in Green House Gas (GHG) emissions, costs and job creation of the different power sector options (natural gas and renewable energy).

The UNEP is the world’s leading environmental authority. It provides leadership and encourages joint work in caring for the environment, inspiring, informing and empowering nations and peoples to improve their quality of life without compromising that of future generations.

The launch of the report comes at a time when the Government of Guyana (GoG) is pursuing an ambitious US-multi-billion Wales, West Bank Demerara, gas-to-energy project.

The new report finds that an expansion of renewable energy sources instead of continuing a fossil fuel path, even with what has been promoted as ‘clean’ natural gas, would be by far the best choice for the region in terms of costs, jobs, and GHG emission reductions. It finds too, that investing in renewable energy largely outweighs economic, social and climate benefits of natural gas for energy generation.

According to the report, the region is responsible for 8.1 percent of GHG emissions. It stressed that in order to meet the Paris Agreement targets the exploitation of new oil and gas fields must stop now. However, it was pointed out that countries like Brazil, Argentina and Mexico are increasing their fossil fuel investments and exploitation, particularly in natural gas, while many other countries in the region like Guyana are planning new natural gas infrastructure projects.

Highlighted in the report is that natural gas equals to climate risk and lost opportunities whereas renewable energy equals to climate action, higher employment and economic outcomes.

It shows that a switch towards a renewable power system would bring the region a net benefit of US$1.25 trillion by 2050 compared to natural gas which the region would receive a net benefit of US$454 billion by 2050. Stated in the report also is that renewable energy far outstrips natural gas in terms of job creation 3 million versus 167,000 respectively would be created by 2050.  Another benefit of renewable energy is that it results in 80 percent lower GHG emissions by 2050 and it is 75 percent lower than the GHG that would be emitted as a result of natural gas projects.

In fact, it was stated that even if natural gas plants are used to replace coal and oil plants it still does not produce significant job generation in the power sector, nor does it generate the emissions reductions needed to achieve the goals of the Paris Agreement and avoid deepening the climate crisis. “There are several avoided costs mainly from diesel, coal and natural gas, as they are not used as an option for the transition,” it is stated in the report.  To this end, it was highlighted in the report is that, wind and solar over hydro can decrease construction costs, adapt more quickly to demand changes (i.e., with smaller projects), and be closer to demand centres in the case of distributed solar generation.

GUYANA

The Irfaan Ali Government has been pilloried for moving ahead with the gas-to-energy project despite no new feasibility study.  This newspaper reported last week  Opposition MP, David Patterson lamenting  that critical issues are yet to be addressed for the US$2 billion gas-to-energy (GTE) project being developed by Government and its partner, US oil major, ExxonMobil. 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 a 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.

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 estimates that the structure could cost Guyana US$1.3 billion. 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.

Given this hefty increase in the project cost, stakeholders have been calling for an updated feasibility study to prove the project’s viability. However, Patterson, the former Minister of Public Infrastructure explained that when the People’s Progressive Party (PPP) Government took office in August 2020, it began streamlining the project for Wales, West Bank Demerara in the absence of any new study. According to him, “they released five of the studies which I myself commissioned as Minister of Public Infrastructure when the energy sector was under my remit and all we did was pre-feasibility studies to see if it’s possible.”

In the absence of new studies for the massive undertaking, Patterson believes the project would merely serve as a “ponzi scheme”. He argued that the Government is yet to explain how the electricity from the power plant would be transmitted to Region Four – the energy capital. He pointed out, “The last time that they did a submarine cable you know what happened – but there’s no comment and there’s nothing at all on that – so it’s just a “ponzi scheme” as I always say to enrich people because there are so many other components of it yet to be discussed.”

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