Gas-to-energy project moves from US$900M to over US$2B

Dec 17, 2022 News

…Govt. now says it will approach US Exim Bank for loan
…Critics slam initiative as abusive, exploitative, not in keeping with spirit of Constitution

Kaieteur News – At a press conference held in April last year at the Arthur Chung Convention Centre (ACCC), several government officials told reporters, editors and publishers that the gas-to-energy (GTE) project would cost roughly US$900M.

Head of Transparency International Guyana Inc. (TIGI), Frederick Collins

Specifically, Winston Brassington, Head of the GTE task force had explained the estimate to be as follows: US$570 –US$630M for the offshore pipeline and “riser”; US$80 – $100M for the onshore pipeline; US$120M for the gas plant and between US$40 – US$50M for infrastructure.

Revelations by Esso Exploration and Production Guyana Limited (EEPGL)—a subsidiary of ExxonMobil Corporation—subsequently exposed that the project estimate would be much higher than the independent media were originally told. In its Environmental Impact Assessment (EIA), EEPGL explained that it is responsible for building out a 135-mile pipeline that would connect to the Liza Unity and Liza Destiny vessels in the Stabroek Block. That pipeline would transport 50 million cubic feet of gas per day to facilities built on the west bank of the Demerara River. Upon arrival, a Natural Gas Liquid (NGL) plant will create dry gas—used mostly to power a 300MW power plant—as well as other useful liquids such as ethane and propane. Those two plants are to be constructed by the government.

EEPGL was keen to note in its EIA that the conservative estimate for building the pipeline was US$1.3B. Kaieteur News previously reported that Guyana would be using a portion of its oil to pay back Exxon for this investment.

On several occasions, Vice President Bharrat Jagdeo said the cost for the gas-powered plant and the Natural Gas Liquids facility would only be known after the State goes to tender. Last week, the government finally inked a US$759M Engineering, Procurement, and Construction (EPC) contract for the 300 megawatts (MW)

International Lawyer, Melinda Janki

combined cycle power plant and Natural Gas Liquids (NGL) facility. This agreement was sealed with a US-based partnership CH4/Lindsayca.
With ExxonMobil’s modest estimate of US$1.3B and the US$759M contract recently signed, it therefore means that the project is expected to cost more than US$2B, a significant jump from the previous estimate proffered by Brassington last year.
Despite such an astronomical increase, Vice President, Dr. Bharrat Jagdeo insists that the promise of a 50 percent slash in electricity costs is still doable. He said this was catered for “in simulations” that were done by government specialists.
Another new detail that recently came to light is the fact that government will be approaching the US Exim Bank for a loan to cover the costs associated with the US$759M contract. This was revealed by Jagdeo less than a week ago.
He said too that government is hopeful that when products such as cooking gas are made by the NGL facilities, it would be sold, and a portion of the profits would go to repaying investors their US$759M.
This newspaper also reported that Engineers India Limited will supervise the Engineering, Procurement, and Construction (EPC) of the onshore plant facility. It is expected to hire another firm to operate the project.
Government has said it remains hopeful to bring the project on stream in 2024. Two years after its operationalization, Jagdeo said consumers would enjoy reduced electricity rates.

In the meantime, several transparency advocates have expressed their displeasure with the government’s handling of this project.

In her review of all that has taken place, International Lawyer, Melinda Janki told Kaieteur News that the proposed gas project appears to be illegal. In 2015, after the discovery of oil, she recalled that Guyana made a commitment under the Paris Agreement to go 100 percent renewable by 2025 subject to available funding.

Janki said one ought to bear in mind that the Paris Agreement is an international treaty. Guyana cannot go back on its legal obligations. She opined that the government therefore has a legal obligation to spend money on renewable energy and not on gas.

Importantly, Janki said observers need to understand that ExxonMobil is not investing in Guyana. She said, “Guyana will have to pay at least US$1.3B for the pipeline if it goes ahead. Exxon pays for nothing. This gas deal is as abusive and exploitative as the Stabroek Block oil deal. In 2018, Mr. Jagdeo told the National Assembly that the deal with ExxonMobil sold our patrimony and would harm us for decades.”

Vice President, Bharrat Jagdeo

The lawyer further noted, “This is a pipeline to nowhere. It needs a gas plant which will cost at least US$759M and power lines which the Inter-American Development Bank says will cost at least US$80M. Therefore, the estimate for this gas project is over US$2bn. That’s over US$2,500 per person in Guyana. The Guyanese people are expected to pay for everything. That is not foreign investment. That is exploitation.”

She said too that Guyanese must also bear in mind that gas is very dangerous. In this regard, she said, “If explosions happen and they kill people, who will compensate families if their loved ones are killed? Who pays for property damage?”

The lawyer maintains her position that solar is the cheapest form of energy. She said all must question why the nation cannot have cheap, safe solar energy instead of dangerous, expensive gas.
Frederick Collins, Head of Transparency International Guyana Inc. (TIGI) also expressed concerns about the project. In a comment to this newspaper, he said TIGI would have preferred the nation be privy to the analysis that arrived at the pipeline alternative. He was keen to note that the nation’s Constitution requires the procurement of goods to be done in a “transparent, competitive and cost effective manner according to law”.

He said the supreme law of the land also requires that consultation be meaningful. “What we are seeing with this gas-to-energy project is all the signs of a lack of compliance with the spirit of the constitution in these areas. At more than double the original cost and climbing, it appears that this project will deliver more cost than benefit to the final Guyanese consumer,” Collins stated.
He said the real burning question therefore is: Who stands to benefit from the nation’s most expensive project?