Why on earth are we proceeding with an uneconomic Gas to Energy Project?

Dec 17, 2022 Letters

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DEAR EDITOR,
The Government has reportedly signed the agreement to build the Wales 300 MW power plant and instructed ExxonMobil to construct a 12-inch pipeline to supply gas to the proposed plant. The million-dollar question, or should we say the two billion US dollar question, is: why are we proceeding with this project when all the data in the public domain is telling us that the project is uneconomic?
Firstly, the cost figures released on the project will not reduce the cost of generating electricity when the crude oil prices are at or less than US$80.00 per barrel. Secondly, renewables, particularly solar and hydro, have been shown to be much more economical in generating power.
Thirdly, there are potentially much more feasible methods than pipeline to transport gas from our oil fields to “shore”, and to market our considerable reserves to foreign markets.
50 Percent Reduction in electricity costs?
The Government insists that the project will reduce electricity bills to the public by 50 per cent.
In all their pronouncements they have not stated 50 per cent reduction at what crude oil price. Is it 50 percent when the oil price is over US$ 100 per barrel, as crude prices were a year ago, or is it 50 per cent when the crude price is US$ 70.00 as it is trending to now?
We are all aware that GPL’s generating costs dramatically varies with fuel costs, since fuel is approximately 65 per cent of its generating costs. Thus, saying the GTE project will reduce costs by 50 percent tells us nothing without a reference to the world market price of crude oil. This muddled, speculative, figure of 50 percent reduction is likely to have arisen due to the absence of a comprehensive study of the project.
It is mind boggling that a project as large as this could proceed without a detailed study. Moreover, a straightforward financial calculation for a billion-dollar pipeline carrying 50 million standard cubic feet per day over its 25 year lifespan, and a cost of capital of a conservative 10 per cent, results in a gas cost of approximately US$8.00 per million Btu.
This cost of gas, using the 2017 Energy Narrative study, results in a conclusion that GPL, with the proposed new plant, will generate power at a cost similar to when they use fuel oil at a crude oil (WTI) price of US$80.00 per barrel. The project, therefore, has a high probability that it is not feasible.
Renewables are far cheaper.
Recent reports from the United Nations and the International Energy Agency (IEA), have clearly stated that solar and hydro power generation are far cheaper than from fossil fuels like gas and coal. The IEA commented in its 2022 report that the dramatic increase in solar power generation worldwide in 2022, leads them to project that in 5 years solar power generation will account for 90 per cent of total worldwide power generation, an astounding prediction. Solar power generation has been estimated by international energy consulting companies like Rystad Energy to be up to 10 times cheaper than gas for new plants in the EU, and that this was a major factor in the doubling, in one year, of solar’s share of total power generation in that area. For its part the IEA attributes this phenomenal growth to both economic and environmental factors.
The economic impact of solar is easily observed in the ‘Mammoth Solar’ project in the State of Indiana, USA. This project is in an advanced state of construction and is projected to cost US$ 1.5 billion, and is expected to generate 1.65 GW of power.
This can be contrasted with the Wales GTE project costing upwards of US$ 2 billion and generating less than one fifth of the power of the “Mammoth Solar” project. This is a clear indication of the economic benefit of solar power, and that the GTE project is potentially, a huge waste of resources.
A ‘virtual pipeline’ is far less expensive than an actual pipeline, in the Guyana Context.
Publicly available information tells us that compressed natural gas is being transported by container vessels more economically than transporting gas either by LNG carrier or by pipeline over distances up to 2000 km.
This method of transporting gas can be termed a ‘virtual pipeline’ and would uniquely address the Guyana contextual challenges of multiple FPSOs located 40 to 60 km apart and approximately 200 km offshore. The result of a rough desk study shows that the capital investment of this ‘virtual pipeline’ method of transporting 50 million standard cubic feet per day of gas to shore, would be less than US$300 million. This dramatically reduced investment cost would reduce the cost of the gas supplied onshore by up to 80 per cent according to the rough desk study. Importantly, it would open the option of supplying gas to existing GPL locations, saving the country the huge sum for a new plant and transmission infrastructure. Moreover, a ‘virtual pipeline’ would open the possibility of marketing vast quantities of our gas to nearby countries who have announced their critical need for additional gas.
Conclusion
Our country must pause our headlong rush into this GTE project and consider our options carefully, options that are likely to provide far superior benefits to our citizens.
Sincerely,
Fitzroy Fletcher

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