Exxon’s boss contradicts Jagdeo on free gas claim

Feb 10, 2023 News

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– official says Guyana must pay for supply of natural gas for energy plant  

By Davina Bagot

Kaieteur News – Vice President Bharrat Jagdeo has said on multiple occasions that Guyana will not be paying American oil giant, ExxonMobil to supply the nation with its gas. However, the operator’s Country Manager, Alistair Routledge shared a different perspective yesterday.

During the company’s first press conference for 2023 held at its Duke Street, Kingston, Georgetown office, Routledge said, “The gas that will come on shore, in essence that development is just gonna pay for the pipeline cost. Nothing more…the gas itself, we are selling the full 50 million cubic feet a day to the government or a government entity that is being established in order to receive the gas and put it through the power station.”

Routledge in responding to a question from this newspaper said, “Yes, we will be selling (gas) to the government- when I say government, I mean the entity that will hold the assets at the power station.”

He explained that this will be the mechanism to repay Exxon’s investment for funding the costs associated with the pipeline that will be used to transport the gas from the Liza Fields in the Stabroek Block to the Wales Development Site, West Bank Demerara.

The Exxon official could not say the cost that would be attached to the transportation of the gas. He said these figures were yet to be finalised as the overall cost of the pipeline is still not yet decided.

“For us what motivates us on Gas-to-Energy is that we can clearly see the benefit. We came to the country wanting to ensure that everyone benefits- clearly it needs to be a win-win-win,” Routledge said repeating the words of Exxon’s Chairman, Darren Woods.

Routledge indicated that while the Heads of Agreement was signed with government last June, this document only outlined the framework for the project. Presently, the two sides are still ironing out details for a Gas Supply Agreement, a Field Development Plan and other associated documents for the project.

He explained, “On the cost, like I said, our latest estimate is the pipeline installation will cost us less than US$1 billion, the final cost would be what it is when we execute the whole thing.”

Routledge also sought to assure that the oil company will not be seeking profits but will set a price for the gas to merely recover its investment. “Some way it (Exxon) needs to recover that cost so the way that’s been agreed is okay, let’s make sure a price is put on the gas that reflects just that cost of infrastructure, no profit, just the cost of infrastructure,” he explained.

Meanwhile, Vice President Jagdeo during a press conference in June 2022 told said that, “Well the pipeline will be funded from cost oil, and we would have to repay that over 20 years. But the gas is free, and this is crucial; it is one of the things we were arguing for from the beginning.”

The Project Summary submitted by ExxonMobil for the Gas-to-Energy (GTE) project pegged the pipeline aspect at US$1.3 billion. The document outlined that the current project cost estimate is approximately $260 billion GYD ($1.3 billion USD). It warned, “A higher certainty cost estimate will be developed after receiving and negotiating all major contracts.”

In July and August last year, Exxon awarded two contracts for the project. The first was announced in late July that Subsea 7 and Van Oord, two international companies were contracted for project management, engineering, and installation of approximately 190 kilometres of 12-inch pipeline.

Meanwhile, on August 1, 2022, it was announced that Technip FMC, a United-Kingdom based firm was hired by the oil company to provide engineering, procurement, construction and installation of subsea risers and pipelines for the Wales venture.

The Environmental Protection Agency (EPA) on November 25 gave the US oil giant its blessings to commence laying the pipeline.

According to Exxon’s EIA, “The combined offshore and onshore pipeline system is targeted to be ready to deliver rich gas by end of 2024, and the NGL (Natural Gas Liquids) Plant is targeted to be operational by mid-2025. The Project has a planned life cycle of at least 25 years).”

The Government of Guyana is pursuing the NGL facility to process the gas, and a 300-megawatt (MW) power plant to generate electricity at half the existing cost.

Independent analysts have questioned the project’s ability to deliver on this promise, since the cost of financing have increased from an initial US$478 million to now over US$2 billion. See link below:

Jagdeo pulling numbers out of thin air to justify US$2 billion Wales gas plant – Engineer

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• ExxonMobil, gas, GTE, pipeline, power

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