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Guyana saddled with US$106M yearly, for 20 years
Gas-to-Energy project…
By Davina Bagot
Kaieteur News – For the next 20 years, Guyana will be saddled with an annual debt of US$106 million to pay back costs associated with developing the Gas-to-Energy project.
This was revealed on Wednesday during the International Energy Conference and Expo when Project Head, Winston Brassington provided delegates with an update on the project and expected financial gains from the venture.
Gas-to-Energy Project Head, Winston Brassington addressing the International Energy Conference and Expo
Based on his presentation, it is understood that the Wales Gas-to-Energy project has surpassed the US$2 billion mark, now totaling US$2,120,000 (GYD$424 trillion). This is more than half of the country’s total debt, according to statistics from the end of 2022. These statistics show the country’s total public debt stood at US$3,654.9M at the end of last year.
What was not made clear however is how the country would manage to pay back these expenses should there be an incident that puts the project out of operation, such as an explosion.
Brassington explained that Guyana will be required to pay back ExxonMobil some US$55 million each year for 20 years to repay the company for its investment in the pipeline.
“That US$55 million is the amortized cost of US$1 billion for 20 years at a discount rate,” he said.
In addition to this, Guyana will also be expected to repay another US$51 million annually for 20 years on a loan the country will take to pay for the Natural Gas Liquids (NGL) facility and the 300 megawatts power plant.
Brassington explained, “The government is funding the power plant and the NGL plant and the EPC contract price, which is a lump sum fixed price is US$759 million (or) US$760 million. We allocated this based on the pricing at about 63 percent of US$477 million to the power plant and US$282 million to the NGL facility.”
“Now if we were to amortize the US$759 million over a 20 years period at three percent, that annual payment would be about US$51 million,” he added.
These costs are not the final investment for the project however as the Government of Guyana (GoG) is gearing to pay out $400 million to land owners who would be affected by the 12-inch pipeline that will be used to transport the natural gas.
According to him, “We had 75 acres of land from about 56 persons acquired. We’ve set aside over $400 million to pay these persons.”
Even as works have commenced for the pipeline, government is still to produce an updated feasibility study for the project.
A Guyanese Engineer, Fitzroy Fletcher, with over 50 years of expertise has so far challenged each aspect of the project, insisting that its viability is simply no longer relevant owing to the mammoth increase in cost.
He explained, “The pipeline costs have escalated too much and have made the project no longer feasible. Clearly we should go back to the drawing board and rethink the whole project. It is certainly not beyond our ingenuity to find a solution, with the help of carefully selected international experts.”
The project entails three major aspects, that is, the pipeline to transport the gas to Wales, the NGL facility that will treat and separate the gas, and the power plant to generate the electricity. So far, Guyanese have been told that the pipeline aspect, which is being pursued by Exxon, will cost around US$1.3 billion. Even this is expected to increase when Exxon closes critical contracts for same.
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 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 project would cost US$478 million. Four years later, the project is now pegged at over US$2.1 billion.
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