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Govt. discarding US$450M investment to push Wales gas project – Daivd Patterson
Kaieteur News – The Government of Guyana (GoG) in its haste to develop the nation’s first natural gas project will be discarding investments to the tune of US$450 million in power generation facilities across the country.
This was brought to the fore by former Minister of Public Infrastructure, David Patterson in a letter to this newspaper.
In his letter, the Member of Parliament (MP) detailed that with the commissioning of the Wales 300-megawatt gas fired power plant that is scheduled to be completed by December 2024, the Heavy Fuel Oil (HFO) plants will be turned off, as was indicated by the government.
Former Minister of Public Infrastructure, David Patterson
He pointed out that the four generators, located in Kingston, Georgetown, Vreed-en-Hoop, West Bank Demerara, Canefield, Berbice and Garden of Eden, East Bank Demerara have a useful lifespan of 25 years. Patterson explained, “Vreed-en-Hoop was commissioned in 2015, Garden of Eden in 2021, Canefield in 2019, Kingston in 2012 – most having more than 20 years useful lifespan remaining.”
To this end, the former Minister reasoned, “One may inquire as to who will absolve these costs – the response was that it has been considered as “sunk” cost.”
On the other hand, Patterson said that government has now reduced the projected energy demand of the country by 45 percent which seems to contradict expectations based on the country’s anticipated increase in Gross Domestic Product (GDP).
With no explanation given in this regard, the MP argued, “Having completely misrepresented the projected demand as well as the economic viability of the Gas to Energy project, the Government in an effort to make this project somewhat viable, will be discarding over US$450M of investments over the last ten (10) years. Interestingly, GPL still has to repay these amounts plus undertake the burdensome costs of the new power plant.”
He concluded that as more is revealed concerning the project, the less viable the US$2 billion initiative appears. According to him, “In less than two years, without any public disclosure of the reasons, all the Government’s projections to justify the Wales Gas to Shore project have been proven incorrect. Yet the PPP forges ahead with the project, regardless of the implications for the country.”
In a table attached to his letter, Patterson compared the cost of the project in April 2021 to its cost in March 2023, using documents released by the Ministry of Natural Resources and the Gas to Energy Taskforce respectively.
In the first report (April 2021), the total project cost was estimated at US$900 million; it was increased to US$2.2 billion in March 2023. This amounts to an increase of 145 percent. The chart presented by Patterson, using the government’s figures also depict a reduction in the estimated power demand, moving from 3,000 gigawatt hours (GWH) in 2026 to 2,068 GWH in the new study- a 45 percent drop.
Patterson told this newspaper, “It’s not logical that the project cost can increase by almost 150 percent, yet the unit cost per electricity remains the same or lower – that defies basic maths!”
Despite consistent calls for an updated feasibility study for the project to be undertaken, the administration remains adamant that the project will generate significant profit for the country and reduce the cost of electricity by 50 percent.
This promise is often touted by President Irfaan Ali and Vice President Bharrat Jagdeo, even though the relevant studies to confirm potential benefits remain outstanding.
The project entails three components including the 300-megawatt power plant, the pipeline to transport the resource and a Natural Gas Liquids (NGL) facility to treat and process the gas.
It is expected that the GTE project will come on stream by the end of 2024.
The NGL and power plant aspects are being pursued by the GoG to the tune of US$759 million, with financing through a loan. In the meantime, the pipeline is being constructed by oil major, ExxonMobil to the tune of US$1.2 billion.
The table comparing the figures associated with the project, as shared by the government in 2021 and 2023.
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