US$100M removed from treasury for Gas-to-Energy project

US$100M removed from treasury for Gas-to-Energy project – VP Jagdeo

Jun 10, 2023 News

Kaieteur News – Vice President, Dr. Bharrat Jagdeo revealed this week that US$100M of taxpayer dollars have been withdrawn from the country’s treasury to finance the Gas-to-Energy project.

Vice President, Dr. Bharrat Jagdeo

While addressing questions about the funding for the project, Dr. Jagdeo noted that the government is seeking a loan from the United States Export-Import Bank (EXIM) and explicitly mentioned that it is not seeking any grant funding. He said the project costs about US$760M. Out of this amount, US$100M has been disbursed from the treasury as a down payment, leaving the remaining balance government hopes will come from EXIM.

The inclusion of this substantial loan from EXIM will further burden Guyana’s debt profile. However, while discussing the country’s management of debt, Jagdeo made the case that the country’s current debt-to-GDP ratio is very low.

While he emphasized that the country has historically managed its debt prudently and highlighted the absence of variable interest loans, it is crucial to consider the long-term consequences of such significant borrowing. While investments in infrastructure, such as roads and power plants, are necessary for development, there must be careful consideration of the capacity to repay these loans without jeopardising the country’s economic well-being.

The Vice President had said during a previous press conference that government is borrowing with the expectation that it will be capable of repaying these debts in the future.

“…So it’s a combination of spending what we have, and a judicious set of borrowing, where we know based on future capacity we can repay”, Jagdeo had said.

Jagdeo noted that, in comparison, European countries and the United States have very high debt-to-GDP ratios, typically around 100%. However, the difference between those countries and Guyana is that much of Guyana’s GDP is constituted by oil production. The volatility of this industry leaves Guyana’s economy dangerously vulnerable to its shocks, to an extent not faced by the developed world.

Construction on the Gas-to-Energy project is set to begin this year, with CH4-Lindsayca handling the natural gas-fired power plant and natural gas liquids plant, and the ExxonMobil subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), handling the pipeline. The pipeline alone is expected to cost more than US$1 billion. Guyana will also have to find money to pay Exxon back for this investment. It hopes to do this with revenues from the sale of natural gas liquids (NGL).

Kaieteur News understands that the Gas-to-Energy is a project aims to reduce Guyana’s energy costs while increasing competitiveness in other sectors.