Gas-to-Energy project pegged at US$1.7B - Govt. tells High Court

Gas-to-Energy project pegged at US$1.7B – Govt. tells High Court

Jun 18, 2023 Court Stories, ExxonMobil, Features / Columnists, News, Oil & Gas

Kaieteur News – After repeatedly dodging questions on the ultimate cost of the Wales Gas-to-Energy (GTE) project, the Government of Guyana (GoG) has finally revealed that the initiative is pegged at some US$1.7 billion, inclusive of all contract costs by the co-venturers and other contractors.

Attorney General and Minister of Legal Affairs, Anil Nandlall S.C in his application to join a Court matter, challenging the legality of the Environmental Permit granted to Esso Exploration and Production Guyana Limited (EEPGL) for the pipeline aspect of the project, told the High Court “The investment in this project is in the vicinity of US$1,700,000,000 (one billion seven hundred million United States Dollars) and includes all associated project costs incurred under respective contracts by the GOG, its contractors, operators and co-venturers.”

He explained that the government entered into an Engineering, Procurement and Construction (EPC) contract in December 2022 for the construction of a 300-megawatt (MW) power plant which would provide low-cost reliable electricity to the public.

Further, he noted that the Government, in accordance with the Acquisition of Lands for Public Purposes Act Cap 62:02, acquired lands required for the Gas to Energy Project (GEP) and has entered into agreements for compensation with the affected property owners.

Meanwhile, EEPGL which has been added as a respondent in the matter, filed by Elizabeth Hughes and Vanda Radzik, told the Court that it has agreed with the GoG along with Hess and CNOOC to “supply natural gas from some of the projects utilizing 12” (twelve inch) pipe line commencing in the Stabroek Block and along the floor of the seabed and onshore to an integrated plant for gas processing and power generation.”

Further, the oil company told the Court that some $US206M was expended in design and construction works for the project while an additional $US762M is expected to complete and commission the pipeline element.

The Opposition had made at least four attempts in the National Assembly to extricate the final cost price and other important details surrounding the venture. These efforts were repeatedly struck down by the government in Parliament. See link below for more. https://www.kaieteurnewsonline.com/2023/02/25/speaker-turns-down-oppositions-request-for-clarity-on-wales-gas-project/

The table used in the pre-feasibility study done by the IDB pegged the project at US$478 million. The cost has more than tripled since then.

The cost of the project has long been a contention, especially since the GoG have made it clear that a feasibility study for the project is not required. Back in 2018, the Inter-American Development Bank (IDB) had partnered with the State to conduct a feasibility study of the project. Notably, a table was used in that report which was sourced from ExxonMobil in which the oil company said the project would cost US$478 million. Five years later, the project cost has more than tripled.

Head of the GTE Taskforce Winston Brassington had said the pipeline would cost about US$1 billion while the other two components of the project would cost an additional US$759 million.

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.”

Given that a number of contracts have already been awarded for the project, the AG is arguing that quashing the pipeline Permit can possibly expose government to litigation.

Vanda Radzik and Elizabeth Hughes has asked the Court to issue an Order of Certiorari to quash the decision made by the EPA to grant the Permit on the grounds inter alia that the decision was in breach of the provisions of the Environmental Protection Act (Cap. 20:05), and more particularly, the Environmental Protection (Authorisation) Regulations. They argue that the Permit was granted by the EPA without proof that the developer owns the land through which the pipeline passes.

The Permit in question was issued by the EPA to EEPGL for the pipeline on November 25, 2022. The applicants argue that Pursuant to Regulation 17 (2)(c)(iii) of the Environmental Protection (Authorisation) Regulations, an application for an environmental authorization must contain “proof that the applicant either owns the facility or has a lease or other agreement with the landowner or occupier to enable the applicant to conduct the activity without the consent of the landowner or occupier.”