Guyanese should demand all contracts related to Gas-to-Energy project be made public – Int’l Report

Oct 08, 2023 ExxonMobil, News, Oil & Gas

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– Urges Govt. to answer key questions on feasibility of project

Kaieteur News – The proposed gas-to-energy project which will use natural gas from the ExxonMobil-operated Stabroek Block to supply 300MW of power to the nation via the Guyana Power and Light (GPL) grid systems will not only increase the country’s debt but lead to an oversupply of power.

This critical perspective was outlined in a damning 33-pages report published by the Institute for Energy Economics and Financial Analysis (IEEFA) last week.

The report which Kaieteur News has reported on extensively over the last four days warns that the increased levels of debt which will be contracted by the Guyana Power and Light (GPL) will likely result in the Government of Guyana bailing out the utility company.

Instead of spending billions for an overbuilt, fossil fuel-reliant grid that will leave Guyana in debt for years, IEEFA found that Guyana could use its oil profits for a reliable, low-cost rooftop solar solution that would save billions while providing low-carbon electricity to the entire country.

“The alternative—substantial investment in solar energy—will help Guyana meet its climate goals. An investment in rooftop solar panels for residents and businesses will provide a direct benefit to individual Guyanese households in the form of solar panels and low electricity costs,” said Cathy Kunkel, IEEFA consultant and co-author of the report. “It will employ local people and help small contracting businesses grow.”

The IEEFA report also notes that Guyana is poised to embark on the path of rapidly overbuilding the electricity generation system that serves about two-thirds of its population. By significantly overbuilding fossil fuel generation, IEEFA believes GPL will crowd out the possibility of renewable energy.

“The Gas-to-Energy plan will cause the Guyanese government and its utility company to go into debt for something that is unnecessary. In the end, future oil profits will be squandered,” said Tom Sanzillo, IEEFA director of financial analysis.

“There are long-term decisions that are being made here that will increase taxpayer costs and benefit foreign corporate and financial interests. An aggressive rooftop solar programme would take profit oil and provide households with something they can see and touch, reduce monthly utility bills and put people to work in every community in Guyana.”

While the IEEFA report offers troubling insights on the dangers that lie with the gas-to-energy project, its authors have been keen to note that their analysis has been limited by the lack of public information and transparency, both on GPL’s electrical system and on the financing arrangements in place for the project. For citizens who are interested in demanding greater clarity from the Guyana Government on this project, they have offered a list of questions that could help increase transparency and accountability for the project. Those questions are as follow:

1. What are the terms of the pipeline agreement between ExxonMobil and the government of Guyana?
2. What is the estimated capital cost of the project?
3. Are the annual payments from the government of Guyana subject to adjustment for inflation or other factors?
4. Which party bears the risk of delays or cost overruns in construction?
5. Is there a transparent accounting for ExxonMobil’s profits as a builder of the pipeline and lender to Guyana for the money to build it?
6. How is Guyana’s decision to build the Gas-to-Energy plant related to ExxonMobil’s attempts to solve its flaring problem?
7. Is there an agreement between ExxonMobil and the government of Guyana that all of the natural gas supplied for this project will be free?
8. If not, what is the basis for the government’s assertion that it will be able to obtain 50 million cubic feet of free natural gas per day for the duration of the project?
9. What are the financial consequences, if any, to the government of Guyana if not all 50 MMcf/d of natural gas is used?

10.What are the anticipated terms of the US Ex-Im bank deal?

11. What alternative financing is the government of Guyana considering if the U.S. Ex-Im loan is not approved?

12. Has GPL quantified the level of investment needed to reduce losses to less than 10%?

13. How much will the government of Guyana have to spend to reduce rates by half?

In addition to the foregoing, IEEFA believes citizens should demand that all contracts related to the gas-to-energy project should be made public.

BACKGROUND ON GAS PROJECT

The People’s Progressive Party Civic (PPP/C) plan for a gas-to-energy project entails partnering with ExxonMobil Guyana Limited to construct a massive 218 km offshore pipeline structure that would bring gas from the Stabroek Block’s Liza field onshore and feed into two facilities, a Natural Gas Plant and a 300MW Power Plant, both to be situated at the Wales Development Zone.

The 12-inch pipeline being constructed by Exxon will have the capacity to transport 50 million cubic feet per day (MMcf/d) from the offshore Liza field, and will be able to deliver a minimum volume of no less than 10 MMcf/d. The Government of Guyana and US consortium, LINDSAYCA/CH4 on December 13, 2022 signed the contract for the construction of the integrated Natural Gas Liquids Plant and the 300-megawatt (MW) combined-cycle gas turbine (CCGT) power plant at Wales, West Coast Demerara (WCD), Region Three. The historical signing of the contract for the US$759 million project took place at the Office of the President, Shiv Chanderpaul Drive.

In January 2023, President Irfaan Ali witnessed the signing of a contract between the Guyana Power and Gas Inc. and Engineers India Limited (EIL) for the provision of Consultancy Services for the Wales Natural Gas Liquids (NGL) facility as well as the 300-megawatt (MW) power plant. That contract is pegged at US$22,143,190.

The consultancy is for the Consultant to assist the Government of Guyana through the Gas to Energy Task Force in the design review, construction, supervision and general project management of the development of the integrated plants, and contract administration throughout the project implementation process and thereafter during the defects liability period. Government has said project generation costs, taking account of payment for the pipeline, operations and maintenance, and capital cost recovery will total less than five US cents per kilowatt-hour.

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• Guyana Power and Light (GPL), Institute for Energy Economics and Financial Analysis (IEEFA), Report, Solar, Stabroek Block

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