Gas-to-Energy project in limbo – Former EPA Head

Nov 27, 2023 News

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…since one year later, Exxon yet to make FID, loans for NGL & power plants still pending

Kaieteur News – Former Head of the Environmental Protection Agency (EPA), Dr. Vincent Adams believes the highly touted Gas-to-Energy (GTE) project is in limbo, as the American oil giant, ExxonMobil is yet to make a Final Investment Decision (FID) and the government of Guyana (GoG) is still trying to secure funding from the United States Export Import (US-EXIM) Bank to fund the 300-megawatt power plant and the Natural Gas Liquids (NGL) facility.

The GTE project is geared towards generating cheaper and cleaner electricity. Gas from the Liza One and Liza Two fields in the Stabroek Block will be piped to shore to be used at the Wales, West Bank Demerara facilities which are yet to be constructed.

On Sunday, this publication reported that Exxon received a Permit for the pipeline component of the project since November 25, 2022; however, a year later, the company is still to announce an FID.  This is a crucial stage in mega energy projects as it’s the final stage to decide whether to go ahead with the project or not. In other terms, it is the final stage to determine if the investment in the project would be beneficial or not.

Before investing such an enormous amount in the project, the company or group of companies assesses all possible outcomes, including the capital required to execute the project successfully. Likewise, it’s the phase for the investors to calculate the project’s financial viability and put their money into it.

After assessing those factors, project owners or investors agree to either go ahead with the funding or back out. If the budget is sanctioned and investors decide to move forward with the project, it is known as FID.

In an exclusive interview with Kaieteur News, Dr. Adams, a Petroleum and Environmental Engineer, said such a key step should have already been completed for the massive project. He believes the lack of an FID and failure by government to secure funding from the US-EXIM Bank for the project questions the feasibility of the facility.

Despite calls for a thorough independent study to be completed to determine the project’s viability, government is adamant that this is not necessary.

The former EPA boss reasoned, “If this here has been touted as being so economical and lucrative, why wouldn’t an investor quickly jumped on it? It goes back to what type of business plan or models the investors are seeing. Are they uncomfortable with what they are seeing?”

He was keen to note that the cost of the project has now more than doubled from its initial estimate of about US$500 million, but government is still convinced that the cost of electricity will be slashed by 50 percent. Dr. Adams said, “It could mean that it doesn’t look that lucrative to the investors with the cost and returns.”

He argued that the project was described as a “no-brainer” by Vice President, Bharrat Jagdeo, however, investors today do not seem convinced. “Why aren’t they getting on board? What’s wrong with the business plan when the VP has been touting this as the best thing since slice bread? He is saying that electricity will be cut by 50% but it’s now turning out that investors might not be able to make money if that’s the price of electricity, they are probably saying we are not gonna get a good return,” he said.

Dr. Adams concluded that the project could be in limbo as investors often shy away from uncertainties. He referenced the fact that two Guyanese women have appealed the ruling of the High Court not to quash the Permit to Exxon, even though it was determined that the EPA acted “illegally” by allowing to project to commence without adherence to the regulations.

According to him, “When they see that there is something wrong here in terms of legal issues and those types of things, they are gonna be spooked. They are not going to want to get into a situation where they put their money in to invest and it becomes held up in Court and cannot make any money.”

He said the current state of the project with the Permit being legally challenged and government failing to secure financing for the other components leaves enough space for uncertainty.

Consequently, the former EPA head stated, “Investors are never gonna want to enter into that arena where you have so much controversy with a lawsuit and so.”

He was keen to note that government has contributed significantly to the delay in the project that could potentially be beneficial to the country. He explained that a feasibility study, as required under the 2016 Petroleum Agreement with Exxon could have allowed for not only greater investor confidence, but support from Guyanese as well, since several stakeholders are still questioning the outcome of the project.

Moreover, Dr. Adams contended that the EPA failed to adhere to the Environmental Act in the granting of the Permit to the oil company, hence the matter is still now before the Appellate Court.

 

 

 

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• court, ExxonMobil, feasibility, FID, GTE, limbo, Permit, pipeline

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