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Gas to energy delay-why

Dec 06, 2023 Editorial

Kaieteur News – Vice President Bharrat Jagdeo has constantly given the proposed Wales gas-to-energy project five stars out of five.  According to him, a cheap and reliable supply of electricity is guaranteed. Jagdeo and the PPPC Government have been marketing and selling the GTE project at 100 miles per hour, and at every opportunity that presents itself. American oil supergiant ExxonMobil is partnering with Guyana to bring this project to fruition.

The company itself has also developed a reputation in Guyana for barreling full speed ahead with either oil production or mammoth and expensive projects in Guyana, with clockwork precision.  Yet there is this curious situation where the GTE project has been seemingly stalled for a year. Why is this so?  Since both Jagdeo and ExxonMobil have spoken glowingly about the benefits of the project, why is there this delay in moving ahead full blast with the GTE project?  What could be contributing to this mysterious hold-up?  At one point, Jagdeo could not stop talking about the GTE project, how much it would mean for Guyanese, so why this big gap in the calendar?  The former Executive Director of Guyana’s Environmental Protection Agency, Dr. Vincent Adams, sees some heavy seas with this GTE project, which has led to this pause.

The government issued a Permit for the pipeline to ExxonMobil a year ago, and the expectation was that two vital follow-up pieces would have materialised.  The first was that a Final Investment Decision (FID) by ExxonMobil would have been made months ago.  ExxonMobil is not a company that sits on these things, especially when the returns are so lucrative in Guyana. A delay of three months, even six, might be understandable, but a year and counting does more than raise eyebrows, it generates all kinds of questions.

The ExxonMobil people in Guyana have displayed an aggressive, moving along, getting things done, mentality.  Bottlenecks and roadblocks are not looked upon favorably, which was one of the reasons that the same Dr. Adams was ousted from Guyana’s EPA.  A lag of a year to issue a FID signals that there could be some misgivings about the GTE project.  ExxonMobil is not the kind of entity to plunge into a US$2 billion project half-cocked if returns indicate shakiness, and its feasibility rests on infirm ground.  There has been too much secrecy and controversy swirling around this project, neither of which is ever comforting to investors.  On a project as costly as the GTE, the PPPC Government and Jagdeo have been tightlipped about its basis.  Repeated questions and condemnations have surrounded the project, which has left Jagdeo groping for answers, putting out unconvincing responses, or sealing his lips, as the situation demands.  His nervousness is obvious, and his history of failure with mega projects drives him to abuse questioners.

A credible financial feasibility study would help.  But none of any substance has been delivered.  It could be that ExxonMobil’s own internal calculations and gas market projections do not reconcile with what Jagdeo has been selling to Guyanese. A higher price per kilowatt hour for gas, or a shift in its market conditions could seriously upend the underlying economics for this GTE project from day one. It is not unreasonable to think that this could be a component of ExxonMobil’s uncharacteristic foot-dragging with the FID for a year.  To repeat what we said earlier, this is highly unusual behavior from the company, which has virtual carte blanche to do as it pleases in Guyana.  Slowing down, holding back and circling around are most unlike ExxonMobil.  Influential people are obviously balking at what is hailed by Jagdeo as a ‘no brainer’ and winner.

Finally, there is the issue of the financing from the US Export Import Bank (US-EXIM).  The US Government gave the nod, yet US-EXIM has not approved any loan(s) for the gas facility and power generation plant.  If it is not legal concerns, the financial ones may have loomed large.  Investors don’t sleepwalk, they race ahead, like ExxonMobil.  A year after the government issued the Permit, the components in the hands of ExxonMobil and US-EXIM should have been completed, but are not.  Something has probably gone wrong, and the bad smell from the GTE project is increasing.

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