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Foreign contractors take Guyana to Court for US$90M over delays in Wales Gas Project
An artist’s impression of the GTE project
Kaieteur News – The contractors of the Wales, West Bank Demerara (WBD) Gas-to-Energy (GTE) project have initiated legal proceedings against the Government of Guyana (GOG) for US$90 million in cost overruns.
The GTE project will see the utilization of Guyana natural gas resources being piped from ExxonMobil Guyana Limited (EMGL) Stabroek Block operations to the location in Wales.
Exxon is responsible for the construction of the 140-mile (225-km) gas pipeline with a price tag of US$1 billion. The oil company has promised to deliver the pipeline by the end of this year. This gas pipeline will be connected to the combined onshore facilities, which falls under the purview of the government. Exxon will have to supply gas from the Stabroek Block to the 300 megawatts (MW) power plant and a Natural Gas Liquids (NGL) facility.
Prime Minister, Mark Phillips
In November 2022, United States-based Lindsayca and CH4 joint venture was awarded the US$759 million contract by the government for the construction of the onshore facilities. Engineers India Ltd (EIL) was also hired at a cost of US$22 million to supervise works by CH4/Lindsayca.
In January 2023, the government signed a US$23 million contract with Engineers India Limited (EIL) for the provision of Consultancy Services for the Wales NGL facility as well as the power plant.
According to Reuters, the US$1.9 billion power project is embroiled in legal fights and risks cost overruns. Notably it was stated that the first phase of a 300-MW power plant is running six months behind schedule and full operation is not expected until the fourth quarter of 2025.
Notably, up to press time there has been no word from the government on the contractors that head to arbitration over the US$90 million in cost overruns. Prime Minister Mark Phillips is spearheading the GTE project.
According to Reuters, Guyana’s efforts to use its natural gas resources to fuel a power plant that would slash the South American nation’s energy costs have snagged on construction delays and threaten to curtail the rising oil hotspot’s revenue this year by US$1 billion.
The gas pipeline completion will require Exxon to pause production in the third quarter at two oil production vessels to connect them to the undersea pipeline, Exxon country manager Alistair Routledge said.
If the tie-in lasts four weeks, Exxon and its consortium partners Hess and China’s CNOOC would have to halt up to 12 million barrels of oil output from two platforms that produce 400,000 bpd at peak levels. It was explained that based on Guyana’s recent sale at US$85 per barrel, it could lead to over US$1 billion in deferred oil revenue.
An Exxon spokesperson last week declined to specify how long the production halt will last. Routledge had said the pipeline connection and maintenance works would take “weeks, not months.”
The executive said Exxon is not worried about having to shut production this year for a project that will not be ready to accept the gas at least until sometime in 2025.
When the gas-fired power plant is ready is “a question of timing,” said Routledge.
“It’s hard to have all the facilities ready at the same time.” As soon as the onshore facilities are ready, “the whole thing will start up and all those benefits will flow to the country,” he said.
Guyana will miss the chance to slash its power costs this year because of the project delay. It imports expensive fuel oil for an aged and often faulty power facility. When fully running on natural gas, the new plant will reduce the nation’s power costs by 50%, officials have said.
Reuters noted that while it is not uncommon for major projects to run behind schedule, Guyana’s government faces a presidential and parliamentary election next year and is keen to deliver tangible benefits to the nation’s 750,000 residents.
Moreover, this publication recently reported that agreements for GTE project are yet to be laid in the National Assembly despite repeated commitments by government.
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