VP Jagdeo blames Exxon for delays to Wales Gas project

Apr 12, 2024 ExxonMobil, News, Oil & Gas

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…Opposition flags lack of transparency

Kaieteur News – Vice President Bharrat Jagdeo has blamed ExxonMobil Guyana Limited (EMGL) for the construction delays in the Wales gas plants.

The Natural Gas Liquids (NGL) Facility and the 300 megawatts (MW) power plant contract was awarded to a joint venture CH4-Lindsayca for US$759M in December 2022. Jagdeo during his weekly Thursday press conference at Freedom House, Georgetown explained that the contractor was required to deliver 228 MW of power by the end of 2024. He said, “Four turbines were to come on stream at the end of 2024- 57 MW each. To complete the project in the agreement where the full 300 MW would come on line, that is the combined cycle…the steam turbines should have come on stream by the end of 2025.” He therefore noted that the completed project was expected to be delivered by the end of 2025. Consequently, he pointed out, “what we have now…the delay we believe is by three months so taking it to end of March- April and the contractor wants to complete the simple cycle turbines, the gas turbines by August but the project timeline has not shifted that is to bring the 300 MW fully on board in 2025.”

Jagdeo explained that ExxonMobil was responsible for the site preparation, the road, the Materials Offloading Facility (MOF) and the lay-down yard.

“We were supposed to hand over the site to the contractor by June, we did not hand over the site, that is Exxon did not hand over the site until September and it was still incomplete and they handed over an additional US$14M from the US$1B that they set aside to the contractor to complete the site, so a three months delay,” he said. Guyana Shore Base Inc (GYSBI) was contracted by ExxonMobil to complete the site.

Jagdeo explained that the government has decided to give the contractors an extension of three months (from the end of 2024), “that is why we are arguing that the plant must be completed by April of 2025, instead of end December 2024.” Further, Jagdeo explained that GAICO, another Guyanese firm was contracted to construct the Materials Offloading Facility (MOF) and was required to hand over the facility to Exxon in July but never did so until October with there still being challenges in that regard.

Arbitration

A Reuters report had first disclosed that the contractor filed for arbitration. According to Jagdeo, “That is where the three months we are arguing the three months delay on the project came. They want a longer period because the liquidating damages for not completing the project on time for the contractor, if they don’t complete the project on time its over US$11M per month they have to pay in liquidating damages for delay on the project so they are arguing they need more time beyond the three months. We are saying three months is adequate.”

Jagdeo added that the contractor has now made a claim for additional money since they argue the delay is costing them. The VP noted however, that the independent supervision firm that was hired by the government from India, Engineers India Limited (EIL) has reviewed the claim and rejected it in its entirety. Consequently, the VP said the contractor was required to file for a dispute resolution through an official ‘dispute adjudication and arbitration board’. He said the matter is likely to be determined by a three member board that is currently being set up. If at the end of the process either party is not satisfied with the outcome, they can then request arbitration.

Lose oil revenue

Jagdeo said that while the Reuters report estimated that Guyana would lose four weeks of oil revenue during the pipeline connection, government was told it would cost two weeks. “We will have deferred production because we will not producing in this period, this was taken into account in our forecast for the revenue for this year. It’s not a US$1B of loss, we estimate about 6-7 million barrels of deferred production but they are hoping to bring forward maintenance for that period on the FPSOs …but you can’t not shut them down and make the connections,” he reasoned.

Additionally, the VP said that while it was reported that there is a dispute over US$90M, this was inaccurate. He said it was around US$50M but the figure needed to be verified. The third aspect of the project, for the transmission of the electricity will be completed by the end of this year.

No transparency

Meanwhile, the Opposition during its Thursday press engagement called out the government for the lack of transparency in the management of the Gas-to-Energy (GTE) project. The Opposition’s spokesman on Oil and Gas, Elson Low said, “That this dispute escalated to the point of arbitration, with the government not saying one word to the Guyanese people, illustrates the typical PPP disdain and arrogance. We must now worry and ask: what else is being hidden about this project?”

Low called for the VP Jagdeo to tell the nation what efforts were being taken to prevent this further financial loss and the impact arbitration may have on all existing contracts and arrangements for this project, including the timeline for the delivery of the project.

He noted, “In light of these controversies and uncertainties, we must again call for the release of all agreements with Exxon for the provision of natural gas. How Guyana will pay for this pipeline is once more unclear, as there are reports that it will come from cost oil, which we have said before is a violation of the constitution. All spending should be approved by parliament, be subject to the Public Accounts Committee, be scrutinized by the Auditor General’s office and fall under the oversight of the Public Procurement Commission. We have stated that any such backhanded attempt to fund national infrastructure bypasses all these institutions and is reckless and dangerous beyond measure.”

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• arbitration, contractors, delays, gas, LINDSAYCA, Transparency

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