The Wales estate after the gantry was removed
January 1 ,2021
The natural gas-to-shore facility which the Irfaan Ali-led PPP/C government hopes to deliver by 2023 as a spinoff from oil extraction will land at Wales, West Bank Demerara, government yesterday announced.
“We have now settled on the location which is Wales Estate,” Vice President Bharrat Jagdeo told Stabroek News as he explained that “the critical decisions regarding the geotechnical, geophysical and the environmental studies, that will advance the project, have been made.”
Landing the gas project at Wales would also enable the rejuvenation of a community hard-hit by the closure of the sugar estate. The former APNU+AFC government was unable to provide alternatives after shuttering the estate at the end of 2016 and the new PPP/C government had floated the prospect of a development authority but without fleshing out the idea.
The Gas to Shore Project Advisory Committee, which is led by former Chief Executive Officer of NICIL, Winston Brassington, and comprises other technical experts, analyzed all options and past studies before advising on the choice.
Government had said that fiscal terms will also be an area focussed on and the committee would have analysed financial models to determine the best options. The gas would come from ExxonMobil’s Liza-1 well which has been in operation for a year and from which gas flaring has sparked severe environmental and other concerns.
“This is a project we are committed to, and as a matter of fact we are hoping we can start the actual project – [the] laying of pipelines – from next year and maybe simultaneously build the power plant at the same time,” Minister of Natural Resources Vickram Bharrat has said.
The PPP/C had campaigned on reducing electricity costs and pledged to “hit the ground running to reduce power costs with natural gas.”
Shortly after being sworn in and as he announced plans for the oil and gas sector, Vice President Jagdeo reiterated the party’s position. He had also stated that his government has gathered that ExxonMobil was moving rapidly on the project but that the past APNU+AFC government had “put… roadblocks in this regard.”
“We have a couple of studies we are going through. We cannot look at what they didn’t do. We have to get it done and we want this done urgently. We have to be guided by the best technical minds but we want this project on the road as early as possible. In that engagement, we will have to get the cost that is very different than is in the contract. The contract locks in a price for the first 300 to 400 megawatts of power. We need the electricity to generate [power for] this country and fulfill the promise that we will cut their electricity bill. This is a project of high priority, we want to engage with Exxon… ExxonMobil is eager to move along and from what I gather is, they have been waiting for government to show interest,” Jagdeo had said.
But he added that environmental issues for all projects of the US oil major must be harnessed and government will “ensure that we have a commitment from ExxonMobil, because all of these issues are interlinked, a commitment that there will be adequate provisions for any environmental disaster, in the contract and by Exxon. We have to satisfy ourselves that that is so. Flaring [from oil extraction] is a key issue and we have to deal with that. We have already signalled that we don’t want flaring. We don’t want flaring.”
Petroleum Advisor to the former APNU+AFC government, Dr Jan Mangal has said that ExxonMobil would have already done an offshore survey of the sea bed so he believed it would not have been difficult after a location was determined and he believed that the West side of the Demerara River would have been the most ideal location.
“My suggestion was where the pipeline was going to land, where we would need a small gas plant to treat the gas and then a large power plant to produce electricity, we should also consider the development of a large industrial zone and provide cheap electricity.
It would attract industrial firms from Brazil and elsewhere, and that industrial zone should be near to a new deep-water port. Hence there were many factors to be considered in choosing the site to land the pipeline, and this was why we needed the comprehensive feasibility study.
“ I initially suspected the west side of the Demerara River would be one of the options to consider,” he had added while pointing out that he never thought, that as was suggested by the APNU+AFC government, a location at Mahaicony would be suitable.
While identifying Clonbrook, Mahaica on the East Coast of Demerara, as the best location for bringing natural gas to shore for domestic use, a 2017 desk study done for the APNU+AFC government had put the cost of doing this at US$304 million at least.
The desk study of the “Options, Cost, Economics, Impacts, and Key Considerations of Transporting and Utilizing Natural Gas from Offshore Guyana for the Generation of Electricity” was undertaken by a United Kingdom company, Energy Narrative.
The study stated that the US$304 million cost would include US$165 million, for the offshore pipeline, US$43.5 million for a compression station and separation plant onshore, and US$95.4 million for onshore pipelines to bring natural gas to power stations at Vreed-en-Hoop, Kingston, Garden of Eden, and Canefield.
Comparing the cost to seven other locations, the study notes, “The offshore pipeline is estimated to cost between US$165 million and US$270 million to build, depending on the size and landing site location. On shore compression and separation of the LPG is estimated to cost between US$43 million and US$114 million. Finally, distributing the natural gas to the various electricity generation locations is estimated to cost between US$95 million and $127 million for the various proposed landing sites.”
Guyanese international attorney, Melinda Janki, has however, argued that this country’s gas has no market value and maintains that several studies, including those from the IDB, would support her claim.
“The IMF, the World Bank, the IADB, the European Investment Bank, leading economists (e.g. former World Bank Chief Economists Lord Stern and Joseph Stiglitz,), the Institute for Energy Economics and Financial Analysis, and a host of other financial and industry experts can all give you excellent reasons why Guyana should not touch gas,” she said.
“The ‘associated gas’ is worthless. Esso would sell it if Esso could get money for it. ExxonMobil posted a loss earlier this year; they need money. But nobody wants to buy the gas. Last year, the Inter-American Development Bank concluded that Latin America and the Caribbean is second only to the Middle East in un-burnable gas [and oil]. Guyana’s ‘associated gas’ has no market value. It is already a stranded fossil fuel asset. Guyana should leave the gas right where it is – as Esso’s problem,” she added.
