The gas-to-power project being pursued by the Government of Guyana can cost as much as US$1B and that is just initial estimates. However, Attorney at Law, Charles Ramson Jr. who has a Masters in oil and gas management, said that even with that amount of money to be spent, this project will not be the answer to Guyana’s energy woes. In fact, he noted that the amount of gas to be brought to shore would not be remotely enough to supply a booming manufacturing sector.
Currently, the peak demand on the coast of Guyana is an estimated 120MW of power. This does not consider certain parts of Guyana. But, according to Ramson, the project will have the capacity to deliver no more than 190MW of power. He said that with the growing demands likely to come with oil—based on the estimated influx of people and the likely expansion of certain energy-demanding sectors—the 190MW will not satisfy Guyana’s needs.
Ramson noted this in light of President David Granger’s recent comments about the coalition’s plans for energy.
Granger was quoted, in government-aligned sections of the media, as stating that the issue of energy was discussed with a team of United States Congressional officials during a meeting held last Thursday at State House.
Granger said that some Congressmen expressed an interest in the area of energy.
“We explained that we are choosing – we are not wedded to one concept – we are choosing; some areas may have solar, some areas may have hydro, some areas may have wind, some areas may have natural gas. So we are looking at a mix of energy sources,” Granger said.
“We are confident that we would bring the tariff rate down to below 15 US cents per kilowatt hour and maybe we’ll keep moving downwards and have cheap energy and this would be important to the manufacturers,” the President said.
The cost of electricity in Guyana is considerably high and has served as a barrier to the growth and expansion of enterprise – particularly those in the manufacturing sector. Electricity tariff in Guyana currently hovers around 25 to 35 US cents per kilowatt hour. Hence, alternatives for energy are always being sought by successive governments.
Ramson told Kaieteur News, “I heard, from the horse’s mouth that initial estimates for the gas to power project is US$700M to US$1B.”
Ramson noted that it is all up to ExxonMobil whether it will bring the gas to shore or not. He said that even if the company decides to bring the gas to shore, this cannot happen before 2022.
“Are you going to spend no less than US$700M to power Guyana for three years? Because President Granger made a commitment on the international stage that no such form of energy will be used post-2025. Our President made a commitment to the world at the UN convention on Climate Change in Paris. He committed that Guyana will be powered by 100% renewable energy by 2025. So it is either that President Granger wants us to spend all that money for three years or he is admitting that he will renege on his promise and Guyana will be powered by natural gas for 25 years after the project becomes operational,” said Ramson.
Further, Ramson said that at 15 cents per kwh Guyana will be nowhere near globally or regionally competitive on the energy tariff scale to consider a thriving manufacturing sector, as other countries are at around 2 to 5 cents per kwh.
He added, “With oil joining the picture, more pressure will be added on our factors of production, so the price of energy will be critical to our competitiveness and 15 cents just will not cut it.”
Also, Ramson said, “Our President, like many of his ministers, fails to appreciate that price is not the only important factor for manufacturing – it is actually the generating installed capacity as well – meaning how much power you actually produce. Manufacturing and industrialization is energy-intensive. The natural gas project is only looking at 180mw to 190mw of power, based on how much gas can be fed to a gas-to-power generator. Guyana will need about three times that to become a serious player in manufacturing.”
Ramson recalled that in 2015, the Granger government requested “an objective and facts-based assessment” into the Amaila Falls Hydropower Project with the Government of Norway and a report was produced by Norconsult at the end of 2016. He noted that the report certified that Amaila Falls Hydropower project would have produced about 165mw of power at about 9cents kwh “yet his government killed it.”
The entire gas-to-power project is essentially dependent on ExxonMobil and the decisions that that company has to make. But the oil giant is still to make any final decision on that front.
The Production Sharing Agreement that exists between Guyana and ExxonMobil clearly gives ExxonMobil the right to re-inject associated gas into the oil-producing wells. Therefore, the company cannot be forced to do otherwise.
Indeed, the contract provides for alternative arrangements like the gas-to-power project. But, that sort of arrangement is predicated on a feasibility study that the contract states, has to be done by ExxonMobil.
In July, ExxonMobil’s Country Manager, Rod Henson, revealed to the Parliamentary Sectoral Committee on Natural Resources that the study is yet to be done.
Henson said, “There are no agreements to date and this gas-to-power project is essentially under discussion. We have done our own study work on this. Currently, the development plan for Liza Phase-One is that all the gas gets re-injected into the reservoir and the reason we do that is reservoir management.”
Henson said that the re-injection method is a “very common, normal way to do these sorts of developments. Ultimately, you get the most value for your resource by doing that. So, Guyana would get more value by re-injecting that gas. Because it helps reservoir pressure and ultimately it helps you recover more oil.”
Henson said that while this is generally the case, ExxonMobil has taken into consideration the uniqueness of Guyana and its needs.
He said, “We have done some (assessment) work that says that Guyana is in a unique position because of the high electricity cost. As part of the community, we are looking to see if we could we divert some of that gas, and that is the project under discussion right now; but there are no agreements yet.”
Henson said that there is a possibility that ExxonMobil can divert 30 to 34 million cubic feet of gas from the Liza Destiny, build a pipeline to shore, then take that natural gas and burn it to generate electricity rather than the heavy fuel oil that is currently being burnt here.
Henson went on to disclose, “We are in early discussions; (brainstorming) where the plant would be, the cost, capital investment, who builds the power plant, stuff like that.”
PPP/C Parliamentarian Odinga Lumumba, a member of the Committee, asked Henson if ExxonMobil would construct the plant, pipeline and other needed facilities as well as manage the project. Henson responded, “That is something we are still discussing internally. We haven’t reached an internal discussion on the role we will play.”
In response to a question by another PPP/C Member of the Committee, Pauline Sukhai, about ExxonMobil’s “intention” to work with Government for the project, which forms part of the green state strategy, Henson said, “We do not have any intention to do this. This is something that we are discussing, it is an opportunity that we want to work with Guyana to see if we can make something work here.”
However, Minister of Public Infrastructure, David Patterson, had said publicly that a site has been identified, but the necessary technical studies will have to be conducted. The site is 475 acres, while the natural gas and liquid petroleum plants will be approximately 20-25 acres. Patterson, who is responsible for the energy sector, said the remaining 450 acres have been dedicated for an industrial park aimed at incentivizing the manufacturing sector with inexpensive electricity.
Already, GPL has advertised for Expressions of Interest for construction of a 50 megawatts natural gas plant to produce power. (See full story online at: https://www.kaieteurnewsonline.com/2018/04/06/govt-steams-ahead-with-landing-natural-gas-pipeline/.)
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