Jan 13, 2021 News
Stabroek block deal reveals…
By Kiana Wilburg
Kaieteur News – On the surface, the proposed gas-to-shore project appears to be one of the solutions to Guyana’s energy supply woes, but once that veil is removed, the true face of the venture is revealed. It is nothing more than another cash cow for ExxonMobil and its partners, Hess Corporation and CNOOC/NEXEN. The true likeness and image of the project is readily gleaned from the terms of the Stabroek Block Production Sharing Agreement.
The provisions under Article 12 of the contract note that “all costs and expenses incurred by the Contractor in the production, use and/or disposal of the Associated Gas of an oil field as stipulated under Article 12.1 and those incurred in carrying out any feasibility study on the utilization of the excess Associated Gas shall be charged to the development cost of the oil field and shall be recoverable contract costs.”
It goes on to state that all costs incurred by the government for the infrastructure and handling of excess associated gas which are not included in the development plan shall be at the sole risk and expense of the government and will not affect the amount of cost oil and profit oil due to the contractor.
According to preliminary reports that were done by the previous administration on the feasibility of bringing gas to shore from the Liza Phase One Project, it was noted that an offshore pipeline is estimated to cost between US$165 million and US$270 million to build, depending on the size and landing site location. As for the onshore compression and separation of the Liquefied Petroleum Gas, this 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 US$127 million depending on the landing site selected.
Guyana is expected to handle the costs for the infrastructure of onshore facilities while ExxonMobil would take care of the offshore aspect of the project but all costs based on the terms of the Stabroek Block PSA would be recoverable. Guyana would also have to pay ExxonMobil for the transportation of the gas, but that price is still being worked out between the oil giant and the PPP/C Government. Specifically in October last year, the government had said that it is negotiating the price for the gas that would fire a 300MW power plant. It has said too that its appointed task force on the matter “will decide whether we will do a private/public partnership (PPP) or build, own, operate and transfer (BOOT) arrangement, or whether government will fund it totally.” Once the price is settled, ExxonMobil will not only be able to recover all costs incurred on realizing the project, but it will have another cash cow on its hands.
A few weeks ago, Vice President, Dr. Bharrat Jagdeo had said that the government has decided to land the gas-to-shore project at Wales, West Bank Demerara, but he is still to release the relevant environmental studies, which support that choice.
It should be noted that previous studies, which were commissioned by the Coalition administration, did not list Wales as one of the most cost-effective options for the landing of the project which would bring gas from the Liza Phase One Project for 20 years.
In fact, the former regime had engaged consultancy group, Energy Narrative, in 2017, to undertake a desk study on the options, cost, economics, impacts, and key considerations of transporting and utilizing natural gas from offshore Guyana for electricity generation.
According to the report, there were three sites which were under discussion for the landing of the proposed pipeline. With respect to the first option being Georgetown, the report said that this location was being considered because of the location of the Guyana Power Light (GPL) Sophia substation (and the proposed New Sophia substation as noted in the 2016 GPL Expansion Study). The second option, which was Clonbrook, was being considered as it is located to the east of the main city along the Atlantic coast. It was being considered as an alternative to Georgetown, as it is less busy and potentially has more space for development. The location is estimated to be near the Columbia substation too. The third option was New Amsterdam, owing to its location along the Berbice River and the potential to develop a new industrial site and deep-water port to support new energy-intensive industries. Its location is estimated to be near the Canefield substation.
After doing its analysis of the costs, the Clonbrook landing site was considered as the most optimal landing site for the 30 million standard cubic feet per day (MMcfd) pipeline. The document said that this option would cost US$304 million, including US$165 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 in Vreed-en-Hoop, Kingston, Garden of Eden, and Canefield.
Based on the sites it reviewed, it was found that the Clonbrook landing site results in the lowest overall delivered cost of natural gas.
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