‘Upgrade existing power plants instead of pursuing gas-to-shore project’

Oct 10, 2022 News

 – says Engineer

Kaieteur News – Jamaica born Engineer, Fitzroy Fletcher is questioning the logic behind Government’s intent to build new gas-fired power plant at Wales, West Bank Demerara, which is expected to cost over US$500 million.

Fletcher told Kaieteur News that he has been analyzing the Gas-to-Energy (GTE) project for over a year with the assistance of his trained and qualified colleagues who have helped him reach the conclusion that the funds should instead be directed to upgrade the existing power plants to use gas. The specialist, who graduated from the University of the West Indies in 1969 and later achieved an MBA from the University of Toronto in 1974, is arguing that there is no feasibility study that justifies the utilisation of hundreds of millions on this project.

Jamaica born Engineer, Fitzroy Fletcher

To justify his position, Mr. Fletcher pointed out, “The construction of the proposed new 300 MW plant could be delayed or cancelled, and saving much of the expected USD600 plus millions investment. The Guyana Power and Light would simply convert all its generating units to dual fuel, costing US$13 million by Energy Narrative’s estimates, and units added as demand grows, and renewable power generation cannot meet demand.”

Just last month, bids were received from five international companies to construct the natural gas fired power plant for the Government.  The Ministry of Natural Resources project opened at the National Procurement and Tender Administration Board (NPTAB) office on September 13 and saw companies from China, Puerto Rico, and United States all vying to build the plant. The companies that bids are as follow: Guycan Consortium – US$549,088,000, China Energy Int’l Group Co. Limited – US$466,649,772, China Machinery Engineering Inc. – US$696,001,776, Power China Int’l Group Limited – US$703,652,256, and Lindsayca Inc. in joint venture with CH4 Guyana Inc. – US$898,764,244.

The Engineer believes that the country will be saving millions by upgrading the existing power plants to use gas rather than construct a brand new gas fired plant. He told this publication that government can explore the option of transporting the natural gas via containers to supply the respective power plants and while this will require an investment, it would be far cheaper than their current plan.

An illustration of the planned Gas-to-Energy project showing how the gas will be brought to shore from the two FPSOs to the treatment plant and power generating system at Wales

In the meantime he has also questioned what would become of those power generating sets currently in operation when the new 300 MW plant is constructed.

While all these questions continue to swirl regarding the project, in the absence of any new study to justify the works, Government has not hosted a Press Conference with the media to iron out these matters. On the other hand, when the local Project Head, Winston Brassington is asked questions, he refuses to discuss the project and requests that the Minister of Natural Resources, Vickram Bharrat offer clarity however, Bharrat too has not been cooperative in the past.

It must be noted that Brassington was expected to represent Government just last week at the Guyana Basins Summit to give an update on the project but he did not show or send a replacement.

The Gas-to-Energy project, as previously reported will encompass three major aspects, that is, the pipeline to transport the gas to Wales, the Natural Gas Liquids (NGL) facility that will treat and separate the gas, and the power plant to generate the electricity. So far, Guyanese have been told that the pipeline aspect, which is being pursued by US oil major ExxonMobil, will cost around US$1.3 billion. Even this is expected to increase when Exxon closes critical contracts for same.

In the meantime, Vice President Bharrat Jagdeo was hoping to have the other two components come on stream for US$700 million. Jagdeo said he “estimates” the project to generate electricity and distribute same at US$0.15 cents per kilowatt hour (KWH). He explained during a Press Conference in June that while the five US cents per kilowatt hour may be the cost to generate the electricity, another five cents may be lost in the transmission and distribution of the power. This could take the final price for the sale of the electricity to about US$0.15 cents, after adding five US cents as profits for the company.

Yesterday, Kaieteur News reported that the estimated cost to generate electricity could triple, based on the new price tag of the project. It was Mr. Fletcher who explained that Energy Narrative (EN), the consultancy firm that conducted a pre-feasibility study for the gas project, concluded that the pipeline and NGL plant would cost an estimated US$450 million and the Guyana Power and Light Inc. (GPL) would generate electricity at approximately 8.5 US cents per KWh, which would be about a 40 percent reduction on GPL’s generating costs when the world market price of crude oil was approximately USD60.00 per barrel.

Now that the cost of the pipeline alone has increased to US$1.3 billion, Fletcher reasoned that this mammoth increase, would necessarily drive up the cost of gas supplied to GPL, and consequentially, place the viability of the project in jeopardy. To this end, he pointed out, “The Government’s estimates that with the latest pipeline cost, the cost of generating power by GPL would be less than the EN estimate of 8.5 US cents per KWh, and be as low as 4 or 5 US cents per KWh, appear to be figures drawn out of a hat, and wishful thinking.”

He went on to point out, “A straightforward calculation, using the latest pipeline cost, the projected pipeline lifespan of 25 years, and, a cost of capital of 10 percent, would increase the energy cost to GPL to USD7.80 per million BTU. This dramatic increase of GPL’s energy costs, and factoring in the information that energy normally averages about 65 percent of generating costs, would result in GPL generating power at approximately 15 US cents per KWh. An increase of this order would obliterate any benefit of using natural gas.” Notably, Jagdeo said that the US$0.15 cents would be the total cost to generate the power, make a profit and cater for losses during the transmission phase. However, Fletcher has made the point that US$0.15 cents would merely be the cost to generate the electricity, given the new price difference.