Exxon still to determine final cost of pipeline, price to transport gas 

Feb 12, 2023 News

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…Gas-to-Energy project…

– EPA approval already given

By Davina Bagot

Kaieteur News – The Gas-to-Energy (GTE) project has been criticised by members of the Opposition as well as transparency activists for not only drowning in secrecy but also proven viability.

The latter may be more of a concern now that ExxonMobil has said it is yet to decide on the final cost of the pipeline it will be constructing for Guyana.

The 12-inch pipeline is estimated to run for 190 kilometres from the offshore operations to the Wales development site onshore. It will be used as the method of transportation for the natural resource.

The Environmental Protection Agency (EPA) has already given the oil company its blessing to commence construction of the pipeline, even though the final cost is yet to be revealed to Guyanese.

Country Manager for the local operations, Alistair Routledge was faced with several questions on the subject during a press conference on Monday. This newspaper had specifically asked Routledge to state the cost of the structure since Guyana will be paying the company back by purchasing its gas.

Project documents submitted by the company had estimated the pipeline cost to be US$1.3 billion, but the document warned “A higher certainty cost estimate will be developed after receiving and negotiating all major contracts.”

In July and August last year, Exxon awarded two contracts for the project. The first was announced in late July that Subsea 7 and Van Oord, two international companies were contracted for project management, engineering, and installation of approximately 190 kilometres of 12-inch pipeline.

Meanwhile, on August 1, 2022, it was announced that Technip FMC, a United-Kingdom based firm was hired by the oil company to provide engineering, procurement, construction and installation of subsea risers and pipelines for the Wales venture.

Even though contracts have been awarded and a Heads of Agreement has been signed with government for the project, Exxon claims the cost is still yet to be finalised.

Routledge told this newspaper, “We never have a final estimate until we have completed the work, but the total estimate for offshore, onshore works and so on is probably just under a billion dollars…the final cost would be what it is when we execute the whole thing.”

He was reminded that his company’s project documents said the pipeline is pegged at US$1.3 billion.

The Exxon official explained that Guyana will be repaying the oil company for its investment by paying to transport the gas through the pipeline; but in the absence of that final cost, the price of the gas to generate electricity for the nation is in limbo.

Routledge said, “The gas that will come on shore, in essence that development is just gonna pay for the pipeline cost. Nothing more…the gas itself, we are selling the full 50 million cubic feet a day to the government or a government entity that is being established in order to receive the gas and put it through the power station.”

Vice President Bharrat Jagdeo said during a press conference in June last year that Guyana will not be paying Exxon for the gas. He explained that the pipeline will be recovered from cost oil.

“Well, the pipeline will be funded from cost oil, and we would have to repay that over 20 years. But the gas is free, and this is crucial; it is one of the things we were arguing for from the beginning,” he said.

The Parliamentary Opposition has been pressing the administration to reveal all agreements signed for the GTE project, but to date have not been successful.

Shadow Natural Resources Minister, David Patterson on October 18, 2022 had asked whether any agreements were signed with EEPGL in connection with the Wales project and if yes, for the Minister to supply the House with a copy of the said agreement.

In response Minister of Natural Resources, Vickram Bharrat explained that while government has inked an agreement with Exxon, the document cannot be made public just yet.

“Mr. Speaker, the Government of Guyana has signed a Heads of Agreement (HOA) with the Stabroek Co-ventures 30th June 2022. This agreement sets out the principles and conditions for the commercial and technical arrangements of the Gas-to-Energy Project,” Bharrat said.

The Minister added in his written response, “There are other agreements on supply, buyer’s agreement, field development, licensing conditions, onshore works, and land matters that are currently being drafted. The respective agreements and policy documents will be presented to this Honourable House when they have been agreed upon and executed. All agreements are being done in a timely manner to meet the Final Investment Decision which will allow for the project to be completed by our committed deadline of December 2024.”

Additionally, former Health Minister and Opposition Member of Parliament (MP), Volda Lawrence had tabled several questions in the National Assembly in January this year to ascertain the financing arrangements in place for multi-billion-dollar GTE project.

More recently, on February 6, 2023, Opposition MP, Ganesh Mahipaul submitted a Motion to Parliament seeking the release of all documents for the Wales Gas Project.

In the motion seen by Kaieteur News, Mahipaul said that in 2022, a total of $24,613,000,000 was allocated in the Budget for the project with another $43,300,000,000 approved this year towards the construction of the project.

With over $67.9 billion already budgeted, the Opposition Parliamentarian pointed out that the House is yet to be provided with the Final Investment Plan. He also noted that the People’s Progressive Party (PPP) Government signed a Heads of Agreement with the Stabroek Block co-venturers, ExxonMobil, Hess and CNOOC on June 30, 2022.

To this end, Mahipaul said in his motion, “BE IT RESOLVED that this National Assembly instructs the Minister of Natural Resources to forthwith lay over to the National Assembly all documents relating to the construction of the Wales Gas-to-Energy Project and the Heads of Agreement signed on June 30, 2022.”

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• cost, ExxonMobil, gas, GTE, pipeline

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