Thursday, January 26, 2023

‘Gas is free, pipeline to be paid for from cost oil’ – VP confirms

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As negotiations continue between the Guyana Government and ExxonMobil’s affiliate, Esso Exploration and Production Guyana Limited (EEPGL) regarding the contractual terms to govern the Gas-to-Energy project, both parties have so far agreed that there will be no cost for the gas being piped to shore. The associated gas is being produced as part of the ongoing oil production operations. All costs associated with these offshore developments are being recovered under the existing terms of the Production Sharing Agreement.

Vice President, Dr. Bharrat Jagdeo told reporters last week the cost for the pipeline has not yet been finalsied but authorities in charge of executing this component are working with approximately US$1B for now. He said this would have to be repaid by Guyana over a 20-year period.

The Vice President said, “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. If you look at the cost of the pipeline over 20 years and you look at cents per kilowatt hour (kWh)…that just adds US$0.016 per kWh…”

Once the pipeline, Natural Gas Liquids (NGL) processing facility and power plant are paid back, “you can generate power at maybe US$0.05 to US$0.06 per kWh, maybe even lower, compared to US$0.30 per kWh that we are selling now… In 20 years, we can fix the price of electricity without any escalation.”

He added, “Then on the NGL, the same principle would obtain if they (EEPGL) fund the NGL facility (via cost oil). Right now, we have the option to own both which we are more likely to pursue.”

The Vice President is of the firm conviction that given the economic and environmental benefits of the project, it is one of the unquestionable keys to Guyana’s future as outlined in the Low Carbon Development Strategy (LCDS).

The Gas-to-Energy project which entails the construction of a 12” pipeline will transport a guaranteed minimum of 50 million cubic feet per day (mmcfd) of natural gas from offshore Guyana to the Wales Development Authority.

Ongoing geotechnical and geophysical works for both offshore and onshore operations are advancing with portions already completed. Construction of the pipeline is expected to start in the third quarter of 2022 and will be completed by the fourth quarter of 2024.

Esso Exploration and Production Guyana Limited (EEPGL) has sought environmental authorisation for the Project on behalf of itself and partners. It is expected to handle the installation of the pipeline which will cost approximately US$1.3B.

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