Guyana’s Gas-to-Energy project includes a gas sales agreement with the Stabroek Block co-venturers. At the same time, government officials have repeatedly said that the natural gas to be brought to shore is “free.”
The distinction here lies in what the payments under the agreement are intended to cover.
Under the arrangement, the ExxonMobil-led group spent about US$1 billion to develop the offshore pipeline and related infrastructure needed to transport natural gas from offshore fields to Wales on the West Bank of Demerara.
The gas sales agreement serves as the mechanism through which the government will repay the oil companies for that infrastructure investment, particularly the pipeline system transporting the gas to shore.
The payments tied to the agreement are therefore linked to recovery of infrastructure costs, rather than payment for the gas itself.
At the International Energy Conference in Georgetown in 2023, Head of Guyana’s Gas-to-Energy Task Force Winston Brassington said the government would pay the Stabroek Block co-venturers about US$55 million annually to repay the investment in the pipeline and associated infrastructure.
Gov’t to pay Exxon US$55M each year to recover cost for gas pipeline︱OilNOW
“This payment is intended to allow Exxon to recover the expected $1 billion investment over time. So, we are paying for the amortisation of the pipeline infrastructure, and not the gas, which is considered free,” Brassington said at the conference.
The project is initially expected to transport about 50 million cubic feet of gas per day over 20 years through a 130-mile pipeline linking the Liza field developments to an integrated gas processing facility at Wales.
Guyana plans to use the gas primarily for electricity generation, replacing heavy fuel oil and significantly increasing the country’s power generation capacity.
The government also plans to commercialize the natural gas liquids (NGLs) extracted from the gas stream. Brassington said in 2023 that Guyana is guaranteed approximately 4,100 barrels per day (b/d) of NGLs from the project, of which about 700 b/d would be used domestically, leaving the remainder available for commercialization.
Using 2021 market prices, he estimated the value of the NGL output at about US$100 million annually, while higher 2022 prices would have placed the value closer to US$150 million. This is where the government expects the revenue to come from, to pay the ExxonMobil-led Stabroek Block group for the pipeline investment.
Guyana gov’t banking on earnings from sale of NGLs to repay Exxon for Gas-to-Energy project︱OilNOW
The Gas-to-Energy project is designed to bring natural gas from ExxonMobil’s offshore Stabroek Block operations to an integrated processing and power generation facility at Wales, where it will be used to produce electricity and natural gas liquids. The project is expected to significantly expand Guyana’s power generation capacity, reduce reliance on heavy fuel oil and lower electricity costs, while creating opportunities for industrial development. First gas is currently targeted by the government for the end of 2026.
Read a complete explainer on the project below:
