By Joel Bhagwandin – OilNOW
A contextual Economic & Financial Analysis of Guyana’s Gas to Shore Project
The purpose of this column series is to contribute to the national debate regarding the feasibility of the gas-to-shore project that the Government of Guyana is moving forward to implement. Analysts and other commentators alike have raised many valid concerns and issues regarding the economic and financial viability of the project including the proposed location as announced by the Government. Within the sphere of the public domain, there are views both in favour of and against the project–though mostly speculative in nature and divorced from Guyana’s development context altogether. In particular, the views against the project surrounds the notion that the project is not economically feasible and that includes the proposed location as well – at Wales, on the West Bank of Demerara on the premises of the closed Wales Sugar Estate. It should be mentioned that the proponents of these views have not endeavor to justify such assertions neither have they sought to conduct any meaningful analysis in support of their views.
This paper, therefore, seeks to lend to the national discourse by conducting an analysis on the potential economic and financial soundness of the project–and to determine whether the project in its entirety is economically sensible.
Methodology and Limitation
The analysis contained herein draws from secondary data sources that are publicly available. These include press releases regarding some of the technical details on the gas to shore project as well as estimates on cost, and the Guyana Power and Light Development and Expansion Project 2012 – 2016 from which data was derived on demand forecasts for electricity. In addition, other information and empirical literature by reputable organizations that are publicly available were evaluated by the author to create scenarios wherein a number of scenario analysis was conducted – together with some degree of extrapolatory forecasting techniques. More importantly, the analysis conducted takes into consideration Guyana’s historic development context as well as Guyana’s development trajectory within the framework of Guyana’s national development strategy and the Government’s ambitious development plans contained in its five-years manifesto. Thus, the thematic scope of the paper can be described as a contextual financial and economic analysis of the gas-to-shore project.
The limitation of the analysis largely surrounds the absence of specific technical details and information on costing. These details, however, are currently being worked out by the Government of Guyana. In this regard, a gas-to-shore task force was put together that is dealing with the implementation of the project. This includes the negotiations with ExxonMobil, evaluation of feasibility studies and financing models of the project. It is expected that upon the completion of the work of the task force, the details and the relevant official studies will be released to the public at the appropriate time.
In the meanwhile, this analysis is intended to bridge this gap and to inform stakeholders – more importantly the citizenry of Guyana about the broader potential economic benefits of the project. In doing so, despite the limitations described above, there is sufficient information within the public domain and on Guyana’s development outlook for analysts to perform reasonable pragmatic analyses. This in turn, can then serve to answer some of the burning questions within the sphere of the citizenry and all the other interested stakeholders or at least put things into a broader perspective.
Contextualizing Guyana’s National Development Strategy of 1996
The current Government in its previous term in office had developed a comprehensive National Development Strategy under the Late President Cheddi Jagan since 1994 which was completed and approved in 1996. This strategy was developed by over 200 Guyanese professionals and stakeholders from across all sections of society including the Private Sector. After its approval and adoption in 1996, the strategy was then implemented incrementally through all the national budgets from 1997 – 2014. An exercise to simply map that strategy with all the national budgets for this period will confirm this fact.
Hereunder mentioned are some examples of major transformational and developmental projects and strategies identified since 1994 – 1996 through the National Development Strategy framework:
- The construction of two deep water harbours in Berbice and Demerara rivers, the improvement and extension of the Timehri and Ogle Airports, and the rehabilitation of many of the country’s internal airstrip”. Over the years, some of these projects were implemented and some are still ongoing – the Cheddi Jagan International Airport, for example, and the transition of the Ogle Airport to an international airport status.
- The strategy identified the role of Information Technology in the modernization of Guyana, and today we have the liberalization of the telecommunications sector and Government’s commitment to digitalize government services.
- Construction of housing schemes, rural roads, schools and health centers.
- A new four lane highway connecting Georgetown to the existing Soesdyke/Linden Highway;
- A widened carriageway on the East Bank road between La Penitence and Peters Hall
- A completed highway linking Linden, by way of Mabura – Kurupukari, Annai – Good Hope and Lethem, to Brazil across the Takutu.
- Two lane road from Port Kaituma to Yarakita.
- Construction of a new High Span Bridge across the Demerara River at the same site as the Demerara Harbour Bridge, and the Berbice River bridge.
- Feasibility study on the re-introduction of railways to be undertaken.
For illustration, the above are just a few examples extracted from the 363 pages National Development Strategy developed since 1996. And as can be seen, a number of these projects have been implemented and / or are ongoing. Now that the very Government that actually developed this strategy was re-elected in 2020 to govern, the continued implementation of this development strategy is clearly being pursued. Evidently, all of the transformational projects that the Government is aggressively moving forward with – have been conceptualized since 1996 in this development strategy. As such, it can be said that this strategy is nothing short of visionary and is indeed 50 plus years ahead of its time. This is the basis upon which Guyana’s development trajectory hinges.
There is a clear vision and direction in terms of the development of the country and interestingly to point out, the National Development Strategy (1996) recognized the need for the development of the country to move further South given that more than 50% of the population are concentrated in Regions Three and Four – along the Low Coastal Plain.
This in fact explains the bypass road project connecting the East Coast and East Bank, which in turn will lead to the opening up thousands of acres of land for housing development, industrial and commercial activities.
The road link connecting Brazil and Guyana through Lethem to Linden will also result in the opening of thousands of acres of land for housing, as well as commercial and industrial activities. In fact, the President of the Cooperative Republic of Guyana has announced in the local press that the Government is seeking to commence discussion to build a secondary city on the Linden Highway. In years to come – (another 30 – 50 years from now) the Linden Town can become the new capital city of Guyana and therefore, such transformational development needs to start from now. With this in mind, it can be seen that these are all consistent with the vision outlined in the 1996 development strategy to move development further in-land – that is, further towards the South.
This in turn will result in the population moving further South. For example, the new housing development drive targeting 50,000 house lots distribution over the next five years – while noting that there are about 60,000 backlog applications in the system to be processed – is designed to start moving the population and the country’s development further South.
It is against this background, that it makes economic sense to land the gas-to-shore project in Wales, on the West Bank of Demerara which is almost adjacent to the Diamond/Grove area on the East Bank. Logically, if development is moving further South, the population is moving further South over the next two to three decades, and a secondary city to be developed further South on the Linden Highway. Then the gas-to-shore project will certainly yield long term economic benefits and will be economically sensible to build it at the exact proposed location for these reasons. In so doing, this can result in efficient and cost-effective distribution channels given where geographic development of the country is moving towards.
More importantly, the Government’s manifesto for 2020 – 2025 draws from that development strategy broadly as the strategy was never fully implemented owing to Guyana’s peculiar development challenges. In a conference paper presented at the West Institute International Academic Conference, this author presented a paper on Guyana’s economic and social development challenges. The main findings of this case study showed that there are four dynamic elements responsible for the under-development nature of Guyana. These are: (1) there is a huge human capital deficit in terms of education and skills of the population, (2) physical infrastructure deficit, (3) high cost of energy which is one of the highest in the Western Hemisphere, and (4) the most crucial determinant is the inherent features of the political economy which is underpinned by ethnic division and politically motivated crime and violence, historically and to some degree in the current political environment. It is noteworthy to mention that Guyana’s development has been increasingly stymied for the past ten years by the previous regime. During the period 2015 – 2020 the previous regime failed to implement any major development plan.
Further, during the period when Guyana’s political dispensation changed for the first time in 2011 with a minority Government – the Political Opposition at that time had control over the National Assembly with a one seat majority. Consequently, a number of major development and transformational projects were stymied – such as the Amaila hydro-project, a new high span bridge across the Demerara River, and a specialty hospital to name a few. These projects were blocked by the Opposition in the National Assembly and it was this deadlock that forced a snap election in 2015 that resulted in the Political Opposition forming the Government in 2015.
Read Part 2 HERE
About the Author
Mr. Joel Bhagwandin is a strong finance professional with over thirteen years’ experience in commercial banking, the financial sector and private sector development combined. He is the Chief Financial Advisor/Analyst of JB Consultancy & Associates, a consulting firm involved in the provision of business & financial consulting in the areas of banking and financial advisory solutions, corporate finance and business analysis for Private Corporations; Small and Medium Sized Enterprises (SMEs), as well as the Public Sector.
Often described as a prolific academic, Joel Bhagwandin is a part time Lecturer for both MBA and BBA programmes in business economics, business and financial management courses with various tertiary level educational institutions and he is actively engaged in academic research work and public debates on a range of economic and finance issues in Guyana. He has Authored more than 200 articles on economic and finance issues, and policy analysis within the context of a developing economy published in the Guyana Times under a weekly column titled “the Economy & Finance”.
He is the holder of a Master of Science Degree in Business Management with specialization in Global Finance, Financial Markets, Institutions and Banking from Edinburgh Napier University; an Executive Certificate in Macro-financial policy-making in Emerging Markets from Columbia University, School of International Public Affairs in New York, and several other Diploma Certificates in Business Communication, Marketing, Business organization and Environment from the University of Cambridge. And, he is currently pursuing his second Master’s Degree, MSc. (Accounting & Finance) through London School of International Business/University of Chichester; while simultaneously pursuing a PhD in Development studies through published works as an alumnus of Edinburgh Napier University, Scotland, United Kingdom.