Monday, February 6, 2023

Guyana Prime Minister pegs cost of Gas-to-Energy project at US$1.8 billion

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Guyana’s Prime Minister, Mark Phillips has informed the country’s Parliament that the landmark Gas-to-Energy project will cost approximately US$1.8 billion.

In providing a breakdown of the project costs, Phillips said the pipeline cost is US$1 billion, which includes the entire pipeline network from offshore to onshore, enabling works, contingencies, and supervision by ExxonMobil Guyana. ExxonMobil had given a preliminary estimate of US$1.3 billion for this aspect of the project in early 2022 and committed to providing a higher certainty estimate later.

Phillips said this cost for the pipeline is separate from the engineering, procurement and construction (EPC) contract inked with CH4/Lindsayca in December 2022 for the integrated natural gas liquids (NGL) plant and the 300-megawatt (MW) combined-cycle gas turbine (CCGT) power plant at Wales, West Coast Demerara (WCD), Region Three. Phillips said the EPC contract costs US$759.88 million. The supervision contract awarded to Engineers India Limited is to the tune of US$23 million.

The information on the cost of the project was recently provided in response to questions from Opposition Member of Parliament, Volda Lawrence. The former Minister also called on her colleague in government to explain the source of funding as well as the inherent terms and conditions.

Phillips said Exxon is funding the US$1 billion pipeline component from Cost Oil, meaning it spends on the project and recovers it from the crude produced offshore.

He was keen to note that the government is sourcing funding for the EPC costs from the proceeds of the national budget over a multi-year period from 2022 to 2025. An early estimate was included in the 2022 capital budget totalling GY$20 billion. For 2023, the authorities budgeted GY$43.3 billion. The Prime Minister said the government also expects to fund a portion of the EPC Contract from loan financing. He said this will be pursued in 2023.

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Additionally, Phillips clarified that the government is not expected to inherit any contingency liability with the project.

The project is meant to allow for transport of a minimum of 50 million cubic feet of gas per day (MCFD) from the Liza field in the Stabroek Block to the Wales Development Zone. There, the plants will receive the gas to generate electricity for Guyana’s grid and NGLs at least for domestic use.

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