With all major contracts awarded for the Gas-to-Energy project, and development works underway, here is an updated breakdown of the basics – parameters, costs, timelines, and other key information.
What is the Gas-to-Energy project?
The Gas-to-Energy project is purposed to establish infrastructure so natural gas can be transported from the offshore Stabroek Block’s Liza oilfield to an integrated gas processing facility at Wales, on the West Bank of Demerara. The project will deliver natural gas liquids (NGL) and dry gas to the government of Guyana.
What is the Liza oilfield?
The Liza field is the area in which ExxonMobil made the first commercial discovery of crude oil in 2015, kicking off Guyana’s incredible growth story. ExxonMobil is already producing more than 600,000 barrels per day (bpd) of crude oil offshore, with more than 60% from the Liza field. While most of the resource is oil, there is a lot of gas.
What infrastructure is needed for the Gas-to-Energy project?
A subsea pipeline is being installed on the seafloor to transport natural gas from the Liza field to an onshore pipeline at the West Coast of the Demerara river. The onshore pipeline will deliver the gas to an integrated facility at Wales, on the West Bank of Demerara. At this facility, a natural gas liquids (NGL) processing plant will treat the gas to remove NGLs for commercialization, and a 300 megawatts (MW) power plant will use the dry gas to generate electricity for domestic use.
Who is involved?
ExxonMobil Guyana is responsible for the installation of the pipeline. The Guyana government is responsible for the integrated facility at Wales.
Why is this project being pursued?
Guyana’s consumer rates for electricity are among the highest in the region. The government says the Gas-to-Energy project will provide the fiscal space to cut the cost of power by 50%. Replacing imported heavy fuel oil (HFO) with Guyana’s natural gas as the main source of electricity generation will significantly reduce emissions. The country also experiences power instability, partly due to rising demand outpacing supply. Gas-to-Energy will boost generating capacity by more than 100%, and is part of a larger strategy to reduce power outages.
Government also plans to sell cooking gas, fertilizer and other natural gas by-products domestically and in the Latin America and Caribbean (LAC) region.
What will the project cost?
ExxonMobil Guyana President, Alistair Routledge said the company will spend about US$1 billion on the onshore and offshore pipeline and ancillary infrastructure. Exxon hired a joint venture of Van Oord and Subsea 7 to lay the offshore pipeline. For the onshore aspect, Exxon hired a joint venture between the Guyanese-owned GAICO Construction and General Services and the Italian, SICIM.
The government contracted a US-based group called CH4-Lindsayca to build out the integrated facility at Wales for US$759 million.
The total cost of the project is approximately US$1.8 billion.
Will it place Guyana in debt?
Guyana has applied for US$646 million (approximately GY$135 billion) in loan support from the United States Export-Import Bank to help meet the cost of its side of the project. The government has faced some criticism for taking on more debt recently, but top officials are confident the country can manage more debt, given the expansion of its economy. The Bank is taking some time to review the application. So, the government has started paying the contractor from its treasury to mitigate delays.
Will Guyana be indebted to Exxon?
No, but Exxon and its partners will need to recover their investment in the project. They plan to implement an agreement for the sale of the transported gas to the government. Head of the Gas-to-Energy Task Force, Winston Brassington, said Guyana will pay the co-venturers US$55 million annually for 20 years. He estimated that the commercialization of the excess NGLs will earn Guyana about US$100 million per year, providing the revenues to meet the annual payments and make a profit.
Is this project feasible?
Public discourse in Guyana has tended to question the economic feasibility of the Gas-to-Energy project. Dr. Justin Ram, former chief economist with the Caribbean Development Bank (CDB), conducted a study on the project and told OilNOW in 2022, that even if delivering the project exceeds US$2 billion in costs, it will be worth it. It would be the largest investment into a project in Guyana’s history, but Dr. Ram said the direct and indirect benefits will far outweigh the cost.
What about the environmental impact?
The Environmental Protection Agency (EPA) required ExxonMobil to conduct an environmental Impact Assessment (EIA) on the Gas-to-Energy project, as part of the authorisation process. The report predicted that the planned project activities will have negligible to moderate impacts on physical resources, biological and socioeconomic resources – with a number of positive impacts on socioeconomic conditions. An extensive report on the EIA is on the EPA’s website.
Has work started?
Yes.
When will the project be delivered?
ExxonMobil expects to complete pipeline installation by the end of 2024. The Guyana government expects the integrated gas processing facility to be completed by the fourth quarter of 2025, with a partial start-up planned earlier in the year. However, Vice President Dr. Bharrat Jagdeo confirmed that government is in arbitration proceedings with its contractor, concerning a dispute over some costs and time of initial start-up.
