Monday, March 27, 2023

Guyana’s Gas-to-Energy Project: Your Questions Answered

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What is the Gas-to-Energy project? 

Gas-to-Energy is a project that aims to put infrastructure in place 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 an average of 380,000 barrels per day (bpd) of crude oil offshore. While most of the resource is oil, there is a lot of rich gas.

Map of Stabroek Block showing the location of the Liza field

What infrastructure is needed for the Gas-to-Energy project? 

A subsea pipeline will be 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 commercialisation, and a 300 megawatts (MW) power plant will use the dry gas to generate electricity for domestic use.

Who is involved? 

ExxonMobil is responsible for the installation of the pipeline. The Guyana government will handle 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 government also plans to sell cooking gas and fertiliser to locals at reduced rates, and sell the remaining NGLs to third parties.

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. 

The government has contracted a US-based group called CH4-Lindsayca to build out the integrated facility at Wales for US$759 million. Guyana Prime Minister, Mark Phillips, said the project total rounds up at about US$1.8 billion. 

Will it place Guyana in debt? 

Guyana plans to seek 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.

United States Export-Import Bank, Washington, D.C. (Photo: PAUL J. RICHARDS/AFP via Getty Images)

Will Guyana be indebted to Exxon? 

No, but Exxon and its partners will need to recover their investment into 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 commercialisation 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.

Head of Guyana’s Gas-to-Energy Taskforce, Winston Brassington.

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 last year, that even if delivering it 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.

Dr. Justin Ram – former Director of Economics at the Caribbean Development Bank (CDB).

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 construction started? 

Some preparatory work has commenced but the substantive construction will have to wait on a few things. On ExxonMobil’s side, the company is waiting on all regulatory approvals. While it has already received environmental authorisation from the EPA, the company is waiting for the Ministry of Natural Resources to approve its proposed revisions to the Liza field development plan (FDP) and production license. When this is done, Exxon and its partners will make their final investment decisions (FID) and commence work. On the government’s side, the contractor will begin work on the integrated facility after it is paid a mobilisation fee. But the government is still working on securing the loan from the EXIM Bank.  

When will the project be delivered? 

Both ExxonMobil and the Guyana government plan to deliver the project by the fourth quarter of 2025, to allow for a reduction in the cost of electricity. 

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