Dear Editor,
Is it in Guyana’s best interests to take ‘associated gas’ to generate electricity, as so enthusiastically advocated by Mr Bynoe and Dr Mangal? Quite simply, no.
The IMF, the World Bank, the IADB, the European Investment Bank, leading economists (e.g. former World Bank Chief Economists Lord Stern and Joseph Stiglitz,), the Institute for Energy Economics and Financial Analysis, and a host of other financial and industry experts can all give you excellent reasons why Guyana should not touch gas. Here are my 5:
The ‘associated gas’ is worthless. Esso would sell it if Esso could get money for it. ExxonMobil posted a loss earlier this year; they need money. But nobody wants to buy the gas. Last year, the Inter-American Development Bank concluded that Latin America and the Caribbean is second only to the Middle East in un-burnable gas (and oil). Guyana’s ‘associated gas’ has no market value. It is already a stranded fossil fuel asset. Guyana should leave the gas right where it is – as Esso’s problem.
The gas is not just worthless. It costs Esso money. Under the Environmental Permit, routine flaring is prohibited and Esso has to re-inject the gas that they don’t use or sell. Re-injection requires the right equipment. It costs money. Esso has flared 9 billion cubic feet. Guyana should enforce the environmental permit, not subsidise Esso’s production by taking worthless gas.
To get the gas, Guyana would have to build a pipeline and other infrastructure. What will that cost Guyana? Hanging H, a pipeline construction company, estimates about US$7.65 million per mile on land. Offshore may be more. The gas is about 120 miles offshore. What return will Guyana get for investing about US$1bn in a pipeline? Investment decisions must be made using solid financial analysis, not the uninformed assumptions of any individual.
Who is going to use the gas? A World Bank report from 2017 says Guyana has little or no gas market. Last year the IMF advocated a carbon tax of up to US$70 per ton. They admitted that gas prices would increase by over 70% and economic activity would decrease. Gas will not provide cheap electricity or the free cooking gas that Raphael Trotman promised in January 2018. Guyana should take heed of market risks not follow pipe dreams.
What is the business case for gas? On 4th May 2020, Professor Lord Nicholas Stern and Joseph Stiglitz published a paper on fiscal recovery following Covid-19. They recommend that countries spend money on renewable energy not fossil fuels. Why? Because their data shows that public investment in green energy offers high returns with benefits for the whole economy. The Green State Development Strategy aims for Guyana to have 100% renewable energy by 2025. Why should Guyana abandon the economy of the future and invest in stranded fossil fuel assets? Why not support Guyana’s people and businesses by cheap renewable energy with zero emissions rather than subsidising foreign oil companies?
There are vested interests in getting Guyana to take gas. Those interests are directly opposed to what is good for Guyana and the Guyanese people.
Yours faithfully,
Melinda Janki
