Amid questions over cost, feasibility and the projected demand for power, the PPP/C government on Tuesday morning brushed aside an APNU+AFC motion for a pause in the planned gas to energy project with Minister of Natural Resources Vickram Bharrat arguing that the scheme will end blackouts and cut the electricity cost by half.
Having not commissioned a feasibility study since it entered office in August 2020 for the massive project estimated to cost between US$900m to U$$1.5b, the PPP/C government has come under pressure from the opposition and civil society to allow a closer examination of the bases of the scheme and to justify the planned expenditure in light of climate change obligations.
The PPP/C government is however ploughing ahead with the project at Wales, West Bank Demerara despite the reservations around it and Bharrat told Parliament that the motion in the name of former Minister of Public Infrastructure, David Patterson was intended to stymie the work of the government
“I rise to present a motion calling on the PPP to pause the development of the proposed Wales Gas to Shore project, until further studies are conducted into the feasibility of this project – in particular the environmental and economic impacts,” Patterson told the House in the wee hours of Tuesday, coming to the end of a gruelling session that began at 2 pm the previous day.
Questions on the environment which he said remain unaddressed include when environmental permits for the additional sub-projects will be approved, if the challenges facing the local fishing industry would be addressed and would the pipeline being used adversely affect maritime traffic?
The motion was defeated as government used its majority to shut it down and many of the questions asked were not directly responded to.
Patterson said that the opposition did not want the project terminated but undertaken in both a sound fiscal and environmentally friendly way that yields tangible benefits for all Guyanese, and it was thus asking that it be sent to the Standing Committee on Natural Resources.
“Mr. Speaker, with no additional studies, no further detailed analyses, the PPP will be plunging the nation, headfirst into what will be the largest infrastructure project in the country’s history, disregarding the nation’s appeal to examine all the implications of this project in detail. Mr. Speaker, this motion calls for the project to be suspended and referred to the Standing Committee on Natural Resources. This committee shall conduct additional studies on the cost, location, environmental challenges as well as alternative energy sources, and on completion, present a fulsome report to this Parliament for debate and approval,” Patterson said.
In rebuttal, Bharrat assured that the necessary studies would be undertaken, pointing out that having natural gas in the energy mix is a plan of his government as this country transitions to clean energy. “Transition energy and this is a part of our energy mix,” he said.
Stymie
Bharrat said that he believes that the motion put forward was one designed to stymie the work of government as it has been clear that the necessary studies would be undertaken before the project commences. Critics have questioned how it is that studies can be done after the government has already concluded that the projected will be proceeded with.
Bharrat said that one has to look at the project from a broad context since it is a subset of developmental plans mapped out. “This project is probably the most critical, most transformational project that we will witness in the history of this country. Every Guyanese will benefit, cost of living will be reduced and improve the standard of living. We cannot stall such an important and critical project,” he said.
“…We as a country need to move forward with development and our developmental agenda and we want to say to the coalition that if you are serious about development and you want to get onboard on the development train, then our arms are open,” he added.
According to Bharrat, “This project will bring an end to blackout. Do we want a next set of parliamentarians to come in here and speak about blackouts or we want to end it?…we are saying to the Guyanese people the gas to energy project will reduce the cost of electricity by 50%”.
Esso Exploration and Production Guyana Limited (EEPGL), Exxon’s local subsidiary, is the operator of the project and has since submitted a proposal seeking environmental authorization to construct and operate components mentioned in the project. For several months now, the terms of reference of an Environmental Impact Assessment for the project have been under construction. It is unclear when the terms will be completed.
The pipeline is expected to transport up to approximately 50 million standard cubic feet per day (MMSCFD) of dry gas to the Natural Gas Liquids (NGL) Plant while the maximum flow of the pipeline is approximately 120 MMSCFD. The NGL plant onshore will remove propane, butane and pentanes+ liquids with the ability to be sold and treat the remaining gas to specifications required by the power plant, including dehydration and pressure letdown of gas.
The route, according to EEPGL, was selected by the government and if approval by the Environmental Protection Agency (EPA) is given, construction is expected to start by mid-2022.
Patterson contended that the project would be a useless one and waste of revenues since the generated power will be far more than what this country needs.
Referring to a power generation expansion study, which he said was conducted in 2016 and updated in 2018, in association with the Inter-American Development Bank and which report the PPP/C government has tabled to justify the Wales Gas-to-Shore project, Patterson said that it was determined that the country’s energy demand would be 330 megawatts (MW) by 2035.
“In other words, this study indicates that in the next 13 years, the estimated additional demand on the DBIS (Demerara-Berbice Interconnected System) would be in the range of 200 MW over the current demand. To arrive at these estimates, the consultants interviewed ALL the major sectors to ascertain their projected energy demands,” he said, while listing top private sector consumers.
“Consultations were held with: The Bauxite Industry – the industry was asked if there were any plans to construct a smelter in the country, their responses were a resounding NO, on the basis that with the known deposits of bauxite, it would not be a profitable venture. Addi-tionally, worldwide smelting operations were being consolidated to ensure better economies of scale in the industry. Gold Board/ Miners Association – this industry was consulted about the feasibility of the establishment of a gold refinery in Guyana. They also indicated based on the experiences of our neighbour Suriname, this as well would not be feasible. The Logging Industry – consultation was also held with this group, on the processing of timber, this industry indicated that there were no plans for large scale kilns, in any event the industry indicated that they intend to use solar dryers,” Patterson noted .
He continued, “Guysuco – indicated that they will be moving towards co-generation and would be looking to supply the DBIS. Manufacturing Association – this association indicated that cheaper electricity would make their products more competitive, any new manufacturing process was a long way off. Private Sector companies (Both Banks and DDL) – Banks indicated that they were already self-generating, and even if power was available cheaper, they had concerns with reliability. DDL indicated that they were moving towards renewable energies to power their operations.
No end users
“The PPP has announc-ed that the projected power demand for the DBIS will be 415 MW by 2025 – that’s correct an additional 290 MW in the next three years, however they have failed to inform the country which industries will be requiring this power – in other words, they are committing the people of Guyana to building a power plant, committing more than US$1.5B but they have no end users. As a country, we will be paying for electricity which we cannot currently utilize, since this supply is nearly three times the current demand. Once again, the PPP needs to inform the nation who will be using 290 MW over the next three years,” he emphasised.
Turning to proposed costs for the project, Patterson said it was pegged at approximately US$1.5B and for those amounts a number of questions remain unanswered.
“The nation is still waiting on answers to several questions relating to these inflated costs, over what was stated up to 2019: -What accounts for the big difference (over US$800M), more than double in the cost for the Wales location compared to the APNU+AFC location on the East Coast? – note: – all surveys up to the mud flats were already completed by 2019 – the same survey vessel that conducted the seismic surveys that resulted in Exxon having an oil discovery rate of over 85% undertook these surveys – hence we could be very confident in the results; plus a special aircraft spent 4 months conducting Lidar (light detection and ranging) surveys of the sites – the level of uncertainty was minimum. Are storage costs included in the estimated Wales US$900 million and if so, what is the amount? What is the cost of the Wales project including transmission and distribution?” he questioned.
“Will there be further transportation of gas from the receiving port? Has such transportation been costed? How much is the insurance coverage for the pipeline? – Who will be paying these costs? How is the Wales project being financed and when it is expected to be completely paid for?” he probed.
Questions were also directed to the government on the proposed gas sales agreement, as Patterson said that ExxonMobil has confirmed that before construction commences, the company will be entering into a Gas Sales Agreement with the Government of Guyana.
“This means that we will be paying ExxonMobil for our gas, in addition to the cost of the pipeline. The Government is yet to provide the nation with several (answers) regarding this Gas Sales Agreement: -Has this Gas Sales Agreement already been signed? If not when? Why are we paying for the associated gas? Note: – during discussions with Exxon, the coalition administration insisted that we would not be paying for gas, only costs associated with the pipeline – why have the PPP reverted from this position? Is Guyana going to pay market price for the gas, history suggests that the price could vary considerably: it has more than doubled in the past few years,” Patterson stated.
“Have any studies been done to determine the upper limit at which gas is viable as a new source of energy for Guyana? And what will insulate the country from a massive/sustained spike in price? How will ExxonMobil be paid for the gas? Will the contract be with Government or Wales Development Authority? When will this Gas Sales Agreement be made public? Patterson further asked.
