Former finance minister Winston Jordan has said that with no agreement between the government and ExxonMobil made public or shared with the Parliament on how the pipeline for the more than US$2 billion gas-to-energy (GtE) project is being funded, it seems like the government has taken an illegal loan.
“We have no agreement in public of what is the arrangement with ExxonMobil for them fronting the pipeline. All we have is statements, from time to time, from [Project Lead Winston] Brassington and [Vice President Bharrat] Jagdeo. Not even calls by the Parliamentary Economic Committee have been answered. There is just nothing, nothing, nothing! How does one start a project and not formalise agreements?” he asked rhetorically in an interview with the Stabroek News yesterday.
“The project is estimated at two-point-something billion dollars. There is the US$1 billion for the pipeline and then the other billion plus comes for the plant from the US EXIM Bank loan of US$640 million and other monies for the works and so on. How can you have such an enormous project and the people don’t know the terms of the agreements?”
Jordan said that he had “been talking to lawyers” about the legality of the project funding, but was told that without agreements no judgements or advice could be offered. He stressed much speculation surrounds the project and if the government was transparent it would eliminate a lot of the guessing in the public domain.
According to Jordan, Jagdeo had said that ExxonMobil would not have advanced money to undertake the pipeline aspect if they did not think it profitable. Therefore, he questioned if the funding for the pipeline would be taken from Guyana’s oil share by ExxonMobil as payment for the fronted works. If this was the case, Jordan said, it would be illegal.
“What the institutional arrangements are with a loan and what the NRF ACT says? I am putting in the public domain that if we know this pipeline is going to belong to the government and Exxon will be financing, well whether de facto or de jure, it means the Government of Guyana has incurred a loan or contingent liability. Contingent liabilities have to be reflected in the books; it must be in the estimates… by law,” he said.
Jordan said that if there was no legal document and ExxonMobil and the government had a gentleman’s agreement, this should not be as it is significant sums of taxpayers’ dollars and there are processes for handling these. “When it comes to US$1 billion, you don’t have a gentleman’s agreement. If they are acquiring an asset,
how is it paying off for this asset?” he queried.
And when the government said that a final cost was not yet determined, Jordan said, “It is also like a shooting star. Exxon said it can’t give a final figure so you are telling me you have to have all these moving parts until the project is completed? Unless we have a document which shows the terms of agreement, so much will be speculated,” he added.
He said all of the financial problems would have been resolved had there been a feasibility study and that document shared on the overall project.
The Cheddi Jagan International Airport Project, he said, in which part of the runway extension had to be relocated, showed similarities of a project that had no feasibility study done.
“Until we can get all the documents that have been signed in respect to this project, especially the pipeline, all we can do is speculate because we have not seen any document,” Jordan reiterated.
“We are talking in excess of US$2 billion and like what happened at CJIA, they had done no feasibility when the project was started and enormous amounts of money were wasted on sand before they realised the land wasn’t the best and we had to go to the other side. History seems to be repeating itself. You have to do enormous expenditure to make the land [structurally sound] which then could run into cost overruns,” he added, pointing to land stability in Wales.
Stabroek News yesterday reported that huge amounts of material have had to be purchased to stabilise the soil at Wales for the GtE project, drawing concerns from the opposition and raising questions as to whether all investors in that area will face similar expenses.
Brassington on Thursday made a presentation to an American Chamber of Commerce event at the Marriott Hotel and disclosed that 1.65 million cubic metres (m3) of sand had to be brought in for soil stabilisation. In addition to the sand, he said that 160,000m3 of loam and 25,000m3 of crusher run had to be used for the stabilisation exercise. This would have been at a significant cost which was not disclosed.
The need for such soil stabilising has raised the question as to whether Wales was the appropriate spot for this project taking soil characteristics and other factors into consideration, or it was purely a political decision to rejuvenate the area in the aftermath of the closure of the sugar estate there by the previous government.
Brassington said that expectations are for the commercial startup of the power plant using lean gas from the power plant in the second half of 2025. In addition it is expected that the combined cycle would be completed by the end of next year. He also announced that the government has added another phase to the project, given that it has realised that the 300 megawatts (MW) of power would not be enough.
“You will see in the papers tomorrow, an advertisement for phase two of the gas-to-energy project. Already at 300MW, we are projecting that we are going to max that out by 2027. We will need more power. The pipeline that is being built has the capacity to handle up to 125 cf of gas. Our commitment from Exxon is 50 cf. The government hopes to secure additional gas to build a second phase power plant,” Brassingron said.
He pointed to land set aside for “future developments” and “downstream activities. Being a fertiliser plant or whatever. We will need to build additional storage for the liquids.” He noted that the project delays were due mainly to soil stabilisation work which took longer than anticipated. “The soil stabilisation has taken a lot longer. It has been a very technical process. So the civil schedule is what is driving, a very critical part, the other items are a little behind but not as much as the civil schedule,” Brassington said.
“But all of this being said, the parties have agreed that sometime in the second half of next year, I don’t want to be precise right now because there are a number of moving parts, but we believe that this will be achieved.”
He said that ExxonMobil’s task of bringing the pipeline to shore is on schedule for the end of this year and they will fill it with nitrogen and await the completion of the plant. Using slides in his presentation, Brassington said that the project was more than just a power plant, as he pointed to the components that will make up the facility. “… We are building an LNG [Liquefied Natural Gas] facility,” he said.
Given that the government has announced plans for the former Wales Sugar Estate area to be converted into an industrial zone with many factories, the opposition is questioning whether companies investing in the zone will also have to dole out millions of US dollars to remediate their lands before construction. Jordan underscored that while engineering could fix structural issues and soil remediation, the core of the matter was that proper feasibility studies would have guided on costs and best locations.
“Again it’s the issue of feasibility…,” he said while noting that to date a feasibility document has also not been made available.
