January 11 ,2021
If it becomes a reality, the proposed gas-to-shore project will be the single largest publicly financed venture in the history of the country. For that reason alone, but amid many others, it requires the most rigorous examination and importantly, full transparency.
When it was last in government, the PPP/C tried aggressively during the Ramotar administration to have the Amaila Falls Hydropower Project (AFHP) executed. The 165-megawatt plant with a price tag of US$858m would have been the single largest project in the history of the country. It, however, failed to win approval. Had the project been approved and been successful Guyana would have been well on the way to meeting ambitious renewable energy targets and reducing carbon emissions. It was not to be mainly because the PPP/C had held a minority in Parliament and was unable to secure cross-party support for the AFHP. The investors simply couldn’t tolerate the risk entailed and pulled out.
That wasn’t the only reason for its failure. The then PPP/C government had had a tendency to violations of good governance, particularly as it related to tendering procedures and transparency. So, the contract for the AFHP access road was scandalously awarded to a Mr Fip Motilall who had had no experience building roads. His contract was terminated when President Ramotar acceded to office. Further, there was very little transparency and forthrightness in the financials surrounding the project and a variety of other variables including the reliability of the flow over the Amaila Falls. There remained significant doubts about the integrity of the transmission and distribution system and its ability to proficiently convey the power. There were also concerns about the wisdom of sinking so much capital into a single source of energy which if there were any disasters would leave electricity generation in a precarious state. Notwithstanding the revolutionary changes that were promised by the AFHP, its handling by the PPP/C government of 2011 did not conform to best practices and left wide ground to doubt that it should be proceeded with.
The best evidence that PPP/C governments on their own cannot be expected to successfully manage big-ticket projects is the Skeldon Sugar Modernisation Programme (SSMP), which also involved expanded cane cultivation, the establishment of a refinery and the co-generation of electricity for the national grid. The brainchild of former president Jagdeo, who is now Vice-President, the US$200m SSMP started in 2003, two years after his first full term as president began. It encompassed a series of disastrous decisions including the choice of contractor, bled revenues from GuySuCo and pumped up production costs to stratospheric levels. To cut a long story short, prior to its closure by the APNU+AFC government the entire Skeldon project was on life support. The factory is irredeemably flawed and won’t be amenable to ministrations that this PPP/C government might conceive of.
Taking account of all of this and the questions posed by the use of associated gas from the oil extraction offshore, no government can rush pell-mell into such a major project and the Ali administration should exercise extreme caution here.
On December 31 last year, Mr Jagdeo told Stabroek News that Wales, West Bank Demerara has been selected as the site for the gas-to-shore facility. He also asserted that “the critical decisions regarding the geotechnical, geophysical and the environmental studies, that will advance the project, have been made.”
Having been in office for just over five months, it is unclear which studies have been vetted by the government and its Gas to Shore Project Advisory Committee and whether they were subject to expert dissection. President Ali’s administration must release the studies that will underpin its decisions in this sector so that the public can inform itself on what will be done with public finances and for there to be detailed examination by experts in the field.
There are several vital areas of interest to the public. The first is the cost-benefit analysis. Will this investment lead to a reduction in the cost of energy supplied by the Guyana Power and Light (GPL)? When the expected investment of US$400m is taken account of will the generation of electricity from natural gas on an annual basis be cheaper than the present arrangements with Heavy Fuel Oil (HFO) taking account of finance charges for the project? Will the project over its lifetime recover the investment to be made by Guyana? What guarantees are there that the plant will have an uninterrupted supply of natural gas and what contingencies/hedges will be in place? By taking the gas to shore are we really aiding ExxonMobil in this already lopsided Production Sharing Agreement from 2016 as opposed to having them reinject the gas into the oil well?
No decisions must be made on a project of this scale without an adequate Environmental Impact Assessment (EIA). This EIA will have to take account of the impact of the pipeline wending its way to the shore and the repercussions for flora and fauna. Further, the network that will lead to Wales and the plant that will be installed will have to be investigated in relation to the dislocation of communities and the risk of discharges and pipe ruptures to habitations along its path. There are doubts whether as presently staffed that these functions can be adequately administered by the Environmental Protection Agency.
Guyana remains committed to meeting international obligations to cut emissions notwithstanding the fact that it is now the producer of 120,000 barrels of oil per day which has a built-in carbon burden. Will switching from HFOs to natural gas enable Guyana to meet its commitments under the Paris Agreement on climate change? Or will this require major investment in clean renewable energies such as hydro, wind and solar?
There are no known answers as yet to these questions from the government. Before this project is proceeded with the Natural Resources Committee of Parliament should undertake a full assessment of it and mobilise experts from here and abroad if necessary to provide advice.
We also endorse the call by Transparency Institute Guyana Inc in a letter in yesterday’s Sunday Stabroek for “open governance” in relation to this project. Too much is at stake in an oil and gas sector that is woefully deficient in terms of legislative cover and good governance.