Govt looking for another partner to fast-track natural gas development – VP Jagdeo

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Vice President Dr Bharrat Jagdeo

As Guyana moves to develop a National Gas Strategy, Vice President Bharrat Jagdeo has noted that now is the time for the country to move swiftly in developing this resource, which has a small window as the world transitions from fossil fuel.

“This is the appropriate time to develop the gas resources given what is happening globally. There may still be a window given this enhanced global demand and the recognition that gas will have to be a transitional fuel…So given that, we have to move swiftly on this matter,” Jagdeo stated during a press conference on Thursday.

Consequently, he noted that the Government will further engage ExxonMobil, which along with its partners Hess Corporation and CNOOC Limited is producing oil in the Stabroek Block offshore Guyana where at least two commercial gas fields have been found.

However, the Vice President pointed out that the Government is not pleased with the pace at which the development of gas is moving and is looking at another partner.

“Moving swiftly means getting ExxonMobil at the table [and] getting maybe another partner who will try to develop this industry and who wants to push it faster than Exxon. We’re not pleased with the pace at which they want to approach the development of the gas assets. I think they’re more interested in oil and so, my personal assessment is that they’re not treating our desire to monetise the gas assets with the same sense of urgency as they are with moving the projects to produce more oil,” he stressed.

Only last week, the Government released the draft National Gas Monetisation Strategy to the public for their feedback. The aim is to simultaneously work on finalising the strategy while getting comments from the public, thus saving time. The deadline for the submission of comments from the public is November 14, 2023.

The Government has already made it clear that its goal is to find the best option to monetise its gas resources.

According to the Vice President, after the finalisation of the strategy, the Government would like to nudge the gas development process along, and bringing in another partner will help to underwrite some of the expenses and the risks associated with monetising the gas.

“Following the finalisation of the strategy, once the comments come in, we would then probably have to go out to RFP (Request For Proposals) to see other partners, who might be willing to work with us and Exxon to monetise the gas. It has to be tripartite because we own 50 per cent of the gas and Exxon owns 50 per cent. But if you don’t have a development [plan] then you can’t get any of the gas out…”

“We know how much gas we have out there. We know where they are. It’s now getting a partner to move on it, make sure we capitalise on this window of opportunity, and then we will go through an internal process of seeing, with of course the partners, what yields the maximum value-added to the country’s benefit?

“Is it Liquified Natural Gas, is it an onshore facility – which we have one coming onstream, is it just having a vessel out there liquifying the gas and shipping it directly, is the using it for fertiliser, should we use the gas to generate a lot of power and try to supply Brazil, should we use it to generate power and process bauxite… That’s what we’re hoping this strategy will do, bring up all the potential ideas that we can use it for,” VP Jagdeo posited.

A model of Guyana’s Gas-to-Energy Project

In the Stabroek Block offshore Guyana, some 17 trillion cubic feet of gas has been found, with the Pluma and Haimara wells being proven gas fields.

The Government is planning to pipe the natural gas onshore for its gas-to-energy project in Wales, West Coast Demerara, where an Integrated Natural Gas Liquid (NGL) plant and a 300-megawatt power plant will be built.

With Guyana seeking to develop the infrastructure to transport and store gas, a pertinent question will be capital costs. According to the draft gas strategy, the Government will be seeking to attract private funding for the gas infrastructure.

It was pointed out that gas transmission pipelines usually require Government investment in the early stages. When it comes to domestic gas and power projects, the strategy pointed out that initial Government investment is particularly in countries with minimal existing gas infrastructure.

The strategy notes, however, that once the sector is more developed and private companies have the capacity, then the Government’s direct participation in these projects may be reduced and the projects themselves privatised.

“Infrastructure investments such as gas transmission pipelines and gas distribution systems typically require initial Government investment, particularly in countries with minimal existing infrastructure. When the sector and regulations are more developed, private companies can build and operate whole integrated systems.”

“At which point the Government participation may be reduced to regulation and the collection of taxes and fees. As projects for which Government has provided the initial investment near the point of becoming economically self-sustaining, there is then the opportunity for the Government to divest the project through privatisation,” the document states.

One benefit of this, according to the strategy, is for the State to avoid the risks and debts, as well as diversifying the investment in the sector. It was noted that private investment is necessary considering Stabroek Block operators ExxonMobil and its partners, as they produce oil from the floating production, storage and offloading (FPSO) vessels.

“GoG will seek to attract private funding for the timely and cost-effective development of its gas infrastructure to avoid the large upfront capital required to develop such projects and eliminate the risk associated with the debt infrastructure given uncertainty related to the revenue streams required for repayment.”

“Additionally, by diversifying the participants in the gas value chain and securing private investment, the GoG will avoid significant capital charges into the cost bank through the current PSC structure, which will significantly accelerate revenues to the GoG given the current upstream plans and FPSO deployment by the Stabroek Consortium,” the strategy states.

The strategy meanwhile noted that generally, power generation and electric distribution projects are initiated by the Government. It noted, however, that some power generation projects, such as Independent Power Producers (IPPs), are done with private participation.