Vice President Bharrat Jagdeo has disclosed that the PPP/C government is now looking to start negotiations on the gas to energy project.
“We’ve set up a team to start the negotiation on the gas to energy project,” he announced at a press conference on Friday.
Only Wednesday, government signed the Production Licence for the Payara Development Project – ExxonMobil’s third development offshore Guyana.
As such, the Vice President pointed out that the gas to energy project will be one of the next frontiers of engagement with the oil companies, particularly the U.S. oil giant which operates the oil-rich stabroek block through it’s local affiliate Esso Exploration and Production Guyana Limited (EEPGL) and two other partners – Hess Guyana Exploration Ltd. and CNOOC Petroleum Guyana Limited.
He said through these engagements, government will be looking to claw back some of the losses, on the fiscal side, that the country suffered in the Production Sharing Agreement with Exxon for the Stabroek Block, which has over eight billion barrels of crude.
“We made it clear that the price for gas will not be the market price. We will not pay market price for the gas and that means more benefits to Guyana and our people,” he stated.
But the Vice President noted that government is still make a decision on whether it will buy the power or generate it.
“We have to see the cost of both to determine whether government can fund this or not. If the government cannot fund it, we will go out to tender for people to build this facility but tie them into a price for the electricity – a low price for the electricity… and to the extent that gas is cheap, that price will even come down further,” he asserted.
Currently, Guyana is generating at nearly 17 to 20 cents per kilowatt/hour, according to Jagde. As such, he noted that this could cut the cost of electricity in the country by more than half.
The PPP/C administration is looking to have this done by 2023, and in an effort to further push this initiative, it has stipulated stiff fines and penalties in the Payara Licence against flaring – something which Exxon has been flagged for doing in the Stabroek Block.
To date, Exxon has flared more than 10 billion cubic feet of natural gas following the failure of a gas compressor on the Liza Destiny Floating, Production, Storage and Offloading (FPSO) vessel that is lifting oil from the Liza 1 Well. This has caused environmentalists to be up in arms since flaring is generally viewed as harmful to the environment.
In the Payara Production Licence, routine flaring to maintain oil production is strictly prohibited unless approval was granted by the Environmental Protection Agency (EPA).
EEPGL, which is the licence-holder for Payara, have will pay the Government for the cost of gas wasted during flaring and will also be subject to fines under the EPA related to emissions from flaring.
Jagdeo contended that such wastage of natural gas will not be tolerated. He explained that there will be two components to the fine – the first being, the EPA doing a two-part fine based on carbon-pricing and the pollution. This system of fines will be put in place shortly.
“The second component of the fine is the part that we insisted on, is the use of the gas because we were entitled to half of that gas and if you’re burning it and it’s your fault, you should pay us for the gas that you burnt – that’s the economic fine,” the Vice President asserted, noting that none of these provisions were included in the previous production licences for the Liza One and Two development projects that were granted by the former APNU/AFC administration.
Part of a US$20 million loan that the Coalition Government had signed with the World Bank had gone towards funding a study to examine the merits of bringing natural gas onshore for the local energy market.
Exxon itself has said that the gas that would be required for the gas-to-shore project is available. Estimates have put the figure required for the gas to shore project at 30 to 35 million cubic feet of natural gas.
Previously released data from Norwegian research company Rystad Energy had indicated that less than 20 per cent of the 1.8 billion Barrels of Oil Equivalent (BOE) discovered last year was gas. The Haimara discovery made by Exxon last year was found to have 207 feet of high-quality gas condensate sandstone reservoirs.
Little progress was made by the previous Government on the gas to shore project.