The Government will pay US oil giant ExxonMobil US$55M per annum for 20 years for the gas to shore pipeline. That revelation was made by the Head of the Gas-to-Energy Project, Winston Brassington.
While maintaining that the gas, which will be supplied by Exxon through the pipeline to the power plant at Wales, will be absolutely free, the cost for the construction of the pipeline will fall on Guyana.
ExxonMobil is injecting US$1 billion into the project to facilitate the construction of the pipeline, which, upon completion will be used to transport the gas from its offshore operations to a US$759 million Power Plant and Natural Gas Liquids (NGL) Plant at Wales.
Last week, ExxonMobil Guyana President, Alistair Routledge told reporters that the gas would be sold to Guyana to recover the cost of the pipeline.
However, while presenting an overview of the project at the ongoing International Energy Conference and Expo, Mr. Brassington maintained that the gas will be free. But he said the Government will be required to pay back Exxon for the pipeline.
“We are looking to pay Exxon an annual fixed payment of US$55 million for the supply of 50 million cubic feet of gas per day over a 20-year period from the time the project comes online. This payment is intended to allow Exxon to recover the expected US$1B investment over time. So, we’re paying for the amortization of the pipeline infrastructure. We are not paying for the gas per se, the gas is considered free,” Mr Brassington explained.
It was further revealed that revenues generated from the sale of electricity from the Natural Gas Power Plant will be used to repay Exxon for the pipeline.
“There is no cost to the gas itself,” he maintained, while explaining further that Government devised a particular formula to arrive at the annual fee to be paid to the oil company.
“So, we [are] guaranteed 50 million cubic feet of gas per day and how did we come up with that US$55M. So, that US$55M is amortized cost of a billion dollars for 20 years at a discount rate and then we convert that to an equivalent price of gas. So that conversion, we took the 50 million, we took $2.40 per MMBtu by 365 days by 1.26, which is the conversion of the MMBtu to MCFD, and that’s how we came up with the US$55M. So, in our gas supply agreement, we denominate the equivalent price of amortizing the pipeline to $2.40 per MMBtu,” Mr Brassington said.
He said Exxon projects that the high-quality gas will remain stable over the life of the project.
Further, he said the Natural Gas Liquids (NGL) Plant is expected to produce a minimum of 63 million barrels of liquid per annum or 4,100 barrels of liquid gas per day, making the venture very profitable with a huge possibility for exportation.
“In addition to that, more importantly, we will receive 311 megawatts using Lean gas, which gas is separated into the liquid and lean gas and that will deliver to us over 2600 gigawatt hours per annum. So that is what we get from that 50 million cubic feet of gas after it goes through the power plant and the NGL facilities,” he said.
He noted that while Exxon will be supplying the country with 50 million cubic feet of gas per day, the pipeline will have the capacity to transport approximately 120 million cubic feet of gas per day.
Mr Brassington said once the project comes on stream, the country will be able to significantly reduce the cost of electricity.
But while he believes it is a very good deal, the main opposition – the A Partnership for National Unity + Alliance For Change (APNU+AFC) – remains concerned about the contractual agreements governing the project.
Opposition Leader, Aubrey Norton told residents at North Ruimveldt last night that there are many unanswered questions.
“None of them can tell us what will be the price for electricity after this project because they don’t plan…the Gas-to-Energy project, the information must be put in the public domain. People must know how much they will pay for electricity. This is virtually the largest investment and it deh in one man head, and the one man head it deh in is a man who does fail all the time,” the Opposition Leader said.
The Opposition has filed a Parliamentary Motion asking Government to hand over the project documents.
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