Jagdeo blames ExxonMobil and its contractor for delays facing gas-to-energy project

Jagdeo blames ExxonMobil and its contractor for delays facing gas-to-energy project

By Svetlana Marshall

Vice President Bharrat Jagdeo has laid blame at the doorsteps of the ExxonMobil company and its local contractor, Guyana Shore Base, for the delays being experienced in the execution of the Gas-to-Energy Project, which has resulted in calls for arbitration by the project contractors – CH4-Lindsayca. 

However, during a press conference today, the Vice President said the claims of costs overruns by the contractors, amounting to US$90M lack merit. 

Mr. Jagdeo explained that as part of the US$1B agreement with ExxonMobil for the construction of the gas pipeline, the company was required to upgrade roads leading to the designated site for the Power Plant and Natural Gas Liquids Plant at Wales, construct a material offloading facility, and also prepare 100 acres of land, including a laydown yard to support the project.

ExxonMobil, according to Vice President Jagdeo, was expected to complete the preparatory works by June 2023, but there was a three-month delay. 

“As I said before Exxon was responsible for the site preparation, the road, the MOF – that is the materials offloading facility – and the laydown yard. We were supposed to hand over the site to the contractor by June, we did not hand over the site, that is Exxon did not hand over the site, until September, and it was still incomplete, and they handed over, an additional $14 from the $1B that they set aside, to the contractor, to complete the site. So, a three months delay. Who was the contractor that Exxon had, it was GYSBI to prepare this site. So, we had a three months delay by GYSBI and Exxon to hand over the site to the contractor,” the Vice President explained.

He said due to the three-month delay, the Government proposed that the contractor completes the first component of the US$759M Power and Natural Gas Liquids plants by April 2025, instead of December 2024 deadline as was originally agreed. But the contracting companies are proposing a further extension, according to the Vice President.

“They want a longer period because the liquidated damages for not completing the project on time for the contractor, if they don’t complete the project on time, it is over US$11M per month, they have to pay in liquidating damages for delay on the project. So, they are arguing that they need more time beyond the three months. We are saying three months adequate for you because that is the delay that we had,” VP Jagdeo said. 

But in addition to the dispute over the extended period, the companies are claiming costs overruns of US$90M. However, the Vice President said based on a review conducted by Engineers India Limited (EIL), which was hired to supervise the project, the claim lacks merit, and has been rejected by EIL. 

Against that backdrop, a dispute resolution and arbitration Board, will be established to resolve the issue. 

But despite the delays, the Vice President is maintaining that the project will be completed within the timeline outlined in the contract with CH4 Lindsayca. 

“The timeline was that by end 2024, listen carefully, end 2024, Lindsayca and the others were supposed to deliver 228 megawatts of power, four turbines were to come on stream at the end of 2024 of 57 megawatts each. To complete the project in the agreement, where the full 300 megawatts would come online, they had, that is the combined cycle, that is the two additional turbines, the steam turbines. The four gas turbines were supposed to come on stream end 2024, and the steam turbines should have come on stream end 2025. So, the completed project as per contract is end 2025,” the Vice President explained. 

Meanwhile, Economic Advisor to the Leader of the Opposition, Elson Lowe today said should the arbitration succeed, the country could suffer a significant financial blow.

While urging the Government to come clean on the matter, Lowe said the Administration must disclose measures being taken to prevent further financial leakage and losses.

“We cannot afford for the Gas to Energy plant to go the way of Skeldon, with a sharp increase in costs, followed by a failure to perform. That would plunge the economy and people of Guyana into a perilous situation, with blackouts disrupting businesses and people’s livelihoods incessantly. Is this arbitration likely to harm the effort to get a US Exim bank loan to finance this project? The government must let the people know.  If the VP is an expert, as he claims, what is there to hide? Come clean to the nation with the facts,” Lowe said.

He said in light of these controversies and uncertainties, the Government must release all agreements with Exxon for the provision of natural gas, including the repayment plan. 

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