Gas-to-Energy Project: Arbitration looms as Govt, contractor in dispute over delays

– VP Jagdeo says timeline for full project still on track

The Guyana Government and its contractor for the model Gas-to-Energy (GtE) Project, Lindsayca CH4 Guyana Inc. (LNDCH4), are at loggerheads over the timelines of the project and associated costs.
The Joint Venture formed by United States-based Lindsayca and CH4 was awarded the US$759 million contract in November 2022 to build the 300-megawatt Combined Cycle Power Plant and a Natural Gas Liquids (NGL) facility at Wales, West Bank Demerara – key components of the Gas-to-Energy project which will utilise natural gas from oil production activities offshore Guyana in the Stabroek Block.
However, there was a three-month delay in other components of the project that would affect LNDCH4’s delivery of the power plant. While the government has extended the deadline, the contractor is not satisfied and wants more time. They are also making financial claims because the delay would cost the company.
This request, however, was rejected by the Guyana Government, which was advised by the project consultant, Engineers India Limited (EIL). The India-based firm was contracted in January 2023 to provide consultancy services for the construction of the NGL and power plants.
“Our independent engineering supervision firm… has reviewed the claim and rejected it totally to say it doesn’t have merit. So, we have a legal opinion to say they have no merit on the financial claim,” Vice President Dr Bharrat Jagdeo said at a press conference on Thursday.
This rejection has now resulted in the contractors moving to a dispute resolution mechanism. According to the Vice President, this was done through a process called ‘Dispute Adjudication and Arbitration Board.’
“So, the matter is likely to be determined by three persons from that Board, which is currently being set up. Now, when they determine this matter if, at the end of the process, either party is not satisfied with the result of it, they can then ask for arbitration. So, that is the full picture,” the Vice President explained.

Delays
The People’s Progressive Party/Civic (PPP/C) Administration’s flagship GtE initiative is divided into five components: the pipeline from offshore production activities to Wales, then the building of power plant and NGL facilities, the transmission main to move power generated at the power plant, a new control centre at Eccles, East Bank Demerara and upgrading the national power grid.
While the JV partners were given the contract to build the two plants, the procurement and installation of the 225-km gas pipeline from the Wales project site to the offshore oil field is being executed by US oil major ExxonMobil Guyana, which is carrying out production activities in the Stabroek Block.
The installation of the US$1 billion pipeline also includes the upgrade of the roads to get to the site at Wales, the Material Offloading Facility (MOF) and site preparation for 100 acres as well as a lay-down yard – all undertaken by Exxon and subcontracted out. The Guyana Shore Base Inc. (GYSBI) and GAICO Construction were the two companies that had delays in delivering their components of the works.
According to Jagdeo, the delays in question stemmed from Exxon’s failure to hand over these projects on time to LNDCH4 for them to start their work.
Based on the contract, the JV contractors are required to deliver 228 MW of power with four gas turbines coming on stream at the end of 2024 at 57 MW each. To get the entire 300 MW, another two steam turbines are expected by the end of 2025.
“What we have is a delay for the four turbines [to be installed]… And the delay, we believe, is by three months so taking it to end March [2025]… [But now] the contractor wants to complete the gas turbines by August [2025].”
“So, that is where we’re arguing the three-month delay came from. They [the contractors] want a longer period because of the liquidating damages… If they don’t complete the project on time, it will be over US$11 million per month they have to pay in liquidating damages for delay on the project. So, they’re argument we need more time than the three months but we’re saying three months is adequate for you because that’s the delay we’ve had,” Jagdeo stated.

No change in timeline
Meanwhile, the Vice President also refuted claims that the project completion is delayed. He noted that “the total project timeline has not shifted”, adding that it will come by the end of 2025.
Following the completion of the pipeline and associated infrastructure, the FPSOs will be shut down for a short period to connect the line to the vessels leading to a pause in oil production. According to the Vice President, this is expected to take just two weeks and has been considered in the planning process.
Therefore, he also refuted claims that the country will lose US$1 billion during this period.
“This was taken into account in our forecast for revenue for this year. It is not a billion dollars of loss, we estimate 6-7 million barrels of deferred production but they’re hoping to bring forward maintenance for that period on the FPSOs for the period when they have to shut them down to make the connection,” he explained.
Guyana’s gas-to-energy project features approximately 200 kilometres of a subsea pipeline offshore that would run from Liza Destiny and Liza Unity floating, production, storage and offloading (FPSO) vessels in the Stabroek Block to the shore. Upon landing on the West Coast Demerara shore, the pipeline would continue for approximately 25 kilometres to the NGL plant at Wales, WBD.
The pipeline would be 12 inches wide and is expected to transport per day some 50 million standard cubic feet (mscfpd) of dry gas to the NGL plant, but it can push as much as 120 mscfpd.
A whopping $80 billion has been budgeted in 2024 to advance this project and its associated infrastructure, including transmission and distribution upgrades to offtake the power. (G-8)