Home Letters Gas-to-shore a good investment for cheaper electricity
The People’s Progressive Party/Civic Government has identified the former Wales Sugar Estate, West Bank Demerara, as the site for establishing the power generation plant. When gas-to-shore pipelines hit Guyana’s shoreline, this location makes economic sense, as it would open avenues for greater development in an area that was depressed by the APNU/AFC in the last five years.
Vice President Bharrat Jagdeo, on Tuesday February 9, announced plans for the associated Environmental Impact Assessment (EIA) and other critical studies to be undertaken this year, and promised that all details would be made public. Jagdeo said financial estimates for the venture were pegged at somewhere between US$500 million and US$800 million, depending on the size of the pipeline, the geotechnical surveys, etcetera.
The Government’s transformative gas-to-shore project is underway, and is set to be completed by 2023. The main objective is to transport sufficient gas from the Stabroek block’s petroleum operations to supply some 200-250 megawatts of energy to the national grid, leading to a significant reduction in electricity costs.
Reducing the cost of energy would not only make the country more competitive, but we could export more, with the objective of having a trade balance surplus; but we would also save foreign exchange, because we spend more than $500 million a year to import fuel. So, if the gas-to-shore would mean that we would get cheaper electricity, we would be pushing industrialisation and reducing manufacturers’ cost.
It also means we are going to save millions in fuel import.
It is important to have a cleaner energy source that can easily be flipped on and off when needed.
In a recent roundtable held by Latin American Finance Ministers on Guyana’s financial future, our Minister of Finance, Dr Ashni Singh, said the Ali Administration would use the project to reduce energy costs for the people.
Guyana’s current electricity system is unstable, and is largely dependent on heavy fuel oil, rising electricity tariffs, and hurting the competitiveness of its industries. The successful implementation of this gas project would help the Government fulfill its plan of halving energy costs.
The gas can also produce ammonia and fertilisers such as urea, growing Guyana’s petrochemical sector. It is fundamental, however, for the Government to implement the proper regulatory and financial frameworks to prevent corruption, political cronyism, and environmental lapses.
The PPP/C Government also believe that the gas-to- power project would allow them to decarbonise our own generational mix. By switching from heavy fuel oil to natural gas, while simultaneously adding renewable energy to the grid, the PPP/C Administration would ‘clean’ its energy sources.
This is similar to what is happening in China, which has vowed to be carbon neutral by 2060, despite being responsible for 28 percent of the global CO2 emissions in 2020. Transitioning from coal to gas is part of China’s plan. This shift should be modelled, to an extent, by oil majors seeking to reduce their carbon emissions and diversify their asset base.
Although this specific project would be funded by the Government of Guyana, in certain instances, the financing would come from the oil majors. Instead of punishing them for volatile crude price, credit agencies should be rewarding these companies for their efforts to decarbonise their operations. Providing majors with continuous access to cheap credit would allow the companies to invest more in low-carbon technologies. If their ratings are downgraded, they will have to pay more to access money, forcing them to abandon riskier climate-friendly ventures.
This is the time to push the market leaders in the right direction by incentivising greener development and asset prioritisation. Guyana’s gas-to-shore project is a good place for Exxon to start.
Vice President Jagdeo indicated that, as the Government works to bring cheaper energy in the short term, it is working on plans for the adoption of renewable energy in the long term.
It is to this end that he said that monies from Norway’s forest pact Guyana would use to fund a solar project for the Essequibo and Linden. “We will be working on renewable energy, and that is why we will restart discussions for Amaila Falls very soon, to add to the mix,” of renewable energy.
There will be a significant amount of solar, although it is not baseload, because you need battery storage. The Government will put in a small amount of storage to keep the spinning reserve. Use solar, gas and hydro in the future for Guyana’s development.