Gas to shore project crucial for Guyana’s energy needs – energy expert

…says Payara permit provisions a “good sign”

By Jarryl Bryan

With Guyana’s electricity cost regarded as one of the highest in the region, oil and gas expert Arthur Deakin has posited that the Government’s ambitious gas to shore energy project will be a crucial one for Guyana’s energy sector.
In an exclusive interview with this publication, Deakin, who is an Analyst at Americas Market Intelligence, explained that breaking Guyana’s dependence on heavy fuel oil (HFO) by integrating renewable energy into the grid is essential to lowering energy costs.
“I think the gas to shore project that they’re contemplating now from the associated natural gas coming from the Stabroek Block, developing that pipeline to transport that natural gas into a state-of-the-art pipeline, is going to be very important to diversifying the energy grid,” Deakin explained.
“Guyana, as you know, is very dependent on importing heavy fuel oil, which makes its electricity cost one of the highest in the region. So just by using this resource which will be available on extraction, will be fundamental to lowering energy costs and making the energy system more reliable.”
But Deakin warned that while natural gas is a good solution, it is not the only solution. According to the expert, the Government will have to keep developing other renewable energy solutions.
With the Government having issued permit licences for the Payara Development Project, Vice President Bharrat Jagdeo had announced recently that it will now turn its attention to negotiating the gas to energy project.
Jagdeo had said that Guyana is generating at nearly 17 to 20 cents per kilowatt/hour. As such, he noted that the project could cut the cost of electricity in the country by more than half. To this end, he had announced that a team has been set up to start negotiations on the gas to energy project.
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 of excess natural gas– something which Exxon has been flagged for doing in the Stabroek Block.
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 on Guyana had indicated that a little 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.
But for reasons unclear, little progress was made by the previous A Partnership for National Unity/Alliance For Change (APNU/AFC) Government on the gas to shore project. There had only been talk of natural gas and liquid petroleum plants, with the pipe carrying the gas to shore at a location along the East Coast of Demerara (ECD) and the power being integrated into the Guyana Power and Light (GPL) grid.

Payara
When it comes to the Payara permit that the People’s Progressive Party (PPP) signed on September 30 within two months of taking office, Deakin was of the view that the environmental provisions within the licence were all a positive step.
“The fines for long-term flaring, I think that’s a good sign. Testing of the water before it’s discharged into the ocean is another good sign of greater consciousness to the environment,” Deakin said.
“I think that the $400,000 for annual auditing of the operations, I think that’s very fundamental for keeping transparency at the forefront of the operations and ensuring that the money is being spent and managed wisely.”
Moreover, the deal was signed at a time when ExxonMobil had complained of being under time constraints to get its Payara permit by September in order to be able to make its Final Investment Decision (FID) and secure funds.
In light of the swiftness with which the PPP Government was able to secure an improved permit, Deakin lauded this as a good indication of the Government’s ability to deal with investors and high stakes investments.
“I think overall it (Payara) was a good deal. And it’s important because there was already a long delay in approving that licence. So, approving it with somewhat of speed since the PPP Administration (took over) shows competence on behalf of the PPP,” he said.
“It shows that they are willing to move forward with important projects for Guyana. And it reflects to other investors and companies interested in operating in Guyana that this Government means business and is willing to sit down and negotiate,” Deakin added.
It has been pointed out that a comparison with the Payara licence and the licence for Liza Field 1 and 2 will show that the People’s Progressive Party (PPP) was able to secure far improved terms compared to the Opposition.
Improvements include stiffer fines for flaring, requiring Exxon to supply daily, disaggregated production statements for both oil and gas and the requirement for Exxon to submit its development and operating cost estimates for the Payara field within 90 days from the date the licence is issued.
The licence also includes provisions for safety and compliance audits paid for by Exxon, which will evaluate Exxon’s management of waste. Exxon has to provide US$400,000 annually for these audits.
Another new provision is the requirement for Exxon to use a capping stack, within a specified period, in case there is a well blowout. A capping stack is a large-scale piece of sub-sea equipment which oil companies keep onshore, ready to deploy to essentially plug the leak of oil.