Private financing to be pursued for developing gas infrastructure – draft strategy

…will maximise benefits while reducing risk to State

As part of its effort to develop infrastructure for natural gas while reducing the financial burden on the State, Government will be pursuing private financing. This is according to the draft gas utilisation strategy released for public consultations.
With Guyana seeking to develop infrastructure to transport and store gas, a pertinent question will be capital costs. According to the draft gas utilisation strategy, the Government will be seeking to attract private funding for the gas infrastructure.
It was pointed out that gas transmission pipelines usually require Government investment in the early stages. When it comes to domestic gas and power projects, the strategy pointed out that initial Government investment is particularly in countries with minimal existing gas infrastructure.
The strategy notes, however, that once the sector is more developed and private companies have the capacity, then the Government’s direct participation in these projects may be reduced and the projects themselves privatised.

“Infrastructure investments such as gas transmission pipelines and gas distribution systems typically require initial Government investment, particularly in countries with minimal existing infrastructure. When the sector and regulations are more developed, private companies can build and operate whole integrated systems.”
“At which point the Government participation may be reduced to regulation and the collection of taxes and fees. As projects for which Government has provided the initial investment near the point of becoming economically self-sustaining, there is then the opportunity for the Government to divest the project through privatisation,” the strategy states.
One benefit of this, according to the strategy, is for the State to avoid the risks and debts, as well as diversifying the investment in the sector. It was noted that private investment is necessary considering Stabroek Block operators ExxonMobil and its partners, as they produce oil from the floating production, storage and offloading (FPSO) vessels.
“GoG will seek to attract private funding for the timely and cost-effective development of its gas infrastructure to avoid the large upfront capital required to develop such projects and eliminate the risk associated with the debt infrastructure given uncertainty related to the revenue streams required for repayment.”
“Additionally, by diversifying the participants in the gas value chain and securing private investment, the GoG will avoid significant capital charges into the cost bank through the current PSC structure, which will significantly accelerate revenues to the GoG given the current upstream plans and FPSO deployment by the Stabroek Consortium,” the strategy states.
The strategy meanwhile noted that generally, power generation and electric distribution projects are initiated by Government. It noted, however, that some power generation projects, such as Independent Power Producers (IPPs), are done with private participation.
Consultations for the National Gas Strategy were launched by the Government through the Ministry of Natural Resources on Monday, with the strategy catering to the infrastructure to develop Guyana’s natural gas potential, which will only enhance the country’s reputation as an investment destination.
The draft strategy was released with November 14, 2023 set as the deadline for submissions from the public. According to the Ministry in a statement, the strategy will be a vital tool to guide the management of Guyana’s natural gas resources, ensuring that informed decisions are made on how to use the gas.
The monetisation of Guyana’s vast gas reserves has been described by Vice President Bharrat Jagdeo as the next wave of economic opportunity for Guyana, seeing as the country has some 17 trillion cubic feet of associated gas. The gas-to-energy project is one way in which this gas is being put to use.
In Budget 2023, the gas-to-energy project received a $43.3 billion allocation. This allocation is in addition to the $24.6 billion injected into the start-up of the transformational project, which includes the construction of an integrated Natural Gas Liquid (NGL) plant and the 300-megawatt (MW) combined cycle power plant at Wales, West Bank Demerara (WBD).
The NGL and 300 MW power plant components of the Gas-to-Shore Project are meanwhile expected to cost US$759.8 million and will be financed through sources that include budgets and loan financing.
The scope of Guyana’s gas-to-energy project consists of the construction of 225 kilometres of pipeline from the Liza field in the Stabroek Block offshore Guyana, where Exxon and its partners are currently producing oil. It features approximately 200 kilometres of a subsea pipeline offshore that will run from Liza Destiny and Liza Unity floating production, storage and offloading (FPSO) vessels in the Stabroek Block to the shore. (G3)