Dear Editor
The most frequently stated justifications for the Gas-to-shore project are:
1. Cheaper Electricity for people, local and international businesses.
2. Reduction of pollution by reducing use of fuel oil to generate electricity
It is also true that there are other justifications for the project, but the two mentioned above seem to resonate well with the people of the country. No one can disagree with the need to bring electricity costs down or the need to reduce pollution. Despite the justifications mentioned, there is still a significant level of skepticism within the local and diasporan community. Several questions have been raised with the major stakeholders, the Government of Guyana, and ExxonMobil, regarding the project. These questions center around Capital Cost of the project and some of the factors that affect this cost, such as selection of the landing site, design basis, and Project scope.
Pipeline Landing Site Selection:
The current plan calls for the transportation line to be landed at Wales West Bank Demerara, which represents a change from an earlier accepted location at Clonbrook, Mahaica. The two locations are approximately 47 kilometers apart and though this distance may seem trivial compared to the length of the pipeline, the questions raised about this change of locations could include the following: a. The original location was assigned during the previous administration, and the new location was assigned during the current administration –What criteria was used to justify the change by the current admin.
b. What are the criteria used to identify the optimum location for landing the pipeline?
c. How did each site perform against the selection criteria?
d. How does this change affect project cost?
Design Basis:
The design basis for the project defines the specific process, site, and other relevant information that will be the foundation for sizing the pipeline, and design of associated onshore equipment, along with the power plant. Some information published in the media showed that the gas throughput was set at 30– 35 [million standard cubic feet per day] MMSCFD which was subsequently reported to be 50 MMSCFD at a later date. The project capital cost at 30– 35 MMSCFD design basis was given as 304 $MM. Capital costs published in the media for the 50 MMSCFD basis comes in at 900 $MM again raising questions because of the significant change (approx. 200%) in Capital cost that didn’t seem to match with a smaller change approx. (43 – 66%) in the design basis.
Changes in the design basis of a project will have a direct impact on the Capital Cost. Increasing the size of the gas throughout increases the size of the pipeline and all the equipment downstream of the pipeline. It will ultimately impact the amount of NGLs produced, amount of Power generated, the quantity of emissions generated by the processing facility and the project schedule.
a. Why did the design basis change?
b. What is the impact of the change on Power Generation capacity?
c. Is the pipeline designed for associated gas from Liza alone or does it have capacity to include gas from other blocks?
Project Scope:
Changes to the design basis of a project can have significant cost and other impacts on the project cost and schedule. Changing the landing site for the pipeline and to the design basis for the project combine to impact the overall scope of the project since one change will affect many other items within the project. If any of the changes are based on motivations that have little or no technical justification this will only increase the potential for negative outcomes, like cost overruns, and schedule delays. The concerns about the potential for cost overruns after people have observed these changes will continue to raise questions, and more transparency and engagement by the leadership would go a long way to reducing the level of concern.
a. How will the project be financed and at what discount rate?
b. Is the NGL separation facility included in the current project scope?
c. Will any gas storage capacity be included at the landing site ?
d. What is the expected transition timing from fuel oil generated power to 100% natural gas power?
Gas Composition:
It has been stated that the current gas has no H2S (Acid gas); however, the Gas composition will change as the well draws down, and it may have enough of these sulphur based compounds to warrant a treatment unit. it raises a question that could have impact on cost and on the environment. Having to treat the sulphur compounds will have a cost associated with it, and there will be some emissions to the environment that will have to be addressed.
- Is acid gas treatment in the scope even though the initial gas composition will not have any H2S?
Conclusion:
The comments above touch on just a few of the areas and issues related to the Gas-to-Shore project. There are many good aspects to this project that are raising the expectations of both people and potential investors. On the other hand, people are quite familiar with the plight of many developing countries that have been in a similar position. The results are not always positive, despite the enormous potential at the beginning. Causes for this type of outcome are many and has become its own area of professional and academic study. Many of the questions raised require that sufficient time and effort is taken to restate some of the Political, Technical, Economic and Environmental issues in a way that will allow citizens who may not be versed in these aspects to participate in the discussion and raise their own questions. Citizens should understand the risks both financial and environmental, and also how implementing these projects will bring the highly touted benefits that they expect.
Respectfully,
Dave Modeste
