Dear Editor,
Some of us have our own energy facilities, but would like to complement that with a cheap, dependable backup supply through the GPL Inc. I would, and should there be evidence that the Wales gas-to-energy (WGTE) project represents both the cheap and reliable, then I am all for it. The supporting numbers and other underpinnings, however, must be forthcoming to furnish the foundation for such throwing of support behind this most controversial of projects. We have not been given any such numbers by the PPP Government; numbers that are from known and authoritative source(s). We have been given something resembling estimates, which I could accept as a starting point, but then run into some turbulence, due to developing conditions, which I point to now.
First, the project costs have more than doubled from what was put before the public. This is one major variable that is now night versus day, with the final total project number still a work in progress. Perhaps, it is more accurate to say a number in progress; it is almost certain to be more than all the ones that came before. As we all know from tough current experience, the price of just about everything is going up. I would think that necessary physical materials for the WGTE would follow suit, possibly even be ahead of the ever-spiraling price curve. Yet, there has been no accompanying developments about the related likely change in the cost price of electricity to the GPL, and its significance to the price offered to consumers.
Second, in its efforts to tame the rampaging inflation beast, the United States Fed has embarked on what is clearly a policy of aggressive interest rate hikes. The indications are that there are more of such interest rate hikes to come. Increases in the Federal funds rate mean that the cost of borrowing just went up for both individuals and corporations. The Fed new interest rate level sets the baseline for financial institutions in terms of their own rate of lending to those who come to them for loans. Few businesses operate on a pure, or mostly, cash basis. The opposite is what more applies, in that a good amount of company operations is financed by borrowing. Hence, it follows that when borrowing costs go up, the cost bases of almost every commercial entity also goes up, and for everything. In the context of the WGTE, it could be pipelines, technology, machinery, and equipment. Though a bit premature, the cost of labour must be considered, too and factored into project figures. The stark reality is that the costs of some of the crucial components of this WGTE are likely to increase materially. But the initial price tendered per kilowatt hour to Guyanese has remained at the same level; there has been no associated adjustment, no talk of that amid the flurry of chatter about this much watched of projects.
Last, early project costs (assumptions, calculations, estimates) were based on the world market price of oil being around US$60 a barrel, and gas price at pre-Ukraine and pre-Nordstrom levels. The world overall, and the West particularly looks at squeezed supplies, which translates to higher prices, with winter hovering. One element that could undermine the OPEC+ revenue and income vision is if member countries overstepped the mark and contributed to demand destruction. That is, energy prices are now too high for consumers leading to no choice but significantly lowering demand. I think that that is a little way off at this point, but we are drawing closer to putting the finishing touches to the WGTE contract, in all of its components. We are dealing with today’s prices that haven’t peaked yet, as I sense things.
To conclude, most, if not all, of the costs around and into the WGTE are on the rise, yet the price of its output stays stubbornly static. I think I speak for all Guyanese in this instance when I take the position that we all long for cheap and reliable energy. But, as based on my commonsense offering, it cannot be as cheap as earlier stated. It would help greatly for the new numbers on this side of the WGTE to be shared. If they still make sense, then I would support. No estimates, please; hard numbers only.
Sincerely,
GHK Lall
