Dear Editor,
The Wales gas-to-shore facility (GTSF), one of the high, if not the highest-cost PPP/C manifesto’s projects has generated a plethora of media articles and discussions, mostly negative. There are several reasons for the negative media coverage. Among these are opponents bent on preventing the PPP/C from executing its manifesto’s projects, overzealous environmentalists with and without attachment to pressure groups, economic analysts making all sorts of estimates, and journalists wanting an exact not estimated construction cost.
The Government has not provided enough publicly available, digestible information on the project, and its messaging is deficient. The crux for the negativity is the estimated construction cost of the GTSF and whether the critical benefit of about 50% reduction in consumer energy cost as proposed by the Government would be realized. In this article, the writer takes an objective look at the controversial GTSF with respect to the engineering process and cost estimation to allow readers to make informed judgement on the initial construction costs.
The GTSF is a multidisciplinary project involving multiple disciplines in Civil Engineering, Mechanical Engineering, Chemical Engineering, Electrical Engineering, and so on. There are several well-established phases/steps that are followed in developing such projects. A decision on continuation is made at the end of each phase/step. The initial step is conceptualization. Guyana relies on environmentally dirty fuel oil to generate nearly all of its power needs with demands outstripping supply. The Government has decided on a matrix of natural, cleaner power sources that include solar, wind, gas and hydro to replace fuel oil. Gas is presently located offshore and is burned (flaring) and/or pumped back into the ground during petroleum extraction. Both flaring and pumping are environmentally damaging and the cost goes towards “cost oil”. The Government conceptualized the GTSF to monetize this valuable, natural non-renewable resource that is currently going up in flames or returned to the ground where it can ooze out over time.
The next step, Phase 1, involves conducting preliminary studies, sometimes called desk studies, by collecting, analyzing, and synthesizing available information including making a very rough estimate of the project cost, consideration of alternatives, and cost-benefit. If the project is feasible, especially if the estimated project cost is financially viable, Phase II consisting of preliminary geotechnical investigations, environmental impact studies, and similar commences. The primary purposes of this Phase is to find a suitable location for the facility and refine the estimated cost. If the decision is made to continue, Phase III involving preliminary design, public scrutiny and further cost estimation are conducted. For a project such as the GTSF, it is best to make life cycle cost analyses (LCCA) in addition to initial construction costs. Phase IV is the production of final design, specifications, contract documents, and refinement in estimated costs. Phase V is the tendering and award of a contract.
The key benefits of the estimated costs are (1) to make a decision on project continuation, (2) budget allocation and identification of funding sources, and (3) evaluating construction bids. A client should not publicly disclose the estimated cost because it can prejudice contractors’ bids and prevent the client from getting a good deal – a bid that is lower than the estimated cost. Because of the vagaries of any construction project, whether it is a shed or a GTSF, an actual cost is impossible before the construction is fully completed. The call for the Vice President to provide “No estimates, please; hard numbers only” (Financials for gas to energy project need to be updated by gov’t, Stabroek News, October 10, 2022) is asking him to be God. Whether or not the Government satisfactorily conducted the various Phases outlined here or consider alternatives or performed LCCA is beyond the scope of this article.
Several “experts” have challenged the initial estimated construction costs provided by the Vice-President and put forward their own values (“Jagdeo pulling numbers out of thin air to justify US$2 billion Wales gas plant – Engineer”, KN, Oct 9, 2022). Neither the Vice-President nor any of the “experts’” estimates is reliable to gauge the actual cost. History is rife with exorbitant cost overruns for engineering projects. The Boston Big Dig, a transportation project in the USA, had an estimated cost at the beginning of construction of US$2.8B. The final project cost was US$14.6B. The estimated cost for the Three Gorges Dam in China was US$9.85B; the final project cost was US$25.96B. This is the reality of engineering projects.
The writer is offering a challenge to the “experts” and anyone else to estimate the GTSF final project costs within plus or minus US$1m prior to contract award. The prize will be G$1m. The news media should participate in this challenge by publishing the estimates from persons accepting the challenge. The conditions for the challenge is that the participants must sign legal documents and provide a guarantee for G$1m to be donated to the writer’s chosen charity in Guyana if he/she loses.
Please come forward and accept the challenge. “Don’t be satisfied with stories, how things have gone with others. Unfold your own myth.” Rumi, The Essential Rumi.
Yours faithfully,
Dr. Muniram Budhu
Professor Emeritus
