Cabinet yesterday issued a no-objection to a US firm being ranked number one to build a 300 MW power plant fuelled by offshore natural gas – drawing the country closer to a project that will spew climate warming residues and be the most expensive public sector undertaking in Guyana’s history, replete with safety and other risks.
President Irfaan Ali made the announcement of the ranking via a video statement on the Office of the President Facebook page.
He said that Cabinet had issued its no-objection to US-based CH4/Lindsayca being ranked number one to build the Combined Cycle Power Plant and Natural Gas Liquids (NGL) Plant at Wales, West Bank Demerara (WCD), under an Engineering Procurement Construction (EPC) Contract.
In the statement, Ali said that Cabinet’s no-objection will now allow negotiations to proceed to conclude an EPC contract. Power China was ranked number two and may be engaged if negotiations fail to conclude a contract with Lindsayca by the end of November, he added.
Importantly, the President said that Guyana will own both the power plant and the gas to liquids facility. This will raise concerns locally even though the President said that prior to the conclusion of the construction an international firm will be competitively selected to operate the project to international standards and best practices.
PPP/C governments have presided over public sector failures the most prominent being the Skeldon Sugar Modernisation Project.
While the President played up the estimated savings from this project he was completely silent on what it will cost the country and how it was going to be funded.
He said that the Gas to Energy Project is expected to deliver power at less than half of the current costs. “Project generation costs, taking account of payment for the pipeline, operations and maintenance (O&M), and capital cost recovery, shall total less than five (5) US cents per kilowatt-hour”, he said.
“Ladies and gentlemen, fellow Guyanese this is a significant movement forward in Guyana, not only achieving energy security, but us achieving an important benchmark that is a reduction in our energy costs so that our manufacturing and industrial development and expansion can take place and so that the ordinary families and the ordinary people can feel a substantial reduction in the cost of electricity in their pockets and in their household. Just for reference, a family at the end of this project that now pays GY$20,000 per month in light bill or electricity costs will see that costs coming down to GY$10,000”, the President declared.
He said that this government has committed to full transparency and accountability on this project and to sharing information with the public and all stakeholders as soon as it becomes available.
Earlier this year, he noted that nine firms were publicly pre-qualified to bid on the EPC contract. A Request for Proposals (RFP) was issued to these pre-qualified bidders. At the closing date of September 13th, five bids were received. These bids were evaluated for technical compliance and ranking by Stantec and Worley, two global engineering firms with expertise in oil and gas, the President said. Based on the reports of these international firms, an Evaluation team of three people, including a representative of ExxonMobil, was appointed. He said that the Evaluation Team conducted the evaluation in accordance with the technical and economic criteria set out in the RFP. On the basis of the bids submitted and clarifications received, the Evaluation Team unanimously ranked CH4/ Lindsayca as number one, and Power China as number two.
Ali said that contract negotiations will now start with the expectation that a deal will be executed before the end of November. Key considerations in the evaluation, he said, took account of the expected date of delivery of the 300 MW power plant by December 2024. Both top-ranked companies confirmed this deadline. The EPC Contract will be supervised by a global supervision firm, Engineers India Limited (EIL).
Tweeted
Prior to the President’s announcement, India’s Union Minister for Housing & Urban Affairs & Minister for Petroleum and Natural Gas, Hardeep Singh Puri had tweeted that “As part of this US$22 million assignment, EIL will provide Consultancy Services for setting up the Integrated Plant & manage the engineering, procurement & construction of the project on behalf of Guyanese govt”.
Exxon is expected to deliver the completed pipeline to the power plant by the fourth quarter of 2024, to achieve commissioning and testing of the 300 MW power plant by the end of 2024.
On its website, the Texas, US-based Lindsayca said it was founded in 1995 through private equity and family ownership. It said that Lindsayca has rapidly expanded initially in Venezuela, providing services to both state- and privately-owned clients in the upstream and downstream energy sector.
“The hard-working ethics of the owners and their values of excellence, safety and integrity have rapidly developed a strong professional organization with a proven track record of delivering quality projects within strict time, financial and regulatory requirements”, it said.
The CH4 Group describes itself as an “Engineering, Procurement, Construction (EPC), project management, operation and maintenance group of companies, with extensive experience in the areas of the electric power, oil, gas, petrochemical, mining and infrastructure”.
At a June 30th event at State House this year on the gas to energy project, Ali pleaded with Guyana’s citizenry to trust his government to give them a facility that will bring not only lower power costs but put savings into their pockets while expanding development and prosperity for the nation.
“There is absolutely nothing to hide in this process or project. It is above board, it is transparent, it is open. It has undergone every single test of scrutiny. But the time has come for us to move forward… in bringing the desired benefits to the people of this country,” the President said.
And as he announced that no cost has yet been put to the project estimated by analysts to be over US$1.3 billion, the President said that by the end of this year that sum would be known as the nine firms which have been shortlisted to bid for its construction had up to September to submit their proposals and government estimates a contract signing in the last quarter of this year.
“I hear people talking about different figures; US$500 million, US$700 million, US$1 billion. We operate and we are going on with this project in a very open and transparent way. It is a public bid. It is a public bid! Companies put in their figures… it is not someone sitting in an office saying ‘this is the project cost’. It is a process that is arriving at a cost based on an open and transparent (process). So whether it comes in at (US)$700 million or US$1 billion, that is what the process would decide. Not influenced by anyone. We would like for it to come in as less as possible but we have to go with what the process delivers.”
In his address on June 30th, Ali said that he wanted to make the ordinary citizen aware of what the project entails and what it would mean to them, as there has been much criticism from sections of society.
On the financial side, Ali acknowledged that negotiating was difficult as “negotiating power with Exxon is like negotiating with a super power state.” Nonetheless, he said that Guyana’s negotiating team’s capabilities should not be doubted as in this phase of bringing gas from the Liza 1 and 2 project, Guyana gets the gas free.
Of the US4.5 cents per KWH that will be paid, he said it “includes paying back for the pipeline, the LGN, facility and the operational costs.”
“The gas comes to the people free of cost!” Ali declared.
The project aims to employ approximately 800 workers during the peak construction stage and 40 full-time workers during the operation phase.
It will be executed in three phases – construction, operation and decommissioning. It entails three aspects as well – an offshore pipeline which is approximately 220 kilometres of a subsea pipeline extending from new subsea tie-ins at the Destiny and Unity FPSOs in the Stabroek Block to the proposed shore landing, located approximately 3.5 kilometres west of the mouth of the Demerara River; onshore pipeline that is a continuation of the offshore line and extends about 25 kilometres from the landing site to the NGL plant; and the NGL plant and associated infrastructure that will be located about 23 kilometres upstream from the mouth of the Demerara River on the west bank.
Both the Destiny and Unity FPSOs have pre-installed facilities to allow for the export of the associated gas with crude production.
President Ali said that government expects $20 billion in savings from the project to “go back” into the pockets of citizens, thus improving their spending power.
“That will now be freed up and made available to be spent in the economy,” he said.
In remarks at the June 30th event, ExxonMobil’s Upstream Oil & Gas President Liam Mallon assured that his company was committed to creating sustainable solutions and pointed out that the project will lower emissions here as it cuts current emissions by more than half.
He contended that the creating of sustainable solutions ensures lower emissions and meeting the Paris climate agreement.
“In meeting that goal we have several strategic priorities and right at the top… is being an essential partner,” he said pointing out that the project is a “win –win” for the people of this country.
“It exemplifies progressive development and lower emissions” he said… “Not only will it improve the lives of people every single day but open up opportunities in every area in Guyana”, he added.
COP27
Ironically, yesterday’s announcement by President Ali came in the midst of the UN COP27 climate change conference in Egypt and in the backdrop of numerous, dire warnings from the United Nations and other international bodies that continued investments in fossil fuel projects such as natural gas to energy will deepen the jeopardy that the planet faces.
Reuters yesterday reported that African activists have called at the COP27 summit for an end to expansion of fossil fuels on the continent, highlighting that the industry has left a large share of people still without electricity and mired in poverty.
Nigerian climate campaigner Friday Barilule Nbani – who is attending the talks for the first time – told Reuters his community in the Niger Delta wanted no more fossil fuel projects, which have left a litany of toxic oil spills and tainted water.
Nbani’s appeal came on the anniversary of the death of his uncle, the writer and activist Ken Saro-Wiwa, who was one of nine men hanged in 1995 – after a flawed trial – for protesting against oil giant Shell’s exploitation of the Niger Delta.
“The polluters in Nigeria should get out from this COP,” Nbani, of environmental group GreenFaith Nigeria, said in an interview after a protest at the conference centre that called for fossil fuel firms to be excluded from U.N. climate summits.
“They are destroying the environment – and anything that destroys the environment destroys life, and we are dying in masses.”
“They are the ones delaying (climate) action. They have their own agenda,” he said, calling for the talks to unlock finance urgently for climate-vulnerable countries such as Nigeria, which has been hit hard by flooding in recent weeks.
“What we want is action now”, he told Reuters.
At the small demonstration, led by activists from Africa and Asia, about 50 protesters held up a red banner emblazoned with the words “Kick Big Polluters Out”, and chanted “Polluters out; people in”.
Reuters said that the demonstration coincided with new research released by human rights groups showing that 636 fossil fuel lobbyists are registered to the COP27 climate talks, affiliated with some of the world’s biggest oil and gas firms – both public and private.
The analysis of the United Nations’ provisional list of named attendees, by Corporate Accountability, Corporate Europe Observatory and Global Witness, said the number – out of a total of about 42,400 registered government and civil society delegates – was an increase of more than 25% from COP26.
The groups said 29 countries have fossil fuel representatives among their national delegations at the talks, with the United Arab Emirates – the host of next year’s COP – bringing the most at 70, followed by Russia with 33.
The African nations with fossil fuel or electricity industry executives on their government teams at COP27 include Angola, Chad, Republic of Congo, Democratic Republic of Congo, Egypt, Gambia, Guinea Bissau, Kenya, Libya, Mauritania, Namibia, Rwanda, South Africa and Uganda.
Others come with industry associations and advocacy groups.
Guyana is being represented at the COP27 conference by Minister of Natural Resources, Vickram Bharrat – perhaps underlining less of a commitment to climate and more to utilization of fossil fuels.
