Government here does not believe that the United States will pause overseas funding on Liquefied Natural Gas (LNG) projects as it recently did internally, but nonetheless has alternative plans for financing if the US EXIM Bank funding isn’t approv-ed, Vice President Bharrat Jagdeo yesterday said.
In the face of a delay to the US$660 million loan application to finance the Wales gas-to-energy project, coupled with the US’ recent pausing on new approvals of LNG exports which activists hope would extend globally, Jagdeo said that Guyana had no plans for immediate exports as the current project was domestic based. It is why he believes strongly that the loan here would be approved also.
“I don’t want to speculate about the EXIM Bank funding because we anticipate that the funding will be available, and as I have said before, it would be retroactive funding. However, without disclosing the sources that we have, we have already been talking about a contingent line of credit that could easily supplant that,” he told a press conference held yesterday at Freedom House in Georgetown.
“Secondly, from the Budget. We have already been financing, beyond the first US$100 million that we have put into the project, from budgetary sources. So that is the first year. We have been making payments to the company from the budget. So those are the two sources – [our] own revenue from the Budget and from a contingent line of credit that we are already discussing,” he added.
The United States last week announced it would pause new approvals of LNG exports. The New York Times had reported that climate activists saw the move by the Biden administration as a win for the environment and had said that the government should also look at funding of similar projects overseas.
Jagdeo however noted that US’ actions are “consistent with their domestic policy, where they made pledges to get closer to net zero,” putting the Biden administration under “a lot of pressure” after several LNG projects took off. “Often it is the policy suited to the purpose of the U.S,” he reasoned.
He said that Guyana has a strong case for its loan, since “our gas production which is the gas to energy project, it is not for export, it is to supplant our supply which is bunker C, mainly which is very (polluting). The very fact that we are investing in a power plant that would produce gas now it would cut out emissions by more than 45 per cent, it is a cleaner form of fuel and would make a big difference here. We are not exporting we are utilizing,” he expressed.
He said that Guyana is “a country that is carbon negative and will remain so. The circumstances are very different, therefore we don’t anticipate it will encounter any problems. We have had strong support, bipartisan support, from the U.S congress on this.”
And with delays in the loan approval, in late December, Jagdeo had explained it was because of US legislative policies but that he knows that US agencies were backing the project.
“Every US agency, including on a bipartisan basis, members from both sides of Congress assured us that this project is a great project; it will receive their full support, so it is just that you have to go through the technical process,” he had said when this newspaper enquired about the loan’s approval. He was quick to make clear that a timeframe could not be given for the release of the funds as the process requires all the necessary technical and other approvals before the sums are handed over.
The gas-to-energy project appears to be severely delayed as the government has said that it could be in place by the end of 2024 and significantly cut energy costs. That timeline appears unattainable at this point.
The Vice President, whose portfolio includes oversight of the energy and finance sectors, explained that the process would see consultants of the EXIM Bank completing their assessments and analyses by the end of next month, which includes on-site inspections. After that process, another phase would be US congressional approval and the final approval by the US EXIM Bank’s board.
In December, Senior Minister in the Office of the President with responsibility for Finance, Dr Ashni Singh, had met with the Senior Vice President of the Export-Import (EXIM) Bank of the United States, David Sena, who had come here on a visit.
Surrounding
A release from the Ministry of Finance had disclosed that the meeting facilitated discussions surrounding the Bank’s support of Guyana’s Gas-to-Energy project. When completed, this project is expected to significantly reduce electricity costs, increase the competitiveness of other industries, and reduce the nation’s reliance on heavy fossil fuels.
In July 2022, the Government of Guyana and the EXIM Bank of the United States signed a historic US$2 billion Memo-randum of Understanding (MoU), with specific focus on infrastructure, energy, water and sanitation, information and communications technology, and agriculture. Then in April of last year, Guyana made the US$660 million loan application.
Last August, during an exit interview, former US Ambassador to Guyana, Sarah-Ann Lynch, noted that deals made through the partnership created by Guyana with the US EXIM Bank are expected to be approved once US regulatory and other processes are completed,
She had been asked about deals arising out of the signing and responded that deals were already in the pipeline and some were mega ones.
“There are deals in the works. They take some time because some of them are quite large,” the ambassador announced.
She too, explained that the approval process for loans from the US institution goes through a rigid review.
“So, as you can imagine, the Export-Import Bank is a US government institution and we have to exercise certain due diligence and there are lots of rules to follow, to do certain analyses that need to be done before a deal is completed. Whether it be environmental, or gender… impact analysis needs to be completed, and then depending upon the size of the award, it may have to go for congressional notification.”
While making it clear that she did not want to get into details as it relates to money thresholds and approvals since she does not work for the bank, she reasoned that if there are smaller amounts, they may not have to go through the tiers of processing as larger ones.
“If it’s under a certain dollar amount, the board of Export-Import Bank can approve it but if it’s a very large deal it has to go for congressional notification.”
Nonetheless, the US envoy was confident that most of the deals brokered will be given approval.
“I expect that most, if not all, of these deals would be successful.”
Meanwhile, Jagdeo echoed Lynch’s optimism and remarked that it was only a matter of time before the approval.
But even as government awaits the funding, works are forging ahead at the West Bank Demerara site with pipe-laying, constructing of internal roads and a materials offloading wharf, pile driving, as well as land preparation and other tasks.
