US hints EXIMBANK loan for gas-to-energy project closer; gov’t says ‘first power’ from Wales delayed to late 2025

Last Updated on Sunday, 22 September 2024, 19:21 by Writer

United States (U.S.) Ambassador to Guyana, Nicole Theriot this week talked up the Wales gas-to-energy project as a pathway to cleaner energy, and sent a strong signal that the American government was poised to approve a loan for the 300 megawatt natural gas-fired power plant.

“We’re literally this close to finalising the EXIM loan that underpins the project,” she told an event organised by the American Chamber of Commerce (AMCHAM) Guyana.

AMCHAM barred the independent media from covering the event on Wednesday, but the Guyana government’s Department of Public Information (DPI) was allowed to record the event and sent out the recording one day later.

In clear reference to the American consortium of CH4/LINDSAYCA having been contracted to build the US$759 million natural gas-fired power plant and the natural gas liquids power plant, Ms Theriot said “we’re proud that the United States is the key partner in this project, not only with the US private sector taking the leading role in building the power plant but the US government offering financing to make the project more cost effective.”

Earlier this month, Vice President Bharrat Jagdeo told a news briefing that experts have confirmed the technical and financial feasibility of the project and that the EXIMBANK’s Board was due to meet next month to consider Guyana’s loan application. The U.S. Congress also has a role to play in greenlighting the project.

While the Joe Biden administration has been largely reluctant to finance fossil fuel projects globally, the American envoy hailed the gas-to-energy project as one for national and regional energy security. In addition to reducing costly energy imports, the U.S. Ambassador subscribed to the environmental value of the project. “For people who don’t know: They say ‘wait, gas, environmental sustainability’ and they don’t understand that, as the world moves towards cleaner energy solutions, Guyana really is positioning itself at the forefront of this transition. Natural gas, which burns much cleaner than other fossil fuels is a responsible choice for powering this country while simultaneously reducing carbon emissions by 30 to 50 percent. It’s a bridge to a future where renewable energy can play an even greater role,” she said.

Finance Minister Dr Ashni Singh recently travelled to Washington to meet with top US EXIMBANK officials.

All aspects of the project are expected to cost just over US$2 billion, according to Project Lead for the Wales gas-to-energy project, Winston Brassington. “Of that, we hope very soon that we will hopefully get the approval of EXIM. While Guyana awaits that bank’s green light, Mr Jagdeo had said Guyana had already spent US$400 million of its own funds on the project that he declared would be built.

Mr Brassington told the event that the power plant is expected to start generating electricity at “simple cycle” of 225 megawatts during the last quarter of 2025. When the combined cycle is ready, he explained that the waste heat would be rec0vered to push generation to 310 megawatts.

He reiterated that Guyanese would pay 50 percent less for electricity, down from 24 US cents per kilowatt hour.

He said the project was behind schedule largely to extensive work that was being done on the soil to ensure stability of the power generators. “For the single cycle and NGL (natural gas liquids) facility, we are behind schedule. At this point in time, we expect it to be some time within the latter half of next year. Now, we were supposed to be finished by the end of this year but then the site and all of the interfaces and handover took a few months longer. The soil stabilisation of the site has taken a lot longer. It’s been a very technical process,” he said. He said that he did not want to be too precise because there are “a number of moving parts.”

Guyana’s general elections are due to be held during the last quarter of 2025, according to Mr Jagdeo.

In working to ensure soil stabilisation, he said more than 1.6 million cubic metres of sand, in addition to loan and crusher run, were put on the 100 acre site and tested with sophisticated equipment to achieve a settlement height of 4.5 metres. “Based on what the engineering is, a lot of attention went into ensuring if its engineered right, built right because when those Siemens engines go on the foundation, it’s a very small tolerance for any settlement and we’re assured and told by all the engineers that this is being engineered to achieve those standards,” he said. He said the Siemens engines could do long range performance forecasts and take “preemptive action”.

About 1,500 of the 7,000 of various types of foundation steel piles are being driven t0 make way for the placement of the gas turbines in December, 2024.

He said the installation of the US$1 billion gas pipeline, whose capacity is 125 million cubic feet of gas per day, was “on schedule” for completion during the fourth quarter of 2024 and would eventually be commissioned and filled with nitrogen until gas supply is needed. ExxonMobil has committed to supply 50 million cubic feet per day.

In terms of transmission of the electricity from Wales, he said a line would be built to cross at Garden of Eden, East Bank Demerara with a 24-kilometre long 230 kVa (volt amps) line, “for the first time in Guyana” to connect to Goedverwagting, East Coast Demerara. Also to be installed are 54 kilometres of new 69 kV lines from Wales to Vreed-en-Hoop, West Bank Demerara; Goedverwagting to Sophia, Greater Georgetown and to the East Bank Demerara. “This is running behind schedule but it’s not on the critical path,” he said, projecting that the transmission lines would be finished by the end of 2024 and the sub-stations at Goedverwagting and two at Wales as well as the upgrade of the existing Vreed-en-Hoop station.

“The good news, though, this is all on budget,” he said.

The National Control Centre, he said, is expected to be finished during next year, but he said pending the completion of the building the existing Sophia Control Centre would be used “to move the power around.”

Overall the project would cost just over US$2 billion, with the US$1 billion pipeline being funded by ExxonMobil, the operator in the Stabroek Block.

The project lead said government formed Guyana Power and Gas Inc that would sell electricity to Guyana Power and Light under a power purchase agreement and sell natural gas liquids. He said government was determining who would operate the plant and buy the liquids, details of which would be announced shortly.

Looking ahead, Mr Brassington said government wants to build a second power plant at Wales because projections are that the 300 megawatts would be maximally consumed by 2027. Government, he said, hopes to secure more gas for the additional plant.

With a mere 20 percent of the NGLs expected t0 be consumed in Guyana, he said more storage capacity for the liquids would be constructed.

By his calculations, the capital cost of the power plant would be 1.3 US cents and the capital cost for the liquids, which would produce 53 million gallons of liquids annually, would be the equivalent of US$0.30 per gallon. “This is how we’re splitting base on a fair allocation of what is the project cost,” he said.

Government has to repay ExxonMobil US$55 million annually for the pipeline cost and its operation over 20 years, and recover US$51 million for the capital expenditure for the power plant and NGL plant and US$35 million for operating both plants – a total of US$141 million annually.

Justifying the cost effectiveness of the investment, he said ignoring NGL revenues and relying on the power plant revenues, it would cost just over 5.4 US cents per kilowatt hour or 2,600 gigawatt hours annually.

On the other hand, he said based on last year’s average freen on board (FOB) price for cooking gas, at US$109 million the country could earn US$183 million from its annual consumption of 20 percent of 63 million gallons to be produced if one uses a retail price of US$4.50 per gallon. “You g0t two legs and either leg could pay for it,” he said. By his calculation, the 63 million gallons of cooking gas could fetch.

Ultimately, the balanced position he said, would be 3.1 cents per kilowatt hour, and the liquids would be little under US$1.00 per gallon.
Of the 50 million cubic feet per gas, he said 43 million cubic feet would go to the power plant and the remainder to the NGL plant which would yield more value, he said.