While it is commendable that the Irfaan Ali administration has signaled intentions to develop renewable sources of energy, a golden opportunity that could strengthen Ali’s energy policy is the monetization of associated natural gas deposits says Senior Analyst at Americas Market Intelligence (AMI), Arthur Deakin.
In his most recent analysis, Deakin noted that associated natural gas is a byproduct of extracting crude oil, of which eight billion barrels have been discovered off the coast of Guyana. Although this gas has historically lacked much use, the analyst said it can now be processed and used to supply gas power plants that emit up to 50 percent cleaner energy when compared to heavy oil.
Deakin noted that since natural gas plants can easily go from zero to full production in response to fluctuating energy needs, this also allows them to mix nicely with intermittent renewable power. He said that these benefits have led the government to accelerate its discussions with ExxonMobil to finalize the details surrounding a 300 MW state-of-the-art combined cycle gas turbine power plant. Through a 120-mile long pipeline, Deakin said that the power plant will be supplied with associated gas from the offshore Liza-1 field.
The AMI analyst said that capitalizing on this gas power plant also makes economic sense. While it costs US$0.50/kWh to produce energy via diesel sources, Deakin recalled that the former Minister of Public Infrastructure, David Patterson noted that gas production in Guyana will cost below US$0.10 /kWh. With this in mind, he argued that the proper implementation of a gas plant could exponentially reduce electricity costs for all Guyanese citizens and operating businesses.
But even in the face of such benefits the analyst asserted that there are still pending issues that should be addressed. In this regard, he stated that the administration needs to decide whether the project will function under a public-private partnership (PPP) or be government-owned. He pointed out that Chile’s success with PPPs in developing toll roads, or Brazil’s development of Belo Horizonte schools, shows that PPPs can be a great solution if they have a clear bidding process, a robust regulatory framework and transparent concession contracts.
In addition to this, he noted that the gas plant also needs to be complemented with investments in other energy sources. He was keen to note that President Ali’s recent discussions with the Islamic Development Bank to finance solar energy are encouraging on this front. Once these and other matters are resolved, Deakin concluded that Guyana would be on its way to developing a reliable and affordable energy mix that would boost economic growth.