While the ordinary Guyanese and even some experts, international and local, are concerned about the financial burden to be placed on Guyana with the execution of the gas-to-shore project, Financial Analyst, Floyd Haynes is certain that those concerns are unwarranted.
He said as much during a recent interview with Guyana Standard.
Haynes was keen to note that he is no oil and gas expert neither is he an environmentalist, but being a financial analyst, he said he is sufficiently qualified to speak about the economic viability of the project.
Haynes told Guyana Standard that based on the projections he examined and verified, “We are going to be saving a tonne of money in the long run.”
He pointed out that the current cost of energy is about 14 cents per kilowatt using heavy fuel oil (HFO). Meanwhile, with gas, the cost of energy will be reduced to 7 cents per kilowatt.
Haynes said that the 7 cents figure is the total cost as it considers operations, maintenance, and capital cost. “If you just look at fuel cost then cost per kilowatt goes down to 10.7cents using HFO and 3.4 cents using gas. Gas simply reduces the cost of energy.”
Further, Haynes noted that it is no secret that energy is a key growth factor for economic development as production and consumption activities involve energy as basic input.
“If you are producing or manufacturing something and look at your total cost input, labor, energy, material, taxes, etc, the more expensive is your cost of energy. By reducing the cost of the energy you are essentially reducing the cost of input which in turn ultimately reduces the cost of production and the cost of goods and services. Once the cost of goods and services is reduced, you can sell at a more competitive price,” said Haynes.
That being the general analysis, Haynes said that there is a direct relationship between the cost of energy and economic development.
Haynes acknowledged the concerns of environmentalists but said that while natural gas is not a renewable energy source, it is probably the cleanest and safest burning fossil fuel. The analyst said that understandably, the ideal goal is to move away from fossil and become100 percent renewable. “But we are not there yet and so we have to deal with where we are and at the point where we are, gas is the better alternative.”
Haynes then turned his attention to the economic concerns in the public domain. He said, “There are lots of speculations as to the price of it, it may cost US$500, 800M, I do not like to respond to those things because it is speculation and I have not seen any credible arguments; Credible meaning not accompanied by analysis.”
However, Haynes said that even if the price were exorbitant, that is not enough to deter execution. He said that it is not prudent to examine an investment solely at its cost; one must also examine the return.
“So look at the cost then measure it against the potential return which involves direct cost savings because of a reduction in the cost of the energy and look at the benefit of economic development etc. All of those things together are not easy to measure. You cannot easily measure the economic impact of a reduction in energy because of the multiplier effect. But when you look at all those things, the return on the investment will outweigh the cost. Because of that, from an economic viability standpoint I think it will be worthwhile,” said Haynes.
The analyst continued, “You cannot look at the price tag and say it is too heavy. You have to look at the net present value. In other words, you take the future cash flows of that investment, discount the current value and compare it to the cost and if it is more than the cost then the investment is worth it.”
Haynes referred to cynics as “the perpetually indignant” saying that they are going to always have a problem as they pride themselves on being contrary. He said however that the reality is, the gas-to-shore project can be a real game-changer for Guyana economically.