Govt’s gas-to-shore project economically viable

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Govt’s gas-to-shore project economically viable

Published: February 01, 2021

Govt’s gas-to-shore project economically viable

Financial Analyst Mr. Joel Bhagwandin
Financial Analyst Mr. Joel Bhagwandin
– Financial Analyst

(DPI) An analysis carried out by local Financial Analyst, Mr. Joel Bhagwandin, has found that the Government’s gas-to-shore project is financially viable.

The Government’s transformative gas-to-shore project is underway and is set to be completed by 2023. The main objective is to transport sufficient gas from the Stabroek block’s petroleum operations to supply some 200-250 megawatts of energy to the national grid, leading to a significant reduction in electricity costs.

Mr. Bhagwandin of JB Consultancy and Associates said he felt compelled to conduct the study to dispel some negative commentaries on the project.  

“Reducing the cost of energy would not only make the country more competitive in terms of we could export more, with the objective of having a trade balance surplus, but we will also save foreign exchange because we spend more than $500 million a year to import fuel. 

So, if the gas-to-shore would mean that we will get cheaper electricity, we will be pushing industrialisation and reduce manufacturers’ cost. It also means we are going to save about $250 million or more in fuel import,” he told DPI, in an exclusive interview today. 

The Government has identified the former Wales Sugar Estate, West Bank Demerara as the site for establishing the power generation plant. Mr. Bhagwandin said that location makes economic sense as it will open avenues for greater development.

“Because that Region has been depressed, there was no sort of economic activity; it, therefore, makes sense to develop the Wales Development Authority. With the gas-to-shore project coming there, with the Liquified Petroleum Gas Plant, which the President announced … talking about the economic trajectory, where the country is heading, putting all these into context is to explain the long-term economic viability of the project,” he said. 

The analysis estimates the project cost at $86 billion (US$400 million). 

It proposes that the project could be financed through a project financing model wherein a Special Purpose Vehicle could be established. With this, the Government could opt to hold 15 per cent equity or $6.4 billion (US$30 million), and the remaining 35 per cent could be financed through equity and debt instruments from a consortium of private investors and the local, regional or international capital market.

The study shows that public and private investments could potentially increase by more than 50 per cent annually, effectively translating into the creation of more than 100,000 jobs along with tremendous growth in entrepreneurship opportunities during this period. 

In this regard, with unemployment currently estimated to be more than 25 per cent or 125,000 persons of the total labour force, the number could be reduced to the lower single digits over the next five years.

The Government believes that the gas-to-shore project will transform Guyana’s economic landscape, bringing tremendous development for all.

President Ali had said the landing of the gas-to-shore pipeline in Region Three would lead to “big industrial development taking place there that is linked to not only power generation and a power plant.”  

He also said the investment on the Demerara River’s shoreside would create massive opportunities and a trickle-down effect.