Arbitration likely as Govt, contractor in disagreement over GtE project

The content originally appeared on: INews Guyana
A depiction of the gas to energy project at Wales

The Government of Guyana and its contractor for the Gas-to-Energy (GtE) project, Lindsayca and CH4 joint venture are in a disagreement over the timelines of the project and associated costs.

The GtE initiative includes the installation of a 225-km gas pipeline from the project site at Wales on the West Bank of Demerara (WBD) and the Stabroek Block offshore Guyana where oil production is currently ongoing. The installation of the pipeline, including the upgrade of the roads to get to the site, the Material Offloading Facility and a site preparation for 100 acres as well as a lay-down yard is being undertaken by ExxonMobil Guyana.

Lindsayca and CH4, on the other hand, is responsible for the completion of the power plant and an NGL facility.

However, a delay in the handover of the site by ExxonMobil to the Lindsayca and CH4 has led to a disagreement over the completion time of the project.

According to Vice President Dr Bharrat Jagdeo, Lindsayca and CH4 is also requesting payments for the delay.

At his weekly press conference today, he explained that the site was slated to be handed over by ExxonMobil in June 2023 but instead, was handed over in September which led to a delay of three months.

As a result of the setback, Lindsayca and CH4 is now asked to finish their part of the project to deliver the 300MW of power by the end of March 2025. Initially, the project was to be completed by the end of this year.

However, according to the Vice President, the company has asked for a six-month extension and also made a claim for money, noting that the delay is costing them.

“They want a longer period because the liquidating damages for not completing the project on time for the contractor… is over US$11M per month they have to pay; this they have to pay in liquidating damages for delays on the project,” he said.

But relating to the claim for costs, Dr Jagdeo said the government’s consultancy firm contracted to oversee the project, Engineers India Ltd (EIL) has advised against granting the claim.

“Our independent engineer supervision firm…has reviewed the claim and rejected it totally to say it doesn’t have merit,” he said.

As a result of the disagreement, a dispute adjudication and arbitration board is being set up to determine the outcome. If at the end of the process, either party is not satisfied, they can ask for arbitration.

Meanwhile, the Vice President has refuted claims that the project completion is delayed.

He noted that “the total project timeline has not shifted”, adding that it will come online in 2025.

Following the completion of the pipeline and associated infrastructure, the FPSOs will be shut down for a short period to connect the line to the vessels leading to a pause in oil production. According to the Vice President, this is expected to take just two weeks and has been considered in the planning process.

Therefore, he also refutted claims that the country will lose US$1 billion during this period.

“This was taken into account in our forecast for revenue for this year. It is not a billion dollars of loss, we estimate to 6-7M barrels of deferred production but they’re hoping to bring forward maintenance for that period on the FPSOs for the period when they have to shut them down to make the connection,” he explained.

Guyana’s gas-to-energy project features approximately 200 kilometres of a subsea pipeline offshore that would run from Liza Destiny and Liza Unity floating, production, storage and offloading (FPSO) vessels in the Stabroek Block to the shore. Upon landing on the West Coast Demerara shore, the pipeline would continue for approximately 25 kilometres to the NGL plant at Wales, WBD.

The pipeline would be 12 inches wide, and is expected to transport per day some 50 million standard cubic feet (mscfpd) of dry gas to the NGL plant, but it can push as much as 120 mscfpd.

A whopping $80 billion has been budgeted in 2024 to advance this project and its associated infrastructure, including transmission and distribution upgrades to offtake the power.