Govt/contractor dispute on GtE will not affect US EXIM Bank loan – Jagdeo

The content originally appeared on: INews Guyana
A depiction of the Gas-to-Energy Project at Wales

The ongoing dispute between the Guyana Government and its contractor for the model Gas-to-Energy (GtE) project, Lindsayca CH4 Guyana Inc. (LNDCH4), will not affect the processing of the US$646 million loan being sought from the United States EXIM Bank.

This is according to Vice President Dr Bharrat Jagdeo during his weekly press conference on Thursday, where he said, “This [dispute] is not going to affect the processing of the loan.”

Back in April 2023, it was announced that Guyana had applied for a loan from the US Exim Bank to finance the GtE project, which includes the construction of an Integrated Natural Gas Liquid (NGL) plant and a 300-megawatt (MW) combined cycle power plant at Wales, West Bank Demerara (WBD), utilising natural gas from the country’s offshore operations.

LNDCH4, which was awarded a US$759 million contract in November 2022 to build the power plant and NGL facility, is engaged in a disagreement with the government over the timelines of the project and associated costs. The contractor – a joint venture between two US-based companies Lindsayca and CH4 – is making financial claims to the tune of US$50 million over delays from other components of the project that would affect their delivery according to contractual timelines.

However, the Vice President explained that the only way the processing of the loan could be affected is if Guyana refused to abide by the terms of the contract, which contains provisions of independent arbitration or mediation when there is a dispute. Since the companies are US-based, he said this could be considered expropriation.

Last week, it was revealed that the government has rejected the financial claim and the contractor has now moved to a dispute resolution mechanism – a process called ‘Dispute Adjudication and Arbitration Board.’

A three-member board is being set to mediate between the Guyana Government and the JV company and at the end of this process, if either party is not satisfied with the outcome, then they can ask for arbitration.

“We’re following the grievance procedure as established by the contract itself. So, that will not affect the processing of the loan,” Jagdeo stated.

According to the Vice President, the US Exim Bank has completed its final due diligence. “They came down here, this was about a week ago, and there was no adverse finding. So, hopefully now the loan would be able to go to the [Bank’s] Board.”

“When the US makes loans of this nature, they also have to do their independent checks and they’ve done all of those on financial feasibility, environmental sustainability – all of those issues. So, we’re expecting it to be processed,” he stated.

Previously, Jagdeo had disclosed that the government can use bridge financing to get the Gas-to-Energy project underway until that EXIM Bank loan comes onstream. Consequently, the government earmarked some $80 billion in the 2024 Budget to advance the project this year.

Nevertheless, the Vice President explained that while it is unclear how long the dispute resolution process would take to be determined, he reassured that this is not affecting the movement of works on the project.

The People’s Progressive Party/Civic (PPP/C) Administration’s flagship GtE initiative is divided into five components: the pipeline from offshore production activities to Wales, then the building of power plant and NGL facilities, the transmission main to move power generated at the power plant, a new control centre at Eccles, East Bank Demerara and upgrading the national power grid.

While LNDCH4 was given the contract to build the two plants, the procurement and installation of the 225-km gas pipeline from the Wales project site to the offshore oil field is being executed by US oil major ExxonMobil Guyana, which is carrying out production activities in the Stabroek Block.

The installation of the US$1 billion pipeline also includes the upgrade of the roads to get to the site at Wales, the Material Offloading Facility (MOF) and site preparation for 100 acres as well as a lay-down yard – all undertaken by Exxon and subcontracted out. However, there were three-month delays in the handing over of two of these components to LNDCH4 for them to start their work.

In light of the delays, the government has extended the deadline but the contractor is not satisfied and wants more time. They are also making financial claims on the grounds that the delay would cost the company.

This request, however, was rejected by the government, which was advised by the project consultant, Engineers India Limited (EIL), that the company is not eligible for any financial payments.

Based on the contract, LNDCH4 is required to deliver 228 MW of power with four gas turbines coming on stream at the end of 2024 at 57 MW each. To get the entire 300 MW, another two steam turbines are expected by the end of 2025.

“What we have is a delay for the four turbines [to be installed]… And the delay, we believe, is by three months so taking it to end March [2025]… [But now] the contractor wants to complete the gas turbines by August [2025].”

“So, that is where we’re arguing the three-month’s delay came from. [The contractors] want a longer period because of the liquidating damages… If they don’t complete the project on time, it’s over US$11 million per month they have to pay in liquidating damages for delay on the project. So, they’re arguing we need more time than the three months but we’re saying three months is adequate for you because that’s the delay we’ve had,” Jagdeo had explained last week.

Meanwhile, the Vice President had also refuted claims that the project completion would be shifted due to these delays. He noted that “the total project timeline has not shifted”, adding that it will come by the end of 2025.