Analysis and News

Gas-to-Energy: Benefits and Other Considerations

BY GEOCAP's Contributor: Kayshav Tewari

There has been much debate surrounding the Government’s commitment to the circa 900 million USD Gas-to-Energy Project slated to come on stream by 2024. According to Petroleum Economist at the Ministry of Natural Resources, Bobby Gossai Jr., the project promises to make a beneficial impact on the economy and will play a major role in the future development of Guyana.

This project entails bringing natural gas from the Liza Phase 1 and Liza Phase 2 Floating, Production, Storage, and Offloading (FPSO) vessels to an onshore natural gas processing plant (NGL Plant) tentatively located in Wales on the West Bank of the Demerara river. The pipeline is meant to transport at minimum, approximately 50 million standard cubic feet per day (MSCFD) of dry gas to the NGL Plant where it will be processed and separated to produce various forms of fuels such as propane, butane, among others.

Electricity and the Economy

Currently, Guyana relies on traditional Heavy Fuel Oils for energy to the tune of 120-130MW. With the NGL plant being supplied with 50 MSCFD, this requirement can be met with much excess to spare. The Minister of Natural Resources, Vickram Bharrat, confirms this when he said the plant will produce approximately 200 MW of power.

The change in the cost of electricity is tentatively set at an impressive 80 percent reduction - from power currently being generated at 0.30 USD per KwH (one of the highest in the Western Hemisphere) to a 0.08 USD per KwH after the introduction of the gas-to-energy project.

The implications of this are obvious for businesses and households alike: costs go down and disposable income goes up. It will also increase the viability of many projects which were before considered infeasible. The construction phase of the initiative alone would create at least 600 jobs.

Applications of Natural Gas

Vickram Bharrat, Minister of Natural Resources, says that initial studies have indicated that the best use of the excess gas and waste heat are for activities in support of the agriculture sector. He said that this includes fertilizer production (ammonia and urea), gas-to-protein (dietary supplements for poultry and aquaculture), and agricultural processing (use of low-grade waste heat for crop drying, rice-boiling and so on).

These are only a few of the benefits; natural gas is an ingredient used to make fertilizer, antifreeze, plastics, pharmaceuticals and fabrics. It is also used to manufacture a wide range of chemicals such as ammonia, methanol, butane, ethane, propane, and acetic acid.

Many manufacturing processes require heat to melt, dry, bake, or glaze a product. Natural gas is used as a heat source in making glass, cement, bricks, ceramics, tile, food products and many other commodities.

Climate Change and Natural Gas

One of the most contentious issues with the Gas-to-Energy Project is the implication it has for Guyana’s climate agenda. It will enhance the reliance on Greenhouse Gas (GHG) emitting industries, at a time when the Intergovernmental Panel on Climate Change asserts that we are fatally close to the 1.5°C limit and must act now to reduce emissions.

It is evident now more than ever that climate change is a very real threat, especially to our low-lying coastal population. Thunderstorms and torrential rains in August and the recent flooding disaster are considered to be inextricably linked to changing world atmosphere. If we look at the effects around the world, it becomes more frightening.

Traditionally, Guyana has prided itself on its carbon sinks – i.e. our forests that take out more GHGs than the country produces and so, on net, does more good for the atmosphere than bad. The Norway agreement that saw Guyana receiving 250 million USD shows just how substantial this benefit was.

With the introduction of the Gas-to-shore project, we are now aiming for net-zero emissions rather than maintaining a net-negative balance of GHGs. This, while still commendable as it is not a feat many countries can boast, is still worrying for some given the dire state of the global climate effort.

Other Considerations

One important way to assess this project, however, is to look at the alternatives of the Gas-to-Energy Project. As it stands right now, Natural Gas is seen as an unwanted by-product in the extraction of crude oil – so much so that ExxonMobil was flaring up to 80 MSCFD per day in 2020 down to 18 MSCFD by March of 2021.

With such amounts being wastefully thrown away, why not make good use of it to the benefit of the Guyanese people? Moreover, if it is not to be flared and wasted but stored and sold to energy producers, the question changes: Why not use the gas to the benefit of Guyanese?

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