GUYANA’S entrance to international oil markets was by no means a simple feat. Thousands of hours of careful planning and billions of dollars later, there is much to celebrate. As the number of discoveries continues to increase and the recoverable barrels of oil eclipse that of many long-time producers, Guyana’s fortunes have never looked better. One of the most promising benefits in the next few years could be converting the natural or ‘associated gas’ from the Liza oil field into energy through a gas-to-energy project that could start operation as soon as 2024 and substantially reduce electricity costs for households and businesses.

One key consideration of developing new oil fields is treating ‘associated gas’ such as ethane, propane, normal butane, isobutane, and gasoline. There are several options commonly used by producers. Associated gas can be re-injected to stimulate further oil production; flared to reduce the harmful compounds; used to power the operations of floating, production, storage, and offloading (FPSO) vessels; or transported via pipeline to be processed into usable products for power generation, cooking gas or other industrial applications. The government has embarked on an ambitious plan to transport the gas produced in the Liza oil field onshore to the site of the abandoned Wales Estate sugar processing plant outside Georgetown, after some twenty locations were considered.

Transporting the associated gas from the Liza oil field to shore is no small undertaking. This would require a 160 kilometre subsea gas pipeline from the Liza Phase 1 and Liza Phase 2 FPSO vessels to the landing site, which would make it one of the most ambitious development projects in Guyana’s history.

The expected volume of gas from the Liza field would be enough to power a 250-300 megawatt power plant, well above the national demand of 205MW. Onshore, the construction of a natural gas liquid (NGL) and natural gas processing (NGP) plant to receive, process, and utilise the gas and ultimately a natural gas power plant that could then be connected to the national grid and provide enough electricity to meet the needs of Guyana for many years would follow. Such a facility could last for 25 years, provide enough electricity to meet the needs of Guyana and propel the economy into the next half of the twenty-first century.

Another option that has been identified is an offshore floating liquified natural gas facility (FLNG) similar to the design of an FPSO. Guyana’s ‘Oil and Gas Master Plan’ first prepared by the Government of Japan in 2018 and since updated – in partnership with Mitsubishi Corporation and Chiyoda Corporation – favoured an offshore facility rather than an onshore facility. The Master Plan concluded that both concepts would be economically feasible and there were no significant differences in the costs beyond a lower power selling price for the onshore plant at 6.93 cents (US) per KWH compared to 7.11 cents (US) per KWH for the offshore facility according to an April 18, 2021 story reported by Stabroek news.
The FLNG would supply LNG to be used in the power generation and would not require the laying of a pipeline between the gas field and the shore. The government ultimately chose to pursue an onshore plan which offers more opportunities for local content in the construction and operation of the facility as well as better options for other industries to benefit.

A gas to energy plant, whether onshore or offshore, has the potential to significantly reduce the cost of energy in Guyana, ushering in reduced household electricity costs and improving competitiveness for light manufacturing and industries that are price sensitive. Guyana ranks among the worst for electricity costs in CARICOM, with an estimated electricity cost of US 32 cents per kilowatt-hour (KWH). By comparison, Trinidad and Tobago, another regional energy powerhouse, enjoys electricity rates of US 4 cents per kilowatt-hour (KWH).

There has been some opposition to some aspects of the gas-to-energy plan, namely Guyana utilising a fossil fuel while committing to a low carbon future. The benefits of natural gas must be examined through the lens of Guyana’s current fuel sources. Guyana’s primary source of electricity production is heavy fuel oil. Heavy fuel oil is the residual oil left over after the lighter, more volatile products like gasoline, diesel and natural gas that are distilled out of the crude oil. Heavy fuel oil is more expensive than gas and produces more polluting sulfurs and heavy metals. Replacing heavy fuel oil with natural gas can reduce the number of pollutants and greenhouse gases generated substantially, creating a cleaner and more reliable electric grid that is better prepared to incorporate renewable sources like wind and solar.

While no fossil fuel is without its drawbacks, the substitution of cleaner-burning and more ecologically friendly fuels like natural gas can reduce emissions incrementally. At the same time, Guyana will continue to procure an energy mix that consecutive governments have agreed will be driven by solar, wind, hydro, and natural gas.