To date, ExxonMobil and its partners estimate total recoverable hydrocarbon resources from the Stabroek Block at more than 5.5 billion barrels of oil equivalent (BOE). Resources contained in the Liza-, Liza Deep-, Payara-, Snoek- Turbot-, Ranger-, Pacora-, Longtail-, Hammerhead-, Pluma-, and Tilapia- reservoirs comprise of high quality light-sweet crude oil and significant amounts of associated natural gas. Additionally, the Haimara reservoir (announced in January 2019) is a natural gas reservoir containing high quality gas condensate. Natural gas is a clean-burning fuel, and Guyana has an abundance of it in its offshore petroleum reservoirs.
Guyana’s offshore hydrocarbon resource, in combination with the country’s abundance of other natural resources, presents the opportunity for transformative economic and societal development in Guyana and the broader Caribbean region.
Natural Gas will Energize, Stimulate, and Catalyze Economic Development. While ExxonMobil’s field development plan (FDP) for the Liza Phase 1 Project reinjects all of the extracted natural gas back into the reservoir, the Guyana Government should insist that Liza Phase 2 include an option to pipeline natural gas to shore.
Pipelining natural gas to shore will initiate a series of events culminating in an unprecedented era of sustainable economic development and opportunity for Guyana and its citizens. Building a natural gas pipeline and related infrastructure will stimulate the local economy by creating both short-term and long-term jobs. Training a workforce to perform those jobs through vocational training in the skilled trades is an essential need that could be met by both public and private educational institutions. Government Technical Institutes and the University of Guyana, in partnership with US technical colleges and others, can create relevant training programs to satisfy oil and gas industry workforce needs.
What is natural gas? Natural gas is composed primarily of methane gas (about 84 – 95%) and contains small amounts of other light hydrocarbons (ethane, propane, butanes, and pentanes) and nonhydrocarbon gases (like hydrogen sulphide, nitrogen, carbon dioxide, and helium). As extracted from a reservoir, the unprocessed natural gas is called wet natural gas. Before going to end users, wet natural gas is sent to a Natural Gas Processing Plant (NGPP) that removes any impurities and other hydrocarbons it contains. After processing, the purified natural gas is called dry natural gas. Other hydrocarbon products from the NGGP, collectively known as ‘natural gas liquids’ or NGLs, include ethane, propane, butanes, and natural gasoline. NGLs are valuable commodity products used in heating, fuels, and petrochemicals. Propane and butanes are sold in ‘liquefied petroleum gas’ (LPG) markets. Ethane, propane, butanes, and natural gasoline are sold as petrochemical plant feedstocks. Guyana’s NGLs can be exported or used in future Guyana-based add on industries like an LPG plant.
Facilities and Infrastructure. To facilitate the receipt, processing, transportation, distribution (e.g., to end users), and conversion of natural gas in Guyana, multiple job-creating infrastructure projects are needed. These projects include one or more ‘natural gas processing plant’, hydrocarbon storage facilities, gas transportation and distribution pipelines, gas-fired power plants, one or more ‘Liquefied Natural Gas’ (LNG) plant, modern port facilities, and electricity transmission and distribution grid upgrade and modernization. For all infrastructure projects and new facilities development in Guyana, the Government must mandate (direct) its contractors to: (a) maximize the utilization of Guyanese labor, and (b) train Guyanese to manage, operate, and staff the completed facilities.
The Guyana government has the onus to prudently develop and implement a long-term strategic plan for citing of industrial parks that are strategically placed to develop the country while maximizing environmental protection and facilitating commerce. To ensure economic viability of the projects, financing through public-private partnerships may be a prudent fiscal approach.
Natural Gas Processing Plant. While many have opined whether there should be a crude oil refinery in Guyana, the short answer to this multi-billion dollar (US) question is no, not now. An oil refinery is a very costly and complex undertaking, and I will address the question more fully in a future blog. Unlike the oil refinery question, a natural gas processing plant is a ‘no-brainer’ for Guyana.
A Guyana natural gas processing plant will produce dry natural gas and natural gas liquids (NGLs). Dry natural gas will supply domestic demand for: (a) direct consumption by industrial, commercial, and residential users; (b) electricity generation to power homes, businesses, and industry; and (c) Liquefied Natural Gas (LNG) production for export. Natural gas is also a raw material input for methanol and fertilizer manufacture. The valuable NGL byproducts will go primarily to export markets, and local and regional Liquefied Petroleum Gas (LPG) markets. Developing an LNG project for export markets requires securing one or more long-term (30 year or more) gas purchase contracts before starting the project. Hence, by its nature, an LNG project can take a long time to develop.
Natural Gas to Electricity. Electricity is the ultimate end-use energy source. Replacing inefficient, unreliable, high-polluting oil burning power plants with efficient combined-cycle natural gas fired power plants will catalyze industrialization and modernization of Guyana. With upgrade and modernization of Guyana’s electricity transmission and distribution grid, power plants fired by Guyana’s natural gas will deliver the energy that drives Guyana’s economic development. Availability of cheap, reliable, relatively clean natural gas will enable Guyana to build sufficient electric power capacity facilitating modernization, improved efficiency, and competitiveness of all of Guyana’s existing industries. The bauxite, sugar, rice, and other agri-businesses will benefit from Guyana’s energy revolution.
Moreover, building sufficient electric power capacity for energizing an aluminum smelter will transform Guyana’s bauxite industry from a producer of raw material (bauxite) to manufacturer of value-added aluminum metal. A Guyana aluminum smelter, producing aluminum locally, will spark local manufacturing and stimulate investment in and relocation of new industrial enterprises to Guyana. For example, manufacturing of automobile and airplane parts, building materials, and durable goods (like refrigerators, washers and dryers) could likely find a home in Guyana. Guyana’s location on the Atlantic coast of South America is very attractive for shipping finished products to the Caribbean and the Americas, and serving those markets. If these scenarios become reality, Guyana and its Caribbean neighbors will benefit from Guyana’s economic boom. Because of its small population, the demand for workers in the new Guyana will source skilled labor from other CARICOM states … and thereby, causing spillover economic benefits in those islands.
Guyana’s Energy Strategy. Because of its vast hydropower potential, initiating Guyana’s energy revolution with natural gas should be just a start. For successful outcomes, Guyana must employ a strategic, comprehensive, and integrated approach for developing and optimizing Guyana’s energy resources to realize maximum, sustainable economic and societal benefits for Guyana while minimizing election-cycle impacts. This is a Guyana government responsibility. As a critical tenet, Guyana must develop and implement long-term (30 yr., 20 yr.) and intermediate-term (5 yr., 10 yr.) Strategic Energy Plans that integrate crude oil, natural gas, electric power, LNG, hydropower, NGLs, and solar into a national economic development plan. As an unparalleled resource, Guyana has relevant oil & gas and energy expertise in the Guyanese diaspora who are willing and very able to assist Guyana. Instead of employing expatriates in this sphere, Guyana must engage its expertise resource from the Guyanese diaspora.
While I could continue writing on this subject forever, I will stop here and leave you with the following takeaways:
- Bringing Guyana’s natural gas onshore for electricity generation, local consumption, and LNG production (for export) is Guyana’s opportunity for sustainable economic development and positive growth, and modernization of the society.
- Natural gas is a relatively clean-burning fuel, and Guyana has lots of it in its offshore petroleum reservoirs.
- Readily available, clean, and relatively cheap electricity (generated from Guyana’s natural gas) will catalyze industrialization, modernization, and positive economic development that will create many jobs for Guyanese.
- Building natural gas pipelines and infrastructure projects for receiving, processing, transportation, distribution, and conversion of natural gas to electricity will be significant job creators that directly boost the economy.
- New gas processing and power generation plants will create long-term jobs for skilled Guyanese.
- Having one or more natural gas processing plants and an LNG plant creates new higher value petroleum products as exports to foreign markets bringing additional revenues to the country.
- Building sufficient electricity generation capacity, from Guyana’s natural gas, to power a Guyana aluminum smelter will transform the bauxite industry from merely producing commodity bauxite to manufacturing value-added aluminum metal … and stimulating downstream manufacture of aluminum components and products.
- The Guyana Government should insist that Liza Phase 2 include an option to pipeline natural gas to shore.
- The Guyana government has the onus to prudently develop and implement a long-term strategic plan for citing of industrial parks that are strategically placed to develop the country while maximizing environmental protection and facilitating commerce.
- For all infrastructure projects and new facilities development in Guyana, the Government must mandate (direct) its contractors to: (a) maximize the utilization of Guyanese labor, and (b) train Guyanese to manage, operate, and staff the completed facilities. A robust and well thought through local content law/ policy is essential to ensuring the benefits from Guyana’s oil and gas industry flow to the Guyanese society.