Speaker 1: Welcome back to Drilled. I'm Amy Westerveldt. I know we're
Speaker 1: in the middle of a new season on the criminalization
Speaker 1: of protest that I'm bringing you an update today on
Speaker 1: an earlier season, Light Sweet Crude, our season about the
Speaker 1: creation and expansion of a new oil and gas industry
Speaker 1: in Guyana. When we were working on that season, it
Speaker 1: was very hard to get any information at all about
Speaker 1: what was being called the Gas to Energy project. This
Speaker 1: was a plan to pump excess gas from the oil
Speaker 1: drilling offshore onshore to a facility and then use it
Speaker 1: either for export or for fuel in Guyana. A new
Speaker 1: report has come out from the Institute for Energy and
Speaker 1: Economic Analysis AIFA, and Tomsonzillo, the author of that report,
Speaker 1: spoke to me about what he has found about this project.
Speaker 1: In a nutshell, seems to be a way for Exxon
Speaker 1: to turn what was a problem for them access gas
Speaker 1: that they couldn't flare without being fined into a new
Speaker 1: revenue stream, gas that is technically free for Guyana, but
Speaker 1: that they're spending an awful lot of money.
Speaker 2: Paying Exxon to get to shore.
Speaker 1: And back with more details on that after this quick break.
Speaker 2: Okay, tell me what you looked into here.
Speaker 3: So what we did is we took a look at
Speaker 3: the gas to energy project that's being proposed in Guyana,
Speaker 3: and a couple things came out of the study. Maybe
Speaker 3: the most important one was that the need for the
Speaker 3: project is really questionable. It's kind of a risky bet,
Speaker 3: and that's because the grid system in Guyana really doesn't
Speaker 3: need something of this size three hundred mega posal. As
Speaker 3: we reviewed the documentation and all, what we came up
Speaker 3: with was if they build this, given the current capacity
Speaker 3: that they have and some other new things that they're
Speaker 3: planning to do in addition, that they would wind up
Speaker 3: the best way to talk about oversupply is that the
Speaker 3: reserve margin would be enormous. And the reserve margin is
Speaker 3: effectively whatevery utility has. If you need one hundred megawatch,
Speaker 3: you're going to build one hundred and fifteen, because that's
Speaker 3: basically how the systems work escially, as a professional standard.
Speaker 3: If they build in either scenario, we have a lower
Speaker 3: I case scenario, the reserve margin will be fifty eight
Speaker 3: percent one hundred and ninety six percent for the low load,
Speaker 3: which is if it is a sort of a slower
Speaker 3: economy and then the high load it would be twenty
Speaker 3: four to one hundred and thirty two percent reserve. So
Speaker 3: no matter how you look at it, it's significantly oversupplied.
Speaker 3: That's unfortunate that they look to build a gas project
Speaker 3: or anything. But that wasn't the only thing that we
Speaker 3: found in that they historically get this wrong. The estimation
Speaker 3: for electricity, and there we basically looked at their past
Speaker 3: practice and they were consistently overestimating the amount of electricity
Speaker 3: they were going to use. That's pretty significant over like
Speaker 3: a ten year period. Would they sort of missed it
Speaker 3: every year?
Speaker 2: And this is this is the government of Guyana, or this.
Speaker 3: Is power and light.
Speaker 2: I'm sorry, okay.
Speaker 3: That's the utility. And then the other problem that we
Speaker 3: that we uncovered is that when they made the announcement,
Speaker 3: they were working with one assumption. They then revised the
Speaker 3: analysis and then very shortly after that and they revised
Speaker 3: it by a significant amount downward. So the stuff that
Speaker 3: we're looking at, which is already you know, an over assumption,
Speaker 3: they had it much higher that justified the gas plant.
Speaker 3: Then they reduced it afterwards, and they didn't reduce any
Speaker 3: sense of that they still needed a three hundred megawatt plant.
Speaker 3: It's kind of like it's a very awkwardly done resource
Speaker 3: plan and they don't have a kind of resource planning
Speaker 3: like we have in the US that you might be
Speaker 3: familiar with. The other problem they have there, and I'm
Speaker 3: going into some length on this because I know they'll
Speaker 3: say I don't know. What I'm talking about is that
Speaker 3: they have about one hundred megawatts actually off the system
Speaker 3: of an entity, mostly industrial and commercial, that are supplying
Speaker 3: their own energy right now because the system is so unreliable.
Speaker 3: They think that's coming back on when they put up
Speaker 3: this new plant, but it probably won't because they're not
Speaker 3: planning for any new system upgrades.
Speaker 2: Transit, right, That's what I was going to ask you about,
Speaker 2: is like, you know, is there any kind of transmission distribution?
Speaker 3: No. The problem is is that they don't have a
Speaker 3: planning process that gives you that comprehensive sense. But we
Speaker 3: went into it and don't see any numbers or any
Speaker 3: you know, thought that they are consistently working to improve
Speaker 3: their reliability. But it's like in the US averages four
Speaker 3: hundred and forty minutes a year of outages. In Guyana,
Speaker 3: it's fifty one hundred minutes, so you get a sense
Speaker 3: of just how unreliable. And it's a it's a major
Speaker 3: item in the newspapers there all the time, and a
Speaker 3: major item people's daily existence. So they have a long
Speaker 3: way to go on that. And it's unlikely that the
Speaker 3: businesses are going to come back in simply because they
Speaker 3: buy a gas plant that they don't particularly need. It
Speaker 3: doesn't improve the system delivery. Right, Those are those are
Speaker 3: the kinds of things we're looking at in terms of necessity.
Speaker 2: Can I ask you, like if this has any impact
Speaker 2: on because I know one of the big promises that
Speaker 2: the government and Exon has made is that like this
Speaker 2: project is going to make electricity cheaper for people in Guyana.
Speaker 3: Well, the only way it's going to do that, I
Speaker 3: was going to get to that next is that it
Speaker 3: is essentially a system that's unaffordable and not necessarily to
Speaker 3: the rate payer, but to the taxpayer. What they've decided
Speaker 3: to do is there's no rate information in any of this. Incidentally,
Speaker 3: and we're going to be calling for the Commission to
Speaker 3: do their job. But the plan is that they're going
Speaker 3: to provide a fifty percent subsidy for rates after this
Speaker 3: is done, and that'll be obviously an annual disbursement from
Speaker 3: the Guyanese government to GPL to offset the rate that'll
Speaker 3: be out of profit oil future profit oil essentially going
Speaker 3: to get to a shot in a minute which explains this.
Speaker 3: And so the affordability issue may be minimal to the ratepayer,
Speaker 3: but it's going to be a significant burden on the
Speaker 3: budget every year, so you know you have an issue
Speaker 3: there as to whether or not it's affordable for the taxpayer.
Speaker 3: The other thing that, as I said to you, the
Speaker 3: system remains unreliable. And then what they're proposing in terms
Speaker 3: of money being spent in the grid system is when
Speaker 3: you build a gas plant, particularly when you're going to
Speaker 3: borrow to build a gas plant, you are you're going
Speaker 3: to be first of all using foreign labor for the
Speaker 3: most part, because you're going to have all of these
Speaker 3: professional engineers and construction coming in. The money is going
Speaker 3: to come from Exon lending as well as the ExM Bank,
Speaker 3: and so you're going to have a lot of the
Speaker 3: money in paying debt off that's not going to stay
Speaker 3: in the Guyana. And then there may be and I
Speaker 3: we'll get into that in a minute. There may be
Speaker 3: that the government has to pay for the gas. That's
Speaker 3: a contented matter right now. And if they do, then
Speaker 3: the fuel cost, of course gets paid to Exon, which
Speaker 3: is not money in Guyana. When you do solar, you're
Speaker 3: going to be employing, because what we're proposing is a
Speaker 3: solar investment of significant nature. When you do solar, you're
Speaker 3: going to be hiring local people. They're going to be
Speaker 3: building things in the neighborhoods, in the communities, in the
Speaker 3: towns and villages and the rural areas, and people will
Speaker 3: see that construction going on and it will be an
Speaker 3: economic benefit to each family who gets the panels, and
Speaker 3: we're trying to cover everybody, and then that will lower
Speaker 3: utility costs, which allows them, of course, some extra money
Speaker 3: in their pocket. So you have here a series of
Speaker 3: direct benefits to the Guinese people, and frankly, the Guinees
Speaker 3: people haven't seen much benefit at all from this oil
Speaker 3: money yet. They see some construction projects and all, but
Speaker 3: as for specific benefits, there really haven't been any like this.
Speaker 3: You know, Alaska, for instance, gives out cash to every
Speaker 3: citizen in Alaska because of their oil surpluses. Here they're
Speaker 3: doing you know, they're doing more generalized so called benefits.
Speaker 3: So those economic issues are also very important. So we
Speaker 3: summarize it as being unnecessary, unaffordable, unreliable and uneconomic. And
Speaker 3: so we propose a solar plan, which would be probably cheaper.
Speaker 3: We're looking to get for the first part of this
Speaker 3: one hundred percent of the residents in Guyana with solar panels.
Speaker 3: I think that can be done probably by twenty forty.
Speaker 3: We find it to be probably around the same course,
Speaker 3: but probably cheaper. Obviously it's a more predictable energy supply.
Speaker 3: If you do it with batteries, which we're building into
Speaker 3: the system, you could probably have twenty four to seven service. Again,
Speaker 3: direct benefits with low electricity bills and the greater likelihood
Speaker 3: of employment and greater likelihood of activity and local stores
Speaker 3: and what have you when you do the when you
Speaker 3: do a solar investment.
Speaker 2: I wanted to ask you one thing about the press
Speaker 2: release before we get into the chart, which is this
Speaker 2: line that says Exonmobile would profit the most from the
Speaker 2: gast entergy.
Speaker 3: Well, yeah's talk about So what you see in the
Speaker 3: left hand side of the chart is financial lender. Exon
Speaker 3: will be one of the lenders. They will be lending
Speaker 3: the money to Guyana, I believe for the pipeline, although
Speaker 3: this is unspecified, but Exon has acknowledged that this. They
Speaker 3: will be making an investment and it will have to
Speaker 3: be paid back. That's about the sum of it that
Speaker 3: I can see. Then they are going to build the pipeline,
Speaker 3: second source of profit for them. Then what we have
Speaker 3: here is two other things that aren't necessarily on the chart,
Speaker 3: but I want to give you the idea. There is
Speaker 3: a contention. Jack Deo, the vice president, has said that
Speaker 3: the gas is free and that they will not be
Speaker 3: charged for it. Right so, and if you read the
Speaker 3: contract then we go into some length in the report
Speaker 3: on this. If you read the contract, there's specific way
Speaker 3: in which Guyana would get free gas, and no matter
Speaker 3: how we look at it, that would be a very
Speaker 3: limited amount, if any. And what Exxon is saying is
Speaker 3: that they are going to be winding up selling the
Speaker 3: gas to Guyana and they will also be producing so
Speaker 3: plus gas. And I don't know how that's going to
Speaker 3: be settled because there's no no public plan put out,
Speaker 3: no contracts put out, So there's a disagreement. You know,
Speaker 3: Guyana seems to be saying it's free and Exon says no, no, no,
Speaker 3: we're selling it to Guyana. So where if you assume
Speaker 3: that they pay for the gas, then you're going to
Speaker 3: have and that dotted line that says debt bail out
Speaker 3: you should probably put in there. And I'm thinking of
Speaker 3: doing this when I at least the report debt bailout
Speaker 3: and potential gas sale. Each of them are likely, but
Speaker 3: they're not certain. And we're trying to separate those things
Speaker 3: through that that you when you settle, when you look
Speaker 3: at risk, you sort of look at the levels of it. Right,
Speaker 3: So this looks like Exceon would benefit if there was
Speaker 3: a gas sale. That would be three forms of profit.
Speaker 3: The fourth form of profit. They currently are in court
Speaker 3: still on the permit case on the flaring, and the
Speaker 3: essence of that case is Exon had permit requirements to
Speaker 3: do zero flaring. They failed to meet that. They've been
Speaker 3: fined already, but we have it in court. And what
Speaker 3: this does is it gets rid of that problem for
Speaker 3: Exon because there's not going to be flaring anymore. They're
Speaker 3: flaring because they're burning excess gas. If they're going to
Speaker 3: be moving the gas into Guyana, then the flaring problem
Speaker 3: is no longer an issue and is no longer any
Speaker 3: costs associated with attempts to comply with that permit term,
Speaker 3: and so they benefit that way. So we see at
Speaker 3: least four forms of profit for Exon, and we're not
Speaker 3: seeing a whole lot of gain obviously for the taxpayers ratepayers,
Speaker 3: because what will happen is they're going to have to
Speaker 3: pay it back, and the way the government has said
Speaker 3: they want to pay it back is with power subsidies.
Speaker 3: Now that would be and that's the line that goes
Speaker 3: from the Guinese government up to over by the rate pays.
Speaker 3: That's a subsidy that would be annually, and we don't
Speaker 3: know they say fifty percent that potential subsidy. And then
Speaker 3: the Utility Commission has warned GPL the inn of Power
Speaker 3: Life that they're borrowing too much. We agree. And the
Speaker 3: likelihood when they start adding on the debt that we're
Speaker 3: thinking about for this particular project, you're looking at a
Speaker 3: very serious financial situation, and the likelihood, again it's a
Speaker 3: risk matter, there is a likelihood of a need for
Speaker 3: a debt bailout of some kind, in which case that
Speaker 3: would benefit Excell again because they would get paid immediately
Speaker 3: and in advance for the money that they've lent to
Speaker 3: the project. So we're looking at that and saying, well,
Speaker 3: this is sort of another way they get it coming
Speaker 3: and going. But the government is going to have a
Speaker 3: problem having to stand behind this deal because if you
Speaker 3: over build on your power and you're unlikely to use
Speaker 3: the facility at one hundred percent or ninety five percent
Speaker 3: capacity because you're going to have other things, other assets
Speaker 3: that you're going to be using. So as we look
Speaker 3: at it, we say, well, how are they going to
Speaker 3: you know, how's this going to work? And the answer is,
Speaker 3: you know, they may wind up with a stranded asset
Speaker 3: where they're not able to really use it beyond the
Speaker 3: sixty percent sixty five percent capacity. And so we're saying
Speaker 3: to ourselves, well, you know that's another problem for that's
Speaker 3: you know, power subsidy, because that that'll be more that'll
Speaker 3: make it more expensive if they run it less. So
Speaker 3: you have a real set up here for a high
Speaker 3: risk venture that is likely to you know, be a problem.
Speaker 3: And what happens then is a lot of the oil
Speaker 3: profits then have to go back into something that they
Speaker 3: don't need in the first place. Right whereas if you
Speaker 3: take the oil profits and the gain these government and
Speaker 3: you invest that and you provide solar panels to families,
Speaker 3: you have a correct benefit. You don't have the borrowing.
Speaker 3: You know, you have a local economic activity, you have
Speaker 3: lower costs over time, you don't have to worry about
Speaker 3: GPL turning the lights on and off. You know, you
Speaker 3: have definitely a better improvement here that's more efficient and
Speaker 3: stable financially for Guyana. It's money that they can invest
Speaker 3: in Guyana and it stays in Guyana, so instead of
Speaker 3: the two billion or whatever it is. That's another thing
Speaker 3: that's a problem that we point down the report. There's
Speaker 3: really no clear estimate of what it's going to cost.
Speaker 3: Some are saying two billion.
Speaker 2: And right. I know that Keana, our reporter in Guyana,
Speaker 2: was saying it like they've been asking over and over
Speaker 2: for some kind of transparency around the cost of this
Speaker 2: project and it's just not coming, not coming.
Speaker 3: It's there's a lot of things in that hear that
Speaker 3: lack transparency. I mean, that's our ongoing problem. So what
Speaker 3: we were able to do here, I think, and if
Speaker 3: you look at it from that angle, is we kind
Speaker 3: of piece together a really poor disclosure system on the
Speaker 3: utility system and an even worse disclosure system on the
Speaker 3: capital part of the pipeline, and then that weak disclosure
Speaker 3: of the utility makes it very hard to do a
Speaker 3: solar power analysis, although we did our best with some
Speaker 3: I level numbers, and we are starting to see other
Speaker 3: places invest heavily in solar and so we have a
Speaker 3: little feel for what a system of this size would
Speaker 3: actually cost. And you know, we're just seeing it in
Speaker 3: a very sort of different light. And we think that
Speaker 3: if they also, if they do this gas project the
Speaker 3: way they're talking about, given what they have, they don't
Speaker 3: need to solar then and so it's going to be
Speaker 3: unlikely that people are going to be you know, using
Speaker 3: it in any great numbers, you know, particularly you're going
Speaker 3: to have a subsidy in there, so the rates will
Speaker 3: be you know, might be reasonable to the households, but
Speaker 3: the government and will have a lot of problems. So
Speaker 3: that's really kind of what we're looking at. And we see,
Speaker 3: as I said, you know, we don't see a whole
Speaker 3: lot of benefit for the public, but we do see
Speaker 3: very clear articulated benefits for Excellon and it seems to
Speaker 3: be at a recurring theme.
Speaker 2: Yeah, I would imagine that that the renewables thing would
Speaker 2: would also have a like a workforce training component too, right,
Speaker 2: that there would be some kind of local training and
Speaker 2: jobs and all that stuff as well.
Speaker 3: Where we've where I've seen them try to do these
Speaker 3: mass renewable stuff, renewable projects. That is what happens. I
Speaker 3: live in Upstate New York, and a number of years
Speaker 3: ago the state government put place a program for solar
Speaker 3: installations and energy efficiency for houses, and the local contractors,
Speaker 3: many of them, took a risk in doing it, and
Speaker 3: one of the things they did was they put together
Speaker 3: a little group schools and that training center was put
Speaker 3: together by the merchants, by the contractors. So I think
Speaker 3: you are pretty confident that if you did that in Guyana,
Speaker 3: you would have some form of training that would go on,
Speaker 3: and you know, and all the work is done locally.
Speaker 3: If you're looking at it, you know, if this is
Speaker 3: a ten or fifteen year undertaking, if you do that,
Speaker 3: you might even get some kind of production, if not
Speaker 3: in Guyana, at least you know, in closer proximity than
Speaker 3: in the US mainland or China. Nevertheless, the parts and
Speaker 3: what have you are all serviceable locally, so you have
Speaker 3: a real you have a local economic benefit here that
Speaker 3: does not compare with what happens when you put in
Speaker 3: a gas plant.
Speaker 2: Wasn't one of the things that jackdo promised about this
Speaker 2: partnership with Exxon was that basically the oil money was
Speaker 2: going to fund climate adaptation.
Speaker 3: Yeah, you know, in terms of the oil profits, there's
Speaker 3: non observable or publicly available capital plan that is laying
Speaker 3: out how they're going to do this. It looks to
Speaker 3: me like they have it the money. They're highly liquid,
Speaker 3: as in it's just sitting in an account and it's
Speaker 3: like in the billions now, which is another question that
Speaker 3: you and I some day should talk about. And then
Speaker 3: they're able to use that in any given budget year
Speaker 3: for whatever amount of money they want to pull out
Speaker 3: of it, you know, and they've been doing that, you know,
Speaker 3: since twenty nineteen. So you don't have a plan as
Speaker 3: to how the money is going to be used. And
Speaker 3: so I don't see any evidence of adaptation plans. You know,
Speaker 3: we see roads. I guess you could argue that it
Speaker 3: fast they get off of the game if there's climate events,
Speaker 3: and it's not. It's not an articulated use of the money.
Speaker 3: It seems to be more of a budget matter, and
Speaker 3: it's used as oil revenue for the annual budget, and
Speaker 3: it's enhancing those expenditures pretty handsomely in the last couple
Speaker 3: of years.
Speaker 2: Mm hmmm hm. Is there any concern that, I mean,
Speaker 2: I know what we've seen in other places in the
Speaker 2: world when there is excess gas that's not being used
Speaker 2: for energy, that the next step is building petrochemical facilities.
Speaker 2: So is there a sense that that might happen here?
Speaker 3: Well, you know, you hear little things as to what,
Speaker 3: you know, what might be next in terms of new building.
Speaker 3: Let's tossed around that there's going to be opportunities for
Speaker 3: additional industrial activity, and nothing's been articulated yet, but that
Speaker 3: seems used to be a very you know, logical possibility.
Speaker 3: The pet CAEM markets. I guess if they started now
Speaker 3: and they're going to build six or seven years from now,
Speaker 3: there's a potential that there would be some market. Right now,
Speaker 3: all the markets in single use plastics are over oversupplied,
Speaker 3: and that's going to be likely till pretty much twenty
Speaker 3: twenty nine, and then I hope, you know, hopefully we
Speaker 3: have some broader intervention into the economy so that it's
Speaker 3: more sternly regulated in that natural gas is not the
Speaker 3: only go to for the petrochemical business. You might, you know,
Speaker 3: there's a lot of emphasis in Europe, for instance, on
Speaker 3: moving fossil fuels out of petrochemicals and looking to replace
Speaker 3: it with biofuels and other kind of recyclables and what
Speaker 3: have you. There should be some ability to curb demand
Speaker 3: for gas, you know, in six or seven years, and
Speaker 3: so you may not have the kind of demand the
Speaker 3: model that we're currently using. So that's a very very
Speaker 3: risky proposition to think that this gas will be deployed
Speaker 3: and it will be significant. I think maybe we're saying
Speaker 3: fifty to sixty percent of the gas would be used
Speaker 3: by this plant that maximum, and we're probably not going
Speaker 3: to be at maximum, and then the rest of the
Speaker 3: guess they have to figure out what to do with
Speaker 3: it now. Currently I guess it could be sold into
Speaker 3: the market. The way I read it, the current contract
Speaker 3: might actually be applying, which case, you know, Gayana once
Speaker 3: again gets short change. But if there's going to be
Speaker 3: a new contract for the sale of that gas, that
Speaker 3: will be another potential revenue stream for Guyana. What you get.
Speaker 3: You know, well, I forgot if you're going to do this,
Speaker 3: and I don't advocate it, they'd be better off if
Speaker 3: they're going to sell gas to little and use the
Speaker 3: profits for a longer term, more stable component to their economy,
Speaker 3: which is solar. I don't think anybody would disagree with that.
Speaker 3: If you're looking at building the economics for the future, it.
Speaker 2: Sounds like this project is more about Exxon dealing with
Speaker 2: a gas problem than Guyana looking for a way to
Speaker 2: fix its its electricity.
Speaker 3: Yeah. Yeah, I think in terms of what the choices
Speaker 3: are the choices for the electricity system, I mean, they're
Speaker 3: claiming there's going to be a massive increase in the
Speaker 3: amount of electricity used in Guyana, and we just can't
Speaker 3: see that. We're not seeing any particular need for this,
Speaker 3: And I mean, so that's kind of how we're just
Speaker 3: looking at the whole thing.
Speaker 2: Are they basing that on like the idea that you know,
Speaker 2: business is booming in Guyana and.
Speaker 3: You know, hear they're basic in on a GDP formula,
Speaker 3: which I don't think they have that right either, but
Speaker 3: and they're saying that because of course the GDP is expanding,
Speaker 3: you know, with the gas. But they're claiming that there's
Speaker 3: going to be a commensurate you know, increase in the
Speaker 3: in the electricity usage. And there may be, and we've
Speaker 3: accounted for our Our view is that it's going to
Speaker 3: be somewhere between their low model and the high model,
Speaker 3: and it's not going to be as high as I say.
Speaker 3: So you're going to have some increase in demand, and
Speaker 3: we're looking at about a oh, I don't know, five
Speaker 3: to six percent increase in demand. They're looking at a
Speaker 3: fourteen or fifteen percent increase, and you know, the consultants
Speaker 3: even told them that it's three to five percent, you know,
Speaker 3: going forward, even with everything. So you know, I could,
Speaker 3: you know, if it really took off. I'm still not
Speaker 3: sure that they would need a gas plant, but I
Speaker 3: guess they could then shut down a lot of their
Speaker 3: current capacity, which of course would be just lost assets
Speaker 3: there in order to make this thing a go. So
Speaker 3: the planning is poor and the transparency is zero, and
Speaker 3: so whereas normally you would have hearings and what have you,
Speaker 3: you don't have any of that. It's not mandated by law.