Guyana should properly assess its demand for electricity before it signs off on any gas-to-shore deal that forces it to accept an oversupply of gas and leave the energy sector financially unsustainable. This advice is coming from the Institute of the Americas, an international non-profit.
In the Institute’s report titled, ‘Guyana’s Gas-to-Power Potential,’ author Kathryn Hillis said that while there are significant reliability problems when it comes to electricity in Guyana, taking too much gas at a time would likely result in oversupply for the nation’s 750,000 people.
“Gas should be brought onshore through a phased approach,” Hillis wrote, “in which the government only purchases incremental natural gas as electricity demand increases and infrastructure is developed so Guyana does not accumulate an unnecessary gas surplus.”
The Institute advised that government first focus on providing power to coastal areas, then attempt to supply power to the hinterlands after sufficient infrastructure has been developed in the area.
The Institute saw it pertinent to weigh in, after seeing that Ghana signed a Power Purchase Agreement (PPA) to bring its gas to shore, and its failure to properly assess its energy needs at the right time has left the African nation struggling to find uses for the gas it is paying hundreds of millions of dollars for.
Ghana also had found itself in Guyana’s position, wanting to reduce power costs and make electricity more reliable. So it signed a long term deal with gas and power suppliers, through which it would have to pay for 90 percent of the produced gas from the field, no matter the demand. It was eager to get the project started as a large portion of the population lacked electricity.
The World Bank partially funded the project, whereby the Ghana National Petroleum Commission (GNPC), and Eni and Vitol drilled wells and interconnected a gas pipeline to the country’s pipeline network and with existing power plants.
After it approved the project in 2015 to bring gas from its Sankofa field, power was provided to 1.6 million households, oil imports decreased by 12 million barrels a year, and carbon emissions dropped by 1.6 million metric tons.
However, the market is now severely over supplied with the government paying $500 million annually for unused power. It made the energy sector financially unsustainable, and the current administration responded by creating the five-year Energy Sector Recovery Programme (ESRP) to find uses for all the extra gas, among other things.
“Despite the numerous benefits of using gas for power generation, the project could become a negative for the country if not executed properly,” the Institute said. “Clearly, Guyana must seek to avoid Ghana’s mistakes with its PPAs.”