Every Man, Woman and Child Must Become Oil-Minded (Part 65)
Introduction
Today’s column carries out a commitment I made in a letter earlier this week responding to a statement by Mr. David Patterson, Minister of Public Infrastructure appearing in the last Sunday Stabroek. Patterson reports that a Dutch company will be undertaking an ocean floor mapping “as government prepares to bring natural gas onshore”.
In my response, I said that it was unclear how much this mapping will cost and where it is provided for in the Budget. After reviewing the 2019 Estimates, I noted that the closest such an activity came to being a project was described on page 467 of Volume 1 of the Estimates as an Energy Matrix Diversification Programme for which there is an allocation of $600 million for provision for studies and distribution infrastructure in the capital budget of the Ministry of Public Infrastructure.
I have since compared the 2019 Estimates with that of 2018 and it is interesting to note that the Project Code for the description is 2609800 which is a new Code and which therefore, did not appear in the 2018 Estimates.
Plenty of gas
It may be reasonable to conclude that the activity is a completely new one commencing in 2019. But then, nothing can be taken for granted and Minister Patterson had been talking about gas as early as 2017, and multiple times in 2018. For example, the Stabroek News of December 29, 2017 headlined a story in which Patterson is quoted as saying that a possible site for natural gas pipelines would be identified in January 2018. This report was followed by an exchange between Engineer Charles Sohan and Patterson from which Patterson seemed to have learnt nothing, not even from the Plain Language reading of the Petroleum Agreement signed by Mr. Raphael Trotman. It probably bears repeating that Patterson is one of President Granger’s Quintet who should be leading the country’s march to First Oil.
Mr. Patterson continued with his banality and on July 9, 2018, he is reported in the Stabroek News to have stated that plans were quickening for a 200 MW plant, apparently completely oblivious that ExxonMobil had informed the Government that the company believed that it would be “more beneficial monetarily to this country if all the natural gas was used for well injection purposes offshore.” To be fair to Mr. Patterson, or perhaps not wishing to embarrass the Minister, Mr. Rod Henderson, ExxonMobil’s Country Representative did say that the company was working with the Government to bring a cleaner and cheaper alternative for Guyana’s domestic use.
SOCU
Bear in mind that all of this was taking place in 2018 in the absence of any budgetary allocation and it can only be assumed that any expenditure would have come from the general funds of Mr. Patterson’s Ministry. But when it comes to the management of public funds, Mr. Patterson is at best suspect. He is one of the first members of this Administration to have been subject to interview by the Special Organised Crime Unit (SOCU) while his Ministry has been involved in improper procurement procedures with the proposed new Demerara Harbour Bridge. This has resulted in the loss of millions of dollars of taxpayers’ funds. We should not forget too that his Ministry failed so miserably in any kind of clean-up exercise in the misspending of about a billion dollars that the task was given to another, lesser agency.
Patterson, it seems, is engaged in popular-sounding projects without any oversight, thought or consideration as to the implications of his quixotic and irresponsible adventures. Let us say that yes, somewhere on the East Coast of Demerara might be a good site for landing of natural gas. And yes, that the Guyana Power and Light Inc. is indeed capable of converting from its existing heavy fuel oil (HFO). And yes, that the mapping which Patterson has now contracted out to a Dutch operation does prove that the ocean floor is smooth enough for the transportation of gas from the petroleum fields. Does Patterson not recognise that each of these elements has a substantial cost and that that should be a primary consideration? And that a holistic approach has to be taken in any project evaluation?
Wanton spending
It is hard to believe that a Minister of Government in this day and age, and worse, one who is professionally qualified, does not have this basic understanding or sense of responsibility. Or that he excludes from consideration the exchange of our share of profit oil for HFO to be used by GPL, while we get a share of profit gas if and when the Contractors begin to exploit the gas commercially. To the charge that such an option is inconsistent with the country’s Green State Development Strategy (GSDS), my retort would be whether it is not inconsistent for a GSDS to sit alongside the pumping of 750,000 barrels of oil per day.
It is troubling to realise that public funds can be so wantonly spent without any kind of oversight and frightening that Mr. Patterson’s spending budget may increase many times over when First Oil arrives. I am worried that this has passed our Budget Director and can only attribute this to oversight or overwork.
But there is probably an even more elementary point that has escaped Mr. Patterson: Guyana does not have the first call on gas, as I sought to explain in Columns 43 and 45 published in the Stabroek News in May of 2018. With complete respect for Mr. Patterson, I recommend that he reads either the two columns, or that he reads Article 12 of the Agreement.
Summary and conclusion
Here follows a brief summary of the two Columns with the caveat that the columns were themselves summaries. The Agreement deals with two types of gas – Associated and non-Associated Gas, the first from any Petroleum Reservoir producing mainly crude oil while the latter would be any gas not falling within the definition of Associated Gas.
The order of priority for utilising Gas is for the purposes related to the operations of production and production enhancement of Oil Fields, such as Gas injection, Gas Lifting and power generation. The laid down principle is full utilisation of the Associated Gas, and with no impediment to normal production of Crude Oil. In case there is any excess Gas, the Contractor is required to carry out a feasibility study regarding the utilisation of such excess and has five years after the submittal of the Development Plan within which to submit the feasibility study.
Moreover, if the Contractor believes that the excess Gas has commercial value, he is entitled, but not required, to make further investment to utilise such excess. Moreover, the Contractor may then negotiate “improved terms” for the development of the excess.
In so far as non-associated gas is concerned, the Agreement requires the Contractor to notify the Minister of any Non-Associated Gas discovery and whether the Contractor thinks that such gas is of commercial value. The Contractor may then propose revisions to the Agreement to enable the Contractor to receive a commercially competitive return on investment for development of the Non-Associated Gas.
As you would appreciate Mr. Patterson, it is not as simple as you think. I am asking that you be very careful with all those mistakes you keep making since they have serious consequences.
