Cash cow for cronies or citizen cash spinner?
Kaieteur News – Today, I’m exploring the criticisms of the lack of transparency in the onshore gas (GTS) project. The absence of project information does not mean that it is impractical; it simply means that the government has not yet facilitated the transparency needed for an informed assessment of the environmental and economic soundness of the project.
The GTS project will be the largest onshore investment. It will exceed the cost of the besieged Skeldon Sugar Factory. In the end, that factory cost taxpayers US $ 180M. Political responsibility for this behemoth must be placed squarely at the feet of Vice President Bharrat Jagdeo, under whom the project was developed.
Jagdeo had promised that, even if he had to take part personally, he would repair the project. It has not been fixed. Jagdeo’s involvement in that turmoil may be the reason why the public is explicit about the GTS project. For many, this is another costly and pointless outing by Jagdeo.
It might be in President Ali’s interest to remove Jagdeo from any part of the project. Given Jagdeo’s reputation with large projects, confidence in its ability to successfully deliver a project of this magnitude is certain.
The government’s failure to make the various studies about the project known will only add to the suspicion that the decision to locate the gas pipeline and factory in Wales. Not enough has been known at this time, and this accounts for the doubts surrounding the project.
When the government was planning to build the Amalia Falls Hydro Electric Facility, the developer wanted the Opposition’s support. The PPP / C was forced to hold a briefing with the parliamentary Opposition in the hope that it could woo its support. This did not happen. The Opposition rejected the project; and the developer walked.
Amazingly, the PPP / C wants to resurrect this project while at the same time promising to build gasworks. This is all the more reason why there should be more transparency because there is no explanation of how all this energy will be used.
The President has said the cost of electricity is likely to be cut in half. This alone should make the project unviable. Given the amount of gas, which is ultimately generated by petroleum operations, there is no reason why the cost of energy from a natural gas station alone should be halved.
It makes no sense to build a natural gas plant to reduce energy costs by 50 percent. Energy costs need to be cut by at least 80 percent if Guyana’s manufacturing is to be competitive. There is also no reason why any household should ever have to pay for electricity again if such a factory is set up. With such a project, there should be enough energy to provide consumers with at least 300MW for free.
The elephant in the room, however, is the financial model, which will be used. Perhaps the government is thinking of a public private partnership. The PPP / C record with this type of arrangement is well known. It benefits friends and cronies in using the state to fund much of the capital costs. The Marriott Hotel and the Berbice River Bridge are great examples where a flawed financial model has benefited syndicate and discretionary investors rather than the country.
The cost of the GTS project is expected to be prohibitive. The government should offer this project to ordinary citizens. The government can fund this project by offering shares, with a guaranteed rate of return back through a state guarantee, as is the case with the GuySuCo bond, which NICIL arranged.
Currently, tens of thousands of ordinary citizens receive less than one two per cent interest on their bank savings. If the government can guarantee a four percent rate of return, many of these ordinary citizens will be prepared to invest in the project.
The little guy is not going to ask for 20 percent, the rate of return, touched for Amaila at one point. They are going to settle for four percent as this is four times what most of them receive on their savings accounts.
In this way, the people of Guyana can rest assured that the GTS project will be their own project. It will not be another cash cow for accruals but a citizen investment.
(The views expressed in this article are those of the author and do not necessarily reflect the views of this newspaper.)