Insurance in place for construction of Gas-to-Energy project – Prime Minister tells Parliament 


Insurance in place for construction of Gas-to-Energy project – Prime Minister tells Parliament 

Prime Minister, Brigadier (Ret’d), Mark Phillips

Prime Minister, Brigadier (Ret’d), Mark Phillips

Kaieteur News – Insurance for the construction phase of the Gas-to-Energy (GTE) project is currently in place, according to Prime Minister, Brigadier Retired Mark Phillips.

The Prime Minister (PM) who holds responsibility for power generation in Guyana provided this assurance to the National Assembly on Wednesday, during consideration of estimates for the 2024 Budget. The GTE project is divided into two parts, with the first- a 225 kilometers pipeline from the Liza fields offshore to the Wales development site on the West Bank of Demerara- being financed by the Stabroek Block operator, ExxonMobil. This is expected to cost about US$1 billion.

The other aspect of the project entails a Natural Gas Liquid (NGL) facility and a 300-megawatt power plant to be financed by the Government of Guyana (GoG) through a loan from the United States Export Import (US EXIM) Bank. The two plants are pegged at US$759 million.

The Prime Minister explained that the construction phases of the projects are insured and related documents can be provided to the House. He was responding to Opposition Parliamentarian, David Patterson on whether insurance is in place for the current works to support the gas plants and whether the government can lay those in Parliament. The PM said, “The EPC (engineering, Procuring and Construction) contract has its own insurance policy.” When reminded about the latter part of the question, he said, “Certainly Mr. Speaker.”

Similarly, on the issue of Exxon’s pipeline, the PM noted, “I am advised again Mr. Speaker that Exxon has insurance coverage with the contractor, so that is catered for…we will lay it over.”

He also committed to providing the total sum expended on the project to date, including costs for the transmission and distribution of electricity, consultancy and substations, among other costs, as well as the agreements signed for the project.

A local insurer in an interview with Kaieteur News back in 2022 highlighted the importance of insurance during the construction aspect of the project. It was explained, “Everywhere in the world once a project is engaged, what happens is that you have insurance that literally covers the project while it is in the form of being carried out.”

According to the insurance company, this coverage is called ‘Construction All Risk’ and is taken out by the contractor that has been hired to complete the job. The credible source explained, “Technically it’s in your care, custody and control until you hand it to me as a finished product. You have problems and your problems are the construction while you are working, that material is worth money so if that material is destroyed while it is in your care, custody and control, you have a problem and your problem is to reimburse me, the owner (if something goes wrong). So how would you do that unless you have coverage for it?”

It is for this reason that the insurance firm stressed the need for coverage at all points during the construction phase to ensure all of the assets are secured. In addition to covering the materials, it was also noted that it is more important to institute a policy that caters to workers on the site. “You have workers on site so consequently if one of them is injured, you need to make sure there is coverage that looks after them so that’s called ‘Employers Liability’. Once you have that work site as well, anybody who goes on that work site, because it’s under your care, custody and control it means that liability could arise against you so that’s insured by something called public liability,” the source explained.

The insurer’s comments came on the heels of Vice President, Bharrat Jagdeo’s position that insurance for the project would be in place after the structures are completed. Jagdeo during an August 2022 press conference was asked about insurance for the pipeline component of the project by this newspaper when he said, “It’s reasonable. It’s common sense. You can’t not know the cost of the total pipeline as yet and seek to insure it. You understand. If you have a house and you build a house for $20 million, you don’t know the house, you start the foundation and you go to the insurance company, they’d say what are we insuring?”

He stammered, “How we gonna do, it’s like how you gonna start the insurance, first of all, the people are gonna say, the insurers, where is this pipeline? Have you built this pipeline, no. We are now procuring material. We are procuring the material to start laying of it. We are now mapping the route; we are still mapping the route. We are completing the environmental studies and we have to put in place, they’d say well when you have done that, when you know the final cost then we can talk about insurance.”

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