Guyana’s choice to entrust a little-known American start-up with the design and development of projects aimed at monetizing its vast untapped natural gas resources, which could cost up to $30 billion, is attracting growing attention. doubts. Fulcrum LNG, created a year ago, is facing financial obstacles that could derail its selection. Ultimately, the South American country could rely on a consortium led by Exxon Mobil, which controls all production in the new energy hot spot. Until now, the main American oil producer has focused on oil.
Guyana has pressed Exxon to present a plan to convert its approximately 16 trillion cubic feet of gas reserves into valuable exports, such as liquefied natural gas (LNG), or to divest areas where gas has been discovered in order to that they can be exploited by others.
When Fulcrum was chosen in June, its founder and former Exxon executive, Jesus Bronchalo, said on LinkedIn that he was “thrilled and honored” to have been selected “to design, finance, build and operate the infrastructure gas required”.
Fulcrum has since not identified any backers, casting doubt on its ability to complete the project and leading government officials to characterize its selection as tentative. “No project has been awarded to anyone. We are in an exploratory phase,” Guyana Vice President Bharrat Jagdeo told Reuters last month. This is a change from the Ministry of Finance’s description of the contract award as one of the economic achievements of the year. Guyana’s president, who announced the contract award, said an agreement, whether including Exxon or not, was expected next year.
Meanwhile, the opposition People’s National Congress party is skeptical about the contract award.
Fulcrum LNG “does not have the required experience and has not demonstrated the ability to raise the type of multibillion-dollar financing needed,” said Elson Low, an economist and PNC adviser.
FULCRUM’S LEVERAGE
Guyana chose Nevada-registered Fulcrum LNG, which it said presented “the most comprehensive and technically sound proposal” among 17 bidders, including China’s third-largest oil company CNOOC, US giant of the Energy Transfer gas pipeline and the fourth American exporter of LNG Venture Global LNG.
Ira Joseph, an LNG market expert and senior fellow at Columbia University’s Center on Global Energy Policy, said it would be “very difficult” for a young company to raise money for a multibillion infrastructure project. of dollars. “Why doesn’t Exxon build the LNG plant itself? It’s very difficult to raise that kind of money to make a project work, (Guyana) should bring in one of the big players like TotalEnergies or Shell,” Mr. Joseph said. In addition to teaming up with U.S. oilfield services firm Baker Hughes and construction contractor McDermott, Fulcrum’s proposal would include financing from the U.S. Export-Import Bank and the participation from private equity firms and an environmental partner, the government said.
The U.S. Export-Import Bank and McDermott did not respond to requests for comment, and Baker Hughes referred questions to Fulcrum. Bronchalo – who is the CEO, secretary, treasurer, director and president of Fulcrum – and the only other person associated with the company, the technical director, did not respond to requests for information.
Fulcrum’s website does not mention any previous projects, but claims “extensive experience in creating new opportunities to access and capture global LNG markets.”
Guyanese authorities now say they chose Fulcrum without first determining whether the company could raise the funds needed to exploit the enormous gas reserves. The technical committee that selected Fulcrum was confident it could raise funds for the projects, Jagdeo told Reuters. “They said they had the capacity to raise funds.
Natural Resources Minister Vickram Bharrat said the expertise of Bronchalo, who worked for Exxon in Guyana and Asia for two decades and was involved in contract negotiation, swung the selection in his favor. “We expect Fulcrum to have the necessary capabilities and experience,” he said in an interview in October.
COLLABORATION OR CONFLICT
The consortium of Exxon, Hess and CNOOC has discovered more than 11 billion barrels of oil off the Caribbean coast of Guyana since 2015 and has produced 500 million barrels of crude from the Stabroek block since 2019, transforming overnight this small country became a major world oil producer.
So far, Exxon only plans to use the gas in a small project to produce electricity from gas.
The independent gas development project was conceived as a way for Guyana to create a new source of income outside of oil, which is entirely exported. Gas would help develop the country’s manufacturing and food sectors and help make it a regional energy power.
Last year, royalties and fees collected by the country amounted to $1.6 billion, compared to $6.33 billion in profits for the consortium. Alistair Routledge, Exxon’s director for Guyana, told Reuters the company would make a decision on exploiting new discoveries containing mainly gas by mid-2025.
Fulcrum “may have better data and more knowledge than the government to push Exxon in this direction,” Guyana’s vice president said.
Mr Jagdeo said Guyana wanted Fulcrum to work with Exxon, but would move forward with or without it. However, if Exxon does not act on the discoveries or auction the land to others interested in exploiting the gas, Guyana could reclaim some of its offshore land, he said.
The oil major, for its part, believes it is the only one that can decide on the use of this gas, said a person familiar with the company’s position, citing the agreement it reached with the Guyana.
“Exxon has indicated that it is interested in gas development, but as negotiations continue, we will see how committed it is to gas,” Minister Bharrat said.
