Guyana's pick of US startup faces hurdles to tap vast gas reserves

By Curtis Williams and Kemol King

HOUSTON/GEORGETOWN (Reuters) -Guyana's dreams of developing its vast natural gas resources are stuck on the drawing board five months after it picked a little-known U.S. startup, Fulcrum LNG, to develop an export project that could cost up to $30 billion.

Guyana has one of the fastest-growing economies in the world, thanks to the rapid rise in oil production at lucrative offshore fields developed by Exxon Mobil (NYSE:XOM ). But the South American country lacks the infrastructure to use the gas produced at those fields, which is reinjected to maintain pressure.

The government selected Fulcrum LNG in June over 16 other candidates - including top liquefied natural gas (LNG) and gas pipeline firms - to develop its gas resources and create a new revenue stream apart from oil, which is all exported.

The country's leadership said it wanted to expand its partnerships beyond the consortium led by Exxon that produces all the oil in the new energy hotspot.

Fulcrum LNG was founded a year ago by former Exxon executive Jesus Bronchalo.

It was an unusual choice to pull off LNG and infrastructure projects that will require significant expertise and financial clout, industry experts and Guyana advisers said.

Fulcrum LNG "lacks requisite experience and a demonstrated ability to raise the type of multi-billion-dollar finances required," said Elson Low, an economist and adviser to the opposition People's National Congress party.

Bronchalo did not respond to Reuters requests for comment. He is Fulcrum's CEO, secretary, treasurer, director and president. The only other person associated with the company, the technical director, also did not respond to requests for information.

Government officials have begun to describe the selection of Fulcrum for the contract as tentative.

"No project has been awarded to anyone. We're in an exploratory phase," Guyana's Vice President Bharrat Jagdeo told Reuters last month. That is a shift in the language used by the ministry of finance when it cited the award of the contract as among its economic achievements this year. Guyana's president, who announced the award, said an agreement, that may or may not include Exxon, was expected next year.

When Fulcrum was selected, Bronchalo said on LinkedIn he was delighted and honored to be selected "to design, finance, construct and operate the required gas infrastructure."

The company plans to pair up with U.S. oil services firm Baker Hughes (NASDAQ:BKR ) and construction contractor McDermott. Fulcrum's proposal would include financing from the U.S. Export-Import Bank and the participation of private equity firms and an environmental partner, the government said.

Fulcrum has yet to make public any details on those investors.

The U.S. Export-Import Bank and McDermott did not reply to requests for comment, and Baker Hughes referred questions to Fulcrum.

It would be "very difficult" for a startup to raise the financing for a multi-billion-dollar infrastructure project, said Ira Joseph, an LNG market expert and senior researcher at Columbia University's Center on Global Energy Policy.

The project was designed to help the country add to its energy revenue. Last year, Guyana's take from oil royalties and fees was $1.6 billion, compared with $6.33 billion in profit that went to the Exxon-led consortium.

FULCRUM

Guyana picked Nevada-registered Fulcrum, which it said offered "the most comprehensive and technically sound proposal," among the bidders, including China's third-largest oil firm CNOOC (NYSE:CEO ), U.S. gas pipeline giant Energy Transfer (NYSE:ET ), and the No. 4 U.S. LNG exporter Venture Global LNG.

Fulcrum's website does not identify any prior projects, but claims "extensive experience in origination of new opportunities to access and capture global LNG markets."

Guyanese officials now say they chose Fulcrum without first determining whether it could raise the money to tap the enormous gas reserves.

The technical committee that selected Fulcrum was confident it could raise money for the projects, Jagdeo told Reuters. "They represented they had the capacity to raise the money."

Minister of Natural Resources Vickram Bharrat said Bronchalo's expertise, having worked at Exxon in Guyana and Asia for two decades helping to negotiate contracts, swung the selection in his favor.

"We don't have the expertise and capability in government, especially when it comes to gas ... we expect Fulcrum will have the capability and experience," he said in an interview in October.

COLLABORATION OR CONFLICT

Exxon's consortium with Hess (NYSE:HES ) and CNOOC has discovered more than 11 billion barrels of oil off Guyana's Caribbean coast since 2015, and produced 500 million barrels of crude from its Stabroek block since 2019, turning the tiny country overnight into a significant global oil producer.

The government has been pressing the group to come up with a plan to convert its about 16 trillion cubic feet of gas reserves into valuable exports such as LNG or relinquish areas where gas has been discovered so they can be developed by others.

Gas would help develop the country’s manufacturing and food sectors and help make it a regional energy powerhouse.

"Why isn't Exxon building the LNG plant itself?" said Joseph.

"It is very hard to raise that kind of money to make a project work, (Guyana) would have to bring in one of the big players like TotalEnergies (EPA:TTEF ) or Shell (LON:SHEL )."

The oil major believes it alone can decide how to use that gas, a person familiar with the company's position said, citing the agreement it has with Guyana.

So far, Exxon's only planned use for the gas is a small gas-to-power project. Exxon's Guyana country manager Alistair Routledge told Reuters the company would make a decision on tapping newer discoveries containing mostly gas by mid-2025. He has said the earliest production could start would be in 2029 or 2030.



Jagdeo said Guyana wants Fulcrum to work with Exxon, but would push forward with or without it. If, however, Exxon does not act on the discoveries or return the acreage for auction to others willing to develop the gas, Guyana could claw back some offshore land, he said.

"Exxon did indicate that they are interested in the development of gas, but as the talks continue, we will see how much commitment is there in regards to gas," Minister Bharrat said.

Source: Investing.com