GEORGETOWN, April 8 (Reuters) - Guyana's efforts to use

its natural gas resources to fuel a power plant that would slash

the South American nation's energy costs have snagged on

construction delays and threaten to curtail the rising oil

hotspot's revenue this year by about $1 billion.

The $1.9 billion gas-to-power project, Guyana's biggest

effort to capitalize on its energy bounty, is embroiled in legal

fights and risks cost overruns. The first phase of a

300-megawatt (MW) power plant is running six months behind

schedule and full operation is not expected until the fourth

quarter of 2025, officials have said.

Exxon Mobil ( XOM ), which operates all the oil and gas

production in Guyana, is building a 140-mile (225-km) gas

pipeline from its offshore Stabroek block to supply the

government's project onshore: a power plant, a related natural

gas processing facility and transmission lines.

The U.S. oil major's part of the project, the about $1

billion pipeline, will be ready by year-end as promised to

Guyana, said Exxon Guyana country manager Alistair Routledge.

That is despite having nothing to connect it to onshore because

of delays on the works managed by the government.

The Stabroek block, site of the country's first

commercial oil and gas discovery in 2015, currently produces

crude - about 645,000 barrels per day (bpd). The new power plant

will be the first to use the associated gas produced from the

oil field that to date has been re-injected underground.

The gas pipeline completion will require Exxon to pause

production in the third quarter at two oil production vessels to

connect them to the undersea pipeline, Routledge said.

If the tie-in lasts four weeks, Exxon and its consortium

partners Hess and China's CNOOC would have to

halt up to 12 million barrels of oil output from two platforms

that produce 400,000 bpd at peak levels.

Based on Guyana's recent sale at $85 per barrel, that could

mean over $1 billion in deferred oil revenue.

An Exxon spokesperson last week declined to specify how long

the production halt will last. Routledge had said the pipeline

connection and maintenance works would take "weeks, not months."

The executive said Exxon is not worried about having to shut

production this year for a project that will not be ready to

accept the gas at least until sometime in 2025.

When the gas-fired power plant is ready is "a question of

timing," said Routledge.

"It's hard to have all the facilities ready at the same

time." As soon as the onshore facilities are ready, "the whole

thing will start up and all those benefits will flow to the

country," he said.

Guyana will miss the chance to slash its power costs this

year because of the project delay. It imports expensive fuel oil

for an aged and often faulty power facility. When fully running

on natural gas, the new plant will reduce the nation's power

costs by 50%, officials have said.

"Of course we are doing the best we can, but we have to be

realistic," Winston Brassington, who coordinates the power

project as a consultant for Guyana's Ministry of Natural

Resources, said in an interview in February.

While it is not uncommon for major projects to run behind

schedule, Guyana's government faces a presidential and

parliamentary election next year and is keen to deliver tangible

benefits to the nation's 750,000 residents.

"There is more pavement in the city," says fruit vendor

Michael Bharrat, 23, when asked about the most visible signs of

development brought by the nation's oil boom. "The government

could be doing more to help poor people," he said.

Government officials are anxious to fulfill a 2020 election

promise to cut residents' energy costs and want to use the gas

for industries that can create jobs or for exports as liquefied

natural gas.

The government has been pressing Exxon and its partners,

which prior to this project have focused on oil, to develop the

country's gas resources.

"There is a window of opportunity between now and the end of

the decade to monetize and maximize the value of Guyana's

natural gas resources," President Mohamed Irfaan Ali told oil

executives during a conference in Georgetown in February. "We

need to develop our gas now."

UNANSWERED QUESTIONS

Critics of the project say there are a lot of decisions yet

to be made and little clarity over the next steps, including who

will operate the power plant and market the gas-liquids such as

propane produced by the related gas-processing facility.

Meanwhile, two contractors hired by the government for the

project have filed for arbitration over costs overruns of $90

million and residents have filed lawsuits claiming unfair

compensation for land taken to build the project.

"What rate will Guyana be paying for the unusable or

unused gas? Is the gas sales agreement completed?" asked

Elizabeth Hughes, a land owner whose family land was

expropriated for the project. "There are so many questions

unanswered, there is no transparency at all."

Bharrat Jagdeo, Guyana's vice president, told Reuters in

February the project is following its new schedule and will stay

within its original budget.

"We believe this is nothing to worry about," Jagdeo said.

"It is a two-year project, will take a few more months, but not

a year" to complete.

Wally David, 66, a retired trolling boat mechanic, smiles

when asked if the government he voted for in 2020 will deliver

on its promise to build the gas-to-power project as promised.

"I think it will get done someday," he says from his home in

Georgetown, where he complains a road construction project

outside his house run by the government is behind schedule.

"Maybe in three, four years, just not now."