ExxonMobil to wipe out half of Payara reserves in six years on poor contract terms

Sep 13, 2020 News

ExxonMobil is set, following approval of the Payara Field Development Plan (FDP), to extract half of the Payara reserves in just six years, under the terms of an internationally condemned Production Sharing Agreement (PSA) set to cost Guyana billions in losses.

Exxon to wipe out half of Payara reserves in six years on poor contract terms

This was revealed by Senior Upstream Research Analyst for Rystad Energy, Palzor Shenga in July, who was commenting on delays in approval for the project.
Shenga is quoted as saying: “Despite recent delays, the Payara-Pacora development is still in a position to produce more than half of its reserves by 2030 if it is able to commence production by 2024.”
The Payara reservoir amounts to an estimated 500 million oil-equivalent barrels, or about six percent of proven Stabroek Block reserves. The company announced the find in July 2017. It is located just 12 miles away from the Liza Phase One project, which is already on stream.
The Prosperity Floating Production, Storage and Offloading (FPSO) vessel is set to produce at a maximum capacity almost twice that of the Liza Destiny.
While Liza Phase One can produce as many as 120,000 barrels per day, Payara, like Liza Phase Two, is set to produce 220,000 barrels per day at peak capacity.
At that rate, ExxonMobil and its Stabroek Block co-venturers, are set to walk away with billions of United States dollars in a short period. Guyana would hope for some of that if it managed to renegotiate the Stabroek Block agreement into a fair deal.
With the current deal, value leakage is significant, with internationally respected anti-corruption watchdog Global Witness declaring that Guyana is set to lose US$55B over the life of the agreement.
It is for reasons like this that former Presidential Advisor on Petroleum, Dr. Jan Mangal, has advised Guyana to renegotiate the deal before it approves the Payara project.
ExxonMobil would have the government believe that a delayed approval would cost Guyana billions.
However, international lawyer, Melinda Janki, said that it is important for Guyana to take all the time it needs to scrutinize the Payara FDP if it is to seriously consider the project.
Janki said that Guyana must ensure that all risks to Guyana associated with this project are done away with.
Dr. Mangal had said that, “oil companies always want to pump everything as fast as possible.”
He had explained that unfavourable contract terms for the country are part of the reason why oil companies rush to produce as much as they can, as quickly as they can.
Mangal said that oil companies would rather “scare Guyanese into thinking that they have to pump everything now, and they will accept whatever rubbish contract terms ExxonMobil is offering.”
It is his view that if a country constrains production, implements depletion strategies and allows production to be longer sustained (over generations), it will have a fighting chance to develop its competence to manage the sector more wisely.
In this regard, a depletion policy is believed to be pertinent. Government had decided in 2018 that it would accept funding from its development partners, including the Inter-American Development Bank (IDB), to fund projects for the strengthening and management of Guyana’s oil sector.
Part of this funding is meant for Guyana to produce a depletion policy. ExxonMobil has been producing oil for nearly nine months, and Guyana still does not have a depletion policy.

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