US$9 billion Payara project approved for 2024 startup

Oct 01, 2020 News

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By Kemol King

Minister of Natural Resources, Vickram Bharrat yesterday approved ExxonMobil’s third field development in the Stabroek Block, the Payara project. The oil major said, after making its final investment decision (FID) yesterday, that the Prosperity Floating Production, Storage and Offloading (FPSO) vessel will start production in 2024 at up to 220,000 barrels of oil per day.

The hull for the vessel is with Dutch firm, SBM Offshore in Singapore awaiting the installation of its topside modules. ExxonMobil said that 10 drill centers are planned along with up to 41 wells, including 20 production and 21 injection wells.
Notably, the company stated in a release yesterday that the Payara development will cost US$9B to produce 600 million oil-equivalent barrels. This is US$3B higher than its US$6B estimate for the Liza Phase Two project, which will be producing at a similar peak rate from a reserve with a similar volume estimate. Liza Phase Two is projected to start producing in 2022. The Liza Unity FPSO is currently under construction in Singapore as well.
Guyana’s review of Payara spanned two administrations. The former David Granger administration had contracted the UK firm, Bayphase, to review it despite ExxonMobil forming part of Bayphase’s clientele. The environmental issues, among others, which arose during this review, were not raised by Bayphase. After all, the firm is not expected to give reports which do not flatter its clients. The former Government had expected the review to be completed early this year, but the contentious 2020 General and Regional Elections took centre stage and prolonged government’s approval of the project.
When the Irfaan Ali administration took over in August, it asked Canada to assist it with the review. That consultation resulted in former Alberta Premier, Alison Redford, being accepted to lead the review of BayPhase’s work. She worked with a team of technical experts, funded by Canada. Despite questions about Redford’s capability to review field development plans (FDP), as well as ethical concerns fuelled by her political history, the administration allowed her to complete the review.
Experts, including Petroleum Consultant, Dr. Jan Mangal, and International Lawyer, Melinda Janki, had spoken against approving Payara so rapidly. They had said that Guyana should take all the time it needs to review Payara, with Dr. Mangal explaining that proper reviews require large teams of technical experts and may take many months, even years.
Following the review, the Ministry of Natural Resources laid out new stipulations for the handling of environmental issues plaguing Exxon’s operations, namely natural gas flaring and discharge of produced water. The government stated that it is committed to managing and harvesting Guyana’s resources in keeping with internationally recognised acceptable environmental standards and transparency.

FLARING
Government said it has strictly prohibited routine flaring without approval from the Environmental Protection Agency (EPA), and explicitly stated that any flaring to maintain oil production is not allowed. ExxonMobil’s local subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) will be expected to compensate the government for the cost of wasted gas during flaring and will be subject to fines under the EPA which are related to emissions from flaring. It is also expected to establish a framework for a carbon price in line with international standards.
Kaieteur News had learnt that ExxonMobil intended to preserve loopholes in its future projects which it exploits in the Liza Phase One permit to flare natural gas. The Payara production license has put a 60-day cap on startup flaring, and includes emergencies, maintenance and restart as “special circumstances”. ExxonMobil will also be expected to report all instances of gas flaring within 24 hours, whether allowed or not, and explain why such flaring has occurred.
ExxonMobil has been flaring gas for over nine months at its Liza Phase One operations, with no word on when it will stop the pollution altogether. There has been public outcry about the issue, given that it has made Guyana one of the highest flaring countries in the world per capita. Government’s statement made no reference to flaring at Liza Phase One.

PRODUCED WATER
Government said that it has now required EEPGL to include tie-in points and space for produced water injection equipment, in its base design, consistent with its commitment to advocate for discharge of produced water at internationally accepted standards.
Government will oversee a study to be conducted by Exxon by the first quarter of 2020 to examine the safe and efficient reinjection of the produced water, and determine the effects of the reinjection on the reservoir. The license states that the study will also seek to determine how the effects of dumping produced water in the ocean can be minimized. Government said that this is in keeping with its commitment to preserve marine life and water quality.
ExxonMobil has been dumping thousands of barrels of produced water into the ocean at its Liza Phase One operations. Its Guyana President, Alistair Routledge claimed that the pollution is not harmful, despite there being no study to back up his assertion. Government’s statement made no reference to the discharge of produced water at Liza Phase One.

750,000 BARRELS A DAY BY 2026
ExxonMobil has managed to secure approval from Guyana for three separate developments in a space of four years, with a combined peak production rate of 560,000 barrels per day. All three projects will run simultaneously by 2024. The company yesterday reminded that it intends to have five FPSO vessels producing in excess of 750,000 barrels per day by 2026.
It has already identified a likely prospect for its fourth development at the Yellowtail well, believed by Westwood Global Energy to hold more than 300 million oil-equivalent barrels. Chief Executive Officer (CEO) for Hess Corporation, John Hess, earlier this month related the consortium’s optimism that Yellowtail will support its fourth drillship and produce at a capacity of 220,000 barrels of oil per day, the same as Payara. That would take peak production to 780,000 barrels per day.
Exxon’s subsidiary, Esso, operates the Stabroek Block with 45 percent interest, while Hess and CNOOC hold 30 percent and 25 percent respectively.
Exxon said it is evaluating development opportunities not just at Yellowtail, but at Redtail, Mako and Uaru. It is forging ahead to develop the proven eight billion plus oil-equivalent barrels in record speed, while Guyana fares with no depletion policy and a contract that falls well below industry standards in more ways than one.

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