Exxon’s partner boasts of receiving US$4B annually starting from next year

Nov 28, 2021 News

---

Dear Reader, in light of the economic impact caused by the COVID-19 pandemic, our publisher, with you in mind, has taken the decision to extend our weekly review of some of our major stories in their entirety.

SUNDAY

-calls Stabroek Block “the mother-load”

Kaieteur News – While it may have stakes in other blocks in the Guyana-Suriname basin, Hess Corporation says its top priority will remain the oil rich Stabroek Block since it is “the mother-load” of its portfolio. Specifically making this comment was Hess’ Chief Operating Officer (COO), Greg Hill. He was at the time participating in Bank of America’s Global Energy Conference.
Participating in the virtual conference as well was Chief Executive Officer (CEO), John Hess, who boasted about the revenue making potential of the Stabroek Block projects. He said, “The Bakken, Deepwater Gulf of Mexico and Malaysia serve as our cash engine, while Guyana serves as our growth engine. With the start-up of Liza Phase Two early next year, Guyana also becomes a cash engine and at that time, all of our major assets will be free cash flow positive.”
With a line of sight of up to 10 Floating, Production, Storage and Offloading (FPSOs) in Guyana to develop approximately 10 billion barrels of oil equivalent resources as well as its robust inventory of high return drilling locations in the Bakken, USA, the CEO said the company’s ability to deliver high return resource growth is, therefore “unparalleled.”
Expounding further he said, “When Liza Two comes on, we will steadily move down the cost curve. Our Guyana developments have a Brent breakeven price between US$25 and US$35 per barrel. And as our Bakken production in the USA goes up to 200,000 barrels of oil equivalent per day in the next several years we will be able to go down the cost curve.”
The Hess boss added, “By 2026, we predict that our cash unit cost will go down by 25 percent versus this year to approximately US$9 per barrel of oil equivalent resources and that our portfolio will achieve a Brent breakeven price of approximately US$45 per barrel.”
Further to this, Hess said his company is clearly positioned to deliver industry leading cash flow growth. In this regard, he said between 2021 and 2026, the company’s cash flow is forecast to increase by 25 percent annually. He said this is more than two times as fast as its production growth. At a price of US$65 per barrel Brent, Hess said this should result in annual free cash flow growth increasing to approximately US$3B per year by 2026. “And if you add a US$10 higher price it is actually US$4B per year,” the Hess boss stated.

Guyanese who was awarded Kaieteur Block jumps into insurance industry with TT partner
Ryan Pereira, the lone Guyanese investor in charge of Ratio Petroleum, one of the two initial owners of the highly prospective Kaieteur Block, is now expanding his portfolio in the oil sector. Just recently, it was announced that the local businessman teamed up with Trinidad’s CIC Insurance Brokers Limited for the establishment of CIC Insurance Brokers (Guyana) Limited to provide the industry with leading risk advisory and risk transfer products. For this partnership, Pereira utilised Zarc Group of Companies, another company he manages.
Kaieteur News understands that the latest alliance will allow for the provision of general insurance, employee benefits, and risk management. Commercial insurance in the manufacturing, financial, hospitality and retail industries as well as insurance for casualties and risk management will also be provided too.
In an advertisement published in the daily newspapers it was noted that CIC Guyana is determined to be a superlative full-service insurance brokerage company given that it will be premised on the combined expertise of the two companies. Kaieteur News understands that Trinidad’s CIC brings 52 years of insurance brokerage experience to the table while Zarc brings its proven track record, knowledge, and understanding of the local business environment.
This newspaper understands that the new partners have already established a multi-million dollar headquarters at Lot A52 Barima Avenue, Bel Air Park.
The company also has a website: www.cic.co.gy where it notes that together with its global partners, CIC Guyana can design programmes that cater for protection in the oil and gas sector. In this regard, the company was keen to note that the complex nature of Upstream, Midstream, and Downstream operations as well as Power Generation and Distribution require experienced individuals versed in the wide range of products and solutions available to cover these facilities.
With this in mind, it noted that the firm’s energy specialists are at the forefront of advising energy companies worldwide on the wide range of risks they face. “Whether your focus is exploration, construction, production, or refining and marketing – single-location operations, new projects, or a diverse portfolio of integrated assets – our energy experts offer bespoke risk management solutions,” the company stated while adding that some of these solutions include the following policies for the oil and power distribution sector: Material Damage All Risks/Property All Risks; Onshore Property – Offshore Property; Operators Extra Expense; Control Of Wells; General Liability/Excess Liability; Pollution Liability; Environmental Liability; Business Interruption; Boiler Explosion and Machinery Breakdown; and Political Violence, Sabotage and Terrorism.
It states too that the company can include services under other policies which include: Risk Engineering, Valuation Surveys, and Training.
With respect to the Trinidadian partner, the company’s website: https://www.cic.co.tt/notes that over the years, CIC has developed long-standing relationships with many of the leading Global Insurance Brokers including Alesco, Aon, Lockton, Marsh, THB and Willis just to name a few. It states, “When our clients require insurance programmes or covers not available in the local market, we utilise our global relationships to deliver comprehensive and competitive solutions through reinsurance placements specially designed to cover the needs of their growing businesses.”
KAIETEUR BLOCK INTEREST
The Kaieteur Block, which spans 13,500 km2, holds a gross, estimated prospective resource of over 2.1 billion barrels of crude. To grasp a better understanding of the size of the block, it is bigger than three of the founding members of CARICOM: Jamaica (10,991 km²), Trinidad and Tobago (5,131 km²), and Barbados (431 km²).
The massive offshore concession was awarded in April 2015 to Pereira’s Cataleya Energy Corporation (CEC) which was formerly Ratio Energy Limited and Ratio Guyana Limited, a subsidiary of Ratio Petroleum Energy Limited Partnership headquartered in Israel (Ratio Petroleum).
Over the years, the original block owners, Pereira in particular, have faced several criticisms for being awarded the offshore concession by the Donald Ramotar administration. There were concerns that the block was awarded to Pereira and his partner who had no known track record in the industry as deepwater oil explorers and developers. There were also calls for the award process to be investigated.
But since assuming office, Vice President, Dr. Bharrat Jagdeo who is also considered the local oil czar has categorically stated that the process, in his view, was above board and that it was free of corruption. He had also said that the award of the Kaieteur Block was in keeping with the nation’s oil laws which state: “No licence shall be granted to an individual unless he is a citizen of Guyana or to a body of persons unless it is a company; or a corporation.” The Vice President as well as President Irfaan Ali are also on record as lauding the inclusion of Guyanese investors in the upstream industry as they are of the firm belief that locals ought not to be excluded from any aspect of the multi-billion dollar sector.
Subsequent to the Upper Cretaceous play-opening at the Liza-One discovery in May 2015, a farm-in agreement executed with ExxonMobil, along with various other arrangements, saw the effective date of the Kaieteur Petroleum Agreement being amended from April 2015 to February 2017.
As a result of the farm-in, the Kaieteur Block is operated by ExxonMobil’s subsidiary, Esso Production and Exploration Guyana Limited (EEPGL), in partnership with CEL, Ratio Guyana Limited and a subsidiary of Hess Corporation.
EEPGL has since applied to the Environmental Protection Agency (EPA) to be authorised to drill 12 wells in the Kaieteur Block which is located in deep water over 200 kilometres northeast of the coastline of Georgetown, Guyana, and adjacent to the northern boundaries of the Stabroek and Canje blocks. Approval from the Ministry of Natural Resources and Guyana Geology and Mines Commission will also be obtained.

MONDAY

Declining fish catch triggers worry among local fishermen
—many blame Exxon offshore operations; predict death of industry in five years
Fishermen in Guyana are reporting a rapid decline in catch, and predicting that they may very well be out of jobs in the next five years even as they attributed this to ExxonMobil’s operations offshore.
A key report from the American multinational has warned that there will be significant impact on the nation’s marine resources, due to the cumulative impact of those oil related activities. This disclosure was made in the project documents for the Yellowtail development in the Stabroek Block, operated by ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL).
The report, which formed the premise for the recently concluded countrywide consultations on the Yellowtail development, noted that there are several exploration and development activities planned or are already in operation by EEPGL. These include the US$3.5B Liza Phase I Development, the US$6B Liza Phase II Development, and the US$9B Payara Development projects.
EEPGL said, it is continuing with a rapid exploration and drilling programme in the Stabroek Block alongside works on its fiber optic cable installation project, an onshore Guyana Office Campus, and the US$900M Gas to Energy Project.

It is also poised to drill 24 wells across the Kaieteur and Canje blocks, which border the Stabroek concession. It said too that the oil related activities will result in changes in marine nutrient cycle, resulting in localized and temporary changes in phytoplankton (a type of microalgae) species distribution, and impacts on gene flow. In spite of the foregoing, EEPGL said citizens and local authorities ought to be assured that the project will adopt a number of embedded controls, mitigation measures, and management plans. The ExxonMobil subsidiary said, these are considered sufficient to address the contributions of the project to cumulative impacts.

Fishermen worried
Local fishermen however are not comforted by the oil company’s assurances. “Ever since them man start drill we seabed out deh we catch gone very low. I in this business like since I was a child. In the earlies, from like 2007 when I start catch fish to like 2016. We used to get an exciting catch. But you see from like 2016 to now; presently, we catch is like going and strain water cause when we go out there we would just catch back lil gas money and something to feed the family. You can’t presently do nothing for yourself with this fish,” said Stayon Frank, a fisherman who retails fish in the Stabroek Market.
He opined that the only way to keep the sector alive may be to create nurseries at home, as he sees the business slowly becoming extinct. “Next five years we won’t get this type of fish here in Guyana anymore. Right now, the fish getting smaller and smaller. Is bare small fish. We might have to start mining fish in we back yard to keep this hustle alive,” the frustrated vendor told this newspaper.
Another vendor, who gave his name as ‘Dexter’ explained that his catch has reduced drastically and the quality of fish is also daunting. He explained that his catch was somewhere between 1,100 pounds in the earlier years. However, it has now reduced to about 700 pounds per catch. “Within a day the fish spoiling too and if you watch you would see some of the fish done get (slender) and this catch this morning we got to try and sell it out cause what we seeing here is a different quality of fish. And it ain’t coming like nuff fish like before. It seems like they just going down and down and down,” he complained. “We don’t know within the next four to five years what will happen. We getting more pressure cause some people don’t even want buy the fish cause they seeing the quality but we got to try and sell what we can to get a money,” the man explained.
Leroy Williams, who retails fish in Georgetown, attributed the decline in catch to Exxon’s operations. The fisherman who said he has been in the business for over 22 years now also said he is fearful of what is to come. “Right now in the fisheries industry what I can say is that since this oil company is out there, the amount of fish we used to get in this market, we are not getting it anymore. Most of them fisherman when they go out, they are not getting no kind of catch because they throw the line and they go back next day to pull it up, but when they go back they can’t get nothing much. Since this oil thing come about the fisherman them suffering in this country here right now. By we aint getting fish in here, people hardly coming in to do any business. You see the size? We used to get bigger Cuirass than this. I think like all the fish moving out by the noise that does be in the water cause especially like how they drilling and so, the fish them like they moving away,” he explained.
Williams told Kaieteur News that he learnt Guyana is now importing fish. This he said could put him out of business and take food from his children. “We daily catch just decreasing and right now saying they want to import fish, but if you want to import fish what is going to happen to us? It would have a lot of impact on my business cause right now they would put us out of business, cause I depend on this for my daily living,” the fish vendor noted.
According to him, Gail baker fish used to be wholesaled at $1,000 per pound but it has increased to $1,500. Trout he said was once at $800 per pound but has gone up to about $1,200 a pound. “Poor people feeling the squeeze right now and you watch next four to five years the poor man will suffer in this country. The oil that they drawing out there, we ain’t getting a cent. All the money is going back to them…something supposed to go back to the poor people. I doing this 22 years now and back then things used to be real good. Now, some day you come out, you barely working for a lil raise, but is just because you want to do something we does come out here but you not getting the courage like before. It just driving we crazy,” Williams detailed.
Another vendor, Jaden Dickinson told this newspaper that the fishes are migrating due to the ongoing drilling and exploration of Exxon Mobil. “We not getting enough fish. It used to be in a lump sum about three years back and now is not the same. Like three years ago I used to get about 3000 to four thousand pounds per catch, now I only getting about six or seven hundred pounds,” he said. Due to this, he noted that his customers have been complaining of the prices. Dickinson highlighted: “This thing affecting me and the customers cause when them man that catch it sell back to we, we got to try and make a lil thing. I in this business for over 10 years now and this is the first time I seeing something like this.”
Now collecting data
Meanwhile, amid the gloom, Exxon has revealed that it is now collecting baseline information to get an understanding of how the fisheries sector here is being impacted by their operations. During a recent virtual Consultation held by the Environmental Protection Agency (EPA) on Exxon Mobil’s Yellowtail Project, Environmentalist, Simone Mangal-Jolly said that even though Exxon compiled a fisheries study, the document failed to highlight the migratory patterns of fish, among others. She said: “It has no comprehensive mapping of the fish nurseries in Guyana or neighbouring countries that might be feeding our fisheries sector. There are no indications whatsoever in any baseline studies done, including the Marine Baseline Study of what the migratory patterns are of commercial or non-commercial fish compared to that whole zone”.
In response to her concerns, the Consultancy agency, Environmental Resources Management (ERM) representative Jason Wiley said that baseline data is being conducted and is expected to continue for about another year. Mangal-Jolly however argued, “A baseline is something you collect before you attempt to do a project or an action that alters the conditions, such that if you were to come later, you would then be able to know how the conditions have changed… You can’t be continuously collecting a baseline when there are already activities going on offshore that are affecting those conditions.”

TUESDAY

7 years later, Guyana struggling with basics for oil and gas sector
…as migration crisis looms—Ramkarran
Guyana discovered hydrocarbons—oil and gas in commercial quantities, back in 2015 at the time the Coalition Administration was being sworn into power, with production beginning in 2019, a national development that the A Partnership for National Unity + Alliance For Change (APNU+AFC) administration was hardly prepared for.
Having lost office to the People’s Progressive Party Civic (PPP/C) in 2020, the incumbent administration is now proving that it too is still struggling with basic issues, with another potential looming crisis on the horizon being the issue of migrants, expatriates, naturalised Guyanese and a policy dealing with the phenomenon.
The matter was raised over the weekend by Senior Counsel, Ralph Ramkarran, in an article on his Conversationtree.gy online blog, where he addressed the issue in light of the fact that during a recent trip to Ghana, Vice President, Dr. Bharrat Jagdeo, said that Guyana, with its small population and limited labour force, would reach full employment soon, and that Guyana would have to consider an active immigration policy.
Lapses
According to Ramkarran, a former Speaker of the National Assembly, “It is clear that since that time (discovery), the APNU+AFC Government hardly prepared for the tasks ahead and the PPP/C Government is still struggling with basic issues.”
He cited as example, the fact that the legislation for the Natural Resources Fund (NRF) is not yet complete and that the Petroleum Commission has not been appointed.
Additionally, Ramkarran highlighted that important tasks, such as the appointment of auditors to verify the expenses of Exxon have not been accomplished.
Conceding, “…capacity in Guyana is very limited, including at the highest level of Government,” Ramkarran is adamant nonetheless, “this needs to be quickly remedied.”
Elaborating on the impending migration and labour dilemma, Ramkarran said, “…if I could have predicted more than five years (ago) that an immigration policy would have to be determined, then others in government, or preparing to enter government, must have envisaged the same need.
As such, he was unwavering in his adumbration, if a governmental team has not yet been established to consider immigration policy, “then we are in bad shape; “but I would not be surprised if no such team has been established, having regard to the fact that the more urgent issue of auditing Exxon’s expenses has been allowed to lapse.”
Refugees
Ramkarran in his public missive recalled that in August 2016, several months after the discovery of oil in Guyana, he had penned an article captioned, ‘Guyana’s future as an oil producer’ where he contended, “if we are serious about progress, an immigration policy would have to be determined and systems put in place for its implementation.”
The senior counsel has since observed that in recent years, Guyana has welcomed Brazilians, Chinese and a smaller number of Indians. Emigration from these countries, he said, would increase and Guyana would begin to welcome emigrants from CARICOM and other countries and that the Guyanese people need to be prepared for these developments.
More recently, Guyana has welcomed a sizeable number of economic refugees from Venezuela. As such, Ramkarran observed that Vice President Jagdeo’s utterances regarding the importation of labour, “did not say anything that would not have been known by anyone knowledgeable about recent developments.”
As such, he posits that such a position being espoused from a leading member of the Government has caused political figures to already speculate on where the immigrants are going to come from.
“This, of course, relates to the potential political implications of large-scale immigration having regard to Guyana’s ethno-political equation.”
The legal luminary was of the view, there are several issues regarding immigration, including determining what categories of labour that Guyana would need, such as unskilled, skilled and professional.
“Although it would be difficult at this stage to assess numbers, the history of immigration in Middle East countries can be looked to for guidance.”
Plan & Prepare
Additionally, Ramkarran suggested that the next issue would be the policies that would be applied to immigrants and pointed out that in many Middle East countries, citizenship is not granted to persons employed under contracts from other countries.
“The stated reason is to preserve the country’s integrity, political stability and wealth for its citizens. But many negative connotations have been attributed to these policies.”
Additionally, Ramkarran said too, there would be a need to examine the applicable laws to ascertain what amendments should be made. He cited as example, there is no status of permanent residence.
With regards, foreigners not on vacation, residence is based on the grant of work permits; the right of residence expires on the expiration of work permits, which are granted at the discretion of the Ministry of Home Affairs and are not backed by any legislation.
In Guyana, work permits are usually issued for one year or less and, according to Ramkarran, the laws that would need to be updated and upgraded, including the Constitution, the Citizenship Act, the Immigration Act and the Aliens (Immigration and Registration Act).
Guyana’s Constitution, he opined, is liberal as it relates to citizenship, in that any person lawfully residing in Guyana for five years can apply for citizenship.
Any person married to a citizen is entitled to citizenship. Children born to parents, one of whom is a citizen, are eligible for citizenship, wherever they may reside. These laws exist in many countries.
He noted, however, in developed countries, which attract immigrants, there are rigid laws which restrict the admission of immigrants and that they generally admit only skilled persons and sponsored family members. However, they are generally entitled to citizenship after a period, usually in the vicinity of five years.
Middle East countries, with oil and/or gas wealth, or are otherwise highly developed, have immigrant populations that are many times the size of their Indigenous populations, according to Ramkarran. He pointed out that many of these do not offer citizenship to their immigrant populations.
“These populations cannot vote or access social benefits or bring their families. Guyana will have to decide what approach to take in relation to immigrants, especially since the speculation is that Guyana will eventually require twice the size of its population, and this can only come from immigration.”
To this end, Ramkarran, former Speaker of the National Assembly and Founder Member of A New and United Guyana, is of the view that, “unless a regime of contract workers and professionals, without the right of citizenship, is established, difficult political questions will arise; the only way to resolve these difficult issues is to start the planning and preparation now.”

50 percent of Region’s gas reserves may be left stranded –IDB warns
When one considers the global movement towards renewable energy sources, driven largely by the need to bring the earth’s temperature down to 1.5° Celsius, the future of natural gas appears bleak.
This is according to a recent report prepared by experts contracted by the Inter-American Development Bank (IDB).
They believe that the energy transition movement and declining competitiveness leaves approximately 50 percent of the Latin American and Caribbean Region’s gas reserves, at risk of being left in the ground.
In their 2021 report titled, “High and dry: stranded natural gas reserves and fiscal revenues in Latin America and the Caribbean,” the industry experts acknowledged that natural gas plays an important role in Latin America and the Caribbean.
Key producers identified in the region are Argentina, Mexico, Brazil, Bolivia, Trinidad and Tobago and Venezuela.
Expounding further, the analysts said Venezuela holds nearly 70 percent of proven gas reserves in the region, while Argentina holds huge unconventional resources, in particular the Vaca Muerta “shale play”.
The report also shared that natural gas in Bolivia and Trinidad and Tobago (T&T) is a meaningful contributor to those nations’ Gross Domestic Product (GDP).
The experts cautioned however, that the impact of gas resources for those producers are likely to change, since the global energy transition makes future gas demand, and therefore prices, quite uncertain.
It was observed that years ago, natural gas was thought to be a potential bridge fuel to a net-zero energy system, since it emits less carbon dioxide during combustion than coal.
The IDB report has since concluded that this is no longer the case, since renewable energy in the last few years has emerged globally as “the cheapest and fastest-growing source of energy in the world.”
With this in mind, the IDB consultants said, it calls into question, the notion that any bridge to renewable energy is needed.
The IDB analysts said fossil fuel reserves are now therefore being seen more as assets exposed to transition risk, meaning that they could become unburnable, or stranded during the energy transition.
In the case of Latin America and the Caribbean, they said an additional issue is that competition from abroad jeopardises domestic natural gas production.
In this regard, they highlighted that the region holds less than 5 percent of global reserves, and accounts for only 7 percent of production.
The report cautioned that the region would be facing stiff competition from major gas producers like Qatar, USA, Nigeria and Australia in the new energy transition era.
Given the favourable economics of moving straight to renewable sources of energy and the small market share the region has for its gas, the experts have since warned that considerable gas assets could be left stranded.
The analysts in their report said, “…we find that 70 percent of proven, probable, and possible reserves in Latin America and the Caribbean remain unburnable due to reduced demand associated with high climate ambition.”
It was noted that removing Venezuela from the sample, unburnable natural gas reserves in the rest of the region range between 39 and 50 percent.”
The report concluded, “that significant volumes of unburnable gas reserves for key producers are as follows: Argentina (34 to 37 percent), Brazil (15 to 30 percent), Venezuela (89 percent), Mexico (69 to 72 percent) and Trinidad and Tobago (6 to 8 percent) unburnable.”
In light of the findings, the IDB consultants said countries in the Latin American and Caribbean region, “need to diversify their revenues and energy strategy away from dependency on gas.”
The experts urged that governments should focus investments on the development of zero-carbon power generation capacity, such as wind, solar and hydro, and the use of electricity to displace fossil fuels in transportation, building and industry.

WEDNESDAY

Exxon partner sells interest in Libyan asset -to focus on mega-profits from Stabroek Block
International media reports have revealed that Hess Corporation intends to shed more global assets to focus on the “mega-profits” to be had from its 30 percent stake in the oil-rich Stabroek Block. Specifically, Argus Media noted that TotalEnergies and ConocoPhillips will purchase Hess’ 8.16% stake in Libya’s Waha Oil Concessions in the Sirte Basin and invest to improve production. This was confirmed with TotalEnergies’ Chief Executive Officer (CEO), Patrick Pouyanne.
The Waha acquisition by TotalEnergies and ConocoPhillips, which already hold stakes of 16.33% each, was approved by Libya’s interim government. It was further noted that TotalEnergies plans to spend US$2B on the Waha project to raise production currently at 300,000 barrels of oil per day by 100, 000 barrels of oil per day.
In March, Kaieteur News reported that Hess had sold a key asset in Denmark to focus on its lucrative Guyana projects, specifically the Liza Phase One, Liza Phase Two, Payara and Yellowtail developments in the Stabroek Block. The American company had told the market that it entered into an agreement with Ineos Exploration and Production Company to sell its subsidiary, Hess Denmark ApS, which held a 61.5% interest in the South Arne Field. The asset was sold for a total consideration of US$150 million.
The following month, the company sold its Little Knife and Murphy Creek acreage interests in The Bakken, North Dakota to Enerplus Corporation, a Canadian energy giant, for US$312 million.
While it may have stakes in other blocks in the Guyana-Suriname basin, Hess Corporation has categorically stated that its top priority will remain the oil rich Stabroek Block since it is “the mother-load” of its portfolio. Specifically making this comment was Hess’ Chief Operating Officer (COO), Greg Hill. He was, at the time, participating in Bank of America’s Global Energy Conference.
Participating in the virtual conference as well was Chief Executive Officer (CEO), John Hess, who boasted about the revenue making potential of the Stabroek Block projects. He said, “The Bakken, Deepwater Gulf of Mexico and Malaysia serve as our cash engine, while Guyana serves as our growth engine. With the start-up of Liza Phase Two early next year, Guyana also becomes a cash engine and at that time, all of our major assets will be free cash flow positive.”
With a lineup of up to 10 Floating, Production, Storage and Offloading (FPSOs) in Guyana to develop approximately 10 billion barrels of oil equivalent resources, as well as its robust inventory of high return drilling locations in the Bakken, USA, the CEO said the company’s ability to deliver high return resource growth is, therefore, “unparalleled.”
Expounding further he said, “When Liza Two comes on, we will steadily move down the cost curve. Our Guyana developments have a Brent breakeven price between US$25 and US$35 per barrel. And as our Bakken production in the USA goes up to 200,000 barrels of oil equivalent per day in the next several years, we will be able to go down the cost curve.”
The Hess boss added, “By 2026, we predict that our cash unit cost will go down by 25 percent versus this year to approximately US$9 per barrel of oil equivalent resources…”
Further to this, Hess said his company is clearly positioned to deliver industry leading cash flow growth. In this regard, he said between 2021 and 2026, the company’s cash flow is forecast to increase by 25 percent annually. He said this is more than two times as fast as its production growth. At a price of US$65 per barrel Brent, Hess said this should result in annual free cash flow growth increasing to approximately US$3B per year by 2026. “And if you add a US$10 higher price it is actually US$4B per year,” the Hess boss stated.

Yellowtail subsea contract among top 10 global awards for the century –Rystad Energy French-American multinational, TechnipFMC recently landed a multi-million dollar contract to supply the subsea equipment for ExxonMobil’s fourth project in the Stabroek Block at the Yellowtail Development area. Based on its analysis of this contract alongside its record of others in the industry over the years, Rystad Energy recently noted that it ranks among the top 10 global awards for the century.
In one of its latest pieces, Rystad noted that the scope of works for the subsea contract includes as much as 51 enhanced vertical deepwater trees and 12 manifolds, together with associated controls and tie-in equipment.
The international consultancy group reminded that TechnipFMC defines the Yellowtail contract as large, meaning that it is worth between US$500 million and US$1 billion. Rystad was keen to note that the latest subsea job is set to eclipse work on previous Stabroek phases, which include the Liza Phase One, Liza Phase Two, and the Payara projects.
Expounding on this matter, Rystad said, “TechnipFMC’s giant Payara win, last fall, landed the company a contract to supply 41 enhanced vertical deepwater trees to ExxonMobil’s third phase of the Stabroek development off Guyana. The 41-tree deal was – at that time – the largest subsea tree contract handed out since Aker Solutions landed Kaombo in 2014.”
The consultancy group said, too, that TechnipFMC’s contract partly saved the subsea market from awarding fewer than 100 trees in 2020 – something it said was seen only once this century in 2016.
Rystad, an independent energy research and business intelligence company headquartered in Oslo, Norway, further noted that TechnipFMC has a strong bond with ExxonMobil in Guyana, having secured all previous phases of the Stabroek development. It said the company’s subsea adventure started back in 2017 when the 17 subsea trees for Liza’s Phase One were handed out and followed up with an additional 30 subsea trees for Liza Phase Two in 2018.
“If Yellowtail formally moves ahead, TechnipFMC would have secured almost 140 subsea trees for the Stabroek development alone. This is significant for a subsea market that saw around 140 subsea trees awarded globally last year,” Rystad explained.
It reminded that the contract for ExxonMobil’s next phase of the Stabroek development offshore Guyana is subject to final project sanctioning and government approvals.
It was only last month that Kaieteur News reported that development costs for the Yellowtail project are poised to exceed US$9B or GY$1.8 trillion.
ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) which is the operator of the Stabroek Block, had said costs are expected to be higher, since there would be a greater number of development wells and associated drilling costs when compared to its Payara project which will also cost Guyana $1.8 trillion.
According to project documents, Yellowtail will consist of drilling approximately 41 to 67 development wells (including production, water injection, and gas re-injection wells); installation and operation of Subsea, Umbilicals, Risers, and Flowlines equipment; installation and the operation of a Floating Production Storage and Offloading (FPSO) vessel in the eastern half of the Stabroek Block; and— ultimately—project decommissioning.
The FPSO will be designed to produce up to 250,000 barrels of oil per day. The initial production is expected to begin by the end of 2025–early 2026, with operations continuing for at least 20 years.
The project is expected to employ up to 540 persons during development well drilling, approximately 600 persons at the peak of the installation stage, and 100 to 140 persons during production operations.
THURSDAY

Climate Change impacts could cost oil rich Guyana US$800M
—Govt. Report says over 300,000 citizens could be harmed
Since the 1960s, increases in temperature, sea level and extreme rainfall have exposed just how vulnerable Guyana is to climate change. This frightening global phenomenon has resulted in more than US$600M in losses. That figure could however see an alarming spike as two government reports predict that more climate woes of potentially catastrophic proportions lie ahead for the world’s latest oil exploration hotspot.
According to the 2015 Climate Resilience Strategy and Action Plan for Guyana, climate change will no doubt alter the characteristics of hazards Guyana is exposed to (e.g. average annual rainfall) and the nature of variability (e.g. more intense storms, irregular seasonal rainfall), which will hamper the nation’s socio-economic development objectives. The report further notes, “It is estimated that by 2030 Guyana could be exposed to cumulative annual flood-related losses totalling US$150 million and that an extreme event similar to the serious flooding in 2005, which resulted in losses equivalent to 60% of GDP, could result in some US$0.8 billion in losses and harm more than 320,000 people.”
The report also states that Guyana’s vulnerability to weather and climate-related impacts is partly as a result of inherent characteristics of the country’s geography and socio-economic development profile. It says these factors interact with the climate hazards to which Guyana is exposed and result in a range of climate impacts. The document says they include ageing and inadequately maintained critical infrastructure, limited access to the latest knowledge and technology, and wider poverty and development challenges. Unless addressed, the 2015 government report warned that these factors will increase Guyana’s sensitivity, and in turn vulnerability, to future climate impacts.
The recently launched draft of the PPP/C Government’s Low Carbon Development Strategy (LCDS) 2030 also acknowledges the foregoing findings while expounding on the extent of climate change impacts on the nation.
The draft LCDS states that the effects on Guyanese people, society, economy and the environment during flooding events in 2005, 2006, 2008, 2010, 2011, 2013, 2014 and 2015 and the droughts of 1997-1998, 2009-2010 and 2015-2016 are poignant examples of the devastation climate change may cause.
It pointed out that flooding in 2005, for example, caused damage estimated at US$465 million (60% of GDP at that point). This event is reported to have affected close to 275,000 people (37% of the population). It was caused by a combination of a wetter than average December (2004), which left the ground saturated, followed in January 2005 by some of the heaviest rainfall the country has experienced since records began in 1888. Kaieteur News understands that some areas reported as much as 120-150cm of standing water, which remained for several days. The heavy rainfall also caused an increase in the water levels of the East Demerara Water Conservancy Dam (EDWC), which came close to a critical breaching level (59ft) and could have resulted in the failure of the dam wall. A socio-economic assessment of the damage and loss caused by the 2005 flood revealed major impacts to the agriculture sector, particularly in the regions of West Demerara/Essequibo Islands, Demerara/Mahaica and Mahaica/West Berbice. Region Four was most severely affected, experiencing close to 55% of the total damage, followed by Regions Two (23%) and Five (19%). Considerable losses were recorded in the sugar, rice, livestock and other crop (fruits, vegetables, roots and tubers, and herbs and spices) subsectors.
For the floods experienced earlier this year, President Irfaan Ali described it as unprecedented and one of the worst disasters in the country’s history. The draft LCDS states that the social and economic damage is likely comparable to the 2005 flood which affected close to 37% of the population and caused economic damage equivalent to 60% of GDP.
In his address to the nation, the President said that in May alone, Guyana had experienced its second highest rainfall in 40 years. He said the resulting impact saw massive flooding across all 10 Administrative Regions with over 300 communities directly affected for a protracted period of time. Furthermore, the President said that the Agriculture Sector suffered the greatest loss with 92,000 acres of farm and farmlands completely affected. He disclosed that the sugar industry was also significantly affected with estimated losses in the fields of over $1.5B. Kaieteur News had reported that over 50 percent of mining operations were affected, as mining communities were cut-off as a result of infrastructural damage. Government’s initial assessment estimates rehabilitation work in excess of $1B for the mining community. Damage to the Forestry Sector; loss of production and damage to equipment is estimated in excess of $8B.
In response to the massive disruption in the economy, the Government had committed to direct transfers to households and farmers to allow them in the first instance, to return to some level of normalcy in their homes whilst supporting the agriculture sector. Approximately $10B was subsequently approved by the National Assembly in supplementary provisions to address these needs.
DROUGHT
While heavy rainfalls which lead to floods have affected the nation over the years, it is not the only climate emergency Guyana faces. Drought is also a concern for the oil producing state, particularly in the Hinterland Region.
Following an extended period of dry weather in late 2014 and early 2015, the draft LCDS report notes that the Hinterland was facing drought conditions by April 2015. Region Nine (Upper Takutu-Upper Essequibo) and parts of Region One (Barima-Waini) were particularly affected, resulting in the reduction of agricultural output in the Regions, reduction in available water supply and increased dust pollution among other issues. The lack of rainfall also caused decreased water levels in the wells, lakes, ponds, rivers, creeks and other water sources. Frequent bush fires, destroyed several farms at Aranaputa and local communities experienced limited access to potable water for domestic and agriculture use. Residents were also forced to go to local rivers, including the Rupununi River, for untreated water for domestic use.
With increases in the number of dry spells, drought conditions and changing rainfall patterns, the report states that stress on Guyana’s internal water resources, aquifers and rivers is increasing.
With resources from the Guyana-Norway Partnership, the PPP/C administration reminded that policy leaders under the guidance of industry experts developed the Climate Resilience and Adaptation Strategy which sets out a comprehensive and overarching framework for adapting and building resilience to climate change impacts.
In 2021, the government said work will re-start to implement the strategy. Specifically, it said the most important elements of the CRSAP will be brought up to date. Funding will be allocated to four priority climate resilience programmes, and a strategy to finance the remainder of the CRSAP from ecosystem services payments and other sources will be put in place.

FRIDAY

Liza 1 can safely pump 144,000 barrels per day – EPA Head clarifies
In light of concerns reported in the local media that ramped up production levels on the Liza Destiny Floating, Production, Storage, and Offloading (FPSO) vessel could leave Guyana exposed to grave dangers, Head of the Environmental Protection Agency (EPA), Kemraj Parsram, has come forward to categorically state that nothing could be further from the truth.
Parsram was keen to note that the Liza Destiny does have a design capacity of 100,000 barrels oil per day. While this is confirmed in the Environmental Impact Assessment (EIA) for the Liza Phase One Project, Parsram noted that the very document states that production can “safely occur” beyond the design capacity.The EPA Head cited specifically Page 28 of the EIA which speaks to the production levels of the Liza Destiny. That section of the document states: “The FPSO vessel to be utilized for the Project will be a VLCC tanker, which utilizes a spread moored configuration to maintain station continuously for at least 20 years. The FPSO will be designed to receive the full production wellstream from the development wells and will process crude oil at a design rate of 100,000 barrels of oil per day (BOPD), with potential to safely operate at sustained peaks of up to approximately 120,000 BOPD. For the purposes of this EIA, potential impacts generated by the Project will be based on the highest potential oil production volume, which is conservatively based on 144,000 BOPD….”
With the foregoing in mind, the Lead Environmental Regulator said it is the understanding of the agency that 144,000 barrels is safe while adding that it is on this basis that approval was granted to the American subsidiary operating the Stabroek block, being Esso Exploration and Production Guyana Limited (EEPGL). “So it is not dangerous at all, we considered it based on the EIA and the safeguards are in the permit. All this talk of a fresh EIA being done since production has been ramped up beyond 120,000 barrels is not necessary,” expressed Parsram.
The EPA Chief also noted that in the event that there is any variance that is needed for production or for any aspect of the project, environmental authorization must be had from the EPA. “…We also have the discretion to request any further scientific assessment based on the change being requested and that has been the practice over the years,” Parsram noted.
The foregoing comments from the EPA Head come on the heels of a publication in the Kaieteur News’ Wednesday edition which quoted the concerns of the former EPA Head, Dr. Vincent Adams. He is of the firm conviction that ExxonMobil’s ramped up production is not safe for the country and could very well increase the potential of an oil spill in the Stabroek Block. Dr. Adams said it is in the best interest of the country to have a fresh assessment of the impacts of the increased production. But the current EPA Head, as noted earlier, disagrees.
While the Liza Destiny is producing around 124,000 barrels of oil per day, John Hess, Head of Hess Corporation (which holds a 30 percent stake in the Stabroek Block), revealed a few months ago that ExxonMobil’s affiliate, EEPGL, plans to optimize the capacity of the Liza Destiny to produce as much as 140,000 barrels of oil to 150,000.
With respect to vessels for future projects, he said once they spend about a year in operation, each ship will undergo an optimization or debottlenecking exercise which would see capacity increase between 10 to 15 percent.

Audit Liza 1, 2 Payara project costs before approving Yellowtail – Former EPA Head
Former Head of the Environmental Protection Agency (EPA), Dr. Vincent Adams is calling on the Government not to approve ExxonMobil’s fourth project- the Yellowtail Development -, until the US-based oil giant agrees to a belated audit of its US$9.5 billion spending.
The Government said that the audit was not conducted as the country lacks the skills to get the job done. However, Adams believes the administration should use as leverage the Yellowtail project which is yet to be approved to force Exxon into extending the time for the completion of the audit. Adams said to not conduct the audit could result in the giveaway of billions to the oil giant.
It was Vice President, Bharrat Jagdeo, who had said that the government is disappointed that it had not been able to push through with these critical audits. He said the absence of strong local groups to do the audits is what stymied the process. The only costs Guyana stands a chance of auditing and refuting if unreasonable charges are found, are those occurring from 2019 onwards. It therefore means that the PPP/C administration still has ample opportunity to review costs expended for ExxonMobil’s Payara Development Project in the Stabroek Block. This project is expected to cost US$9B.
International transparency bodies have strongly contended that the two-year deadline the government has accepted, along with the fact that it can only do one audit per year on Exxon, is not sufficient. They have stressed that the timeline should be extended. Specifically making this point over the years is Oxfam America. It has made this perspective known since 2015 alongside the International Monetary Fund (IMF). Oxfam America, a confederation of 20 charitable organisations which seeks to fight poor governance of extractive wealth, has said that the expiration periods for audit rights are set out in petroleum contracts and tax laws. It stressed, however, that these deadlines differ from one country to the next. It noted that in Ghana and Kenya for example, the authorities there retain the right to complete auditing companies within seven years. In Peru, the time limit for audits is a minimum of four years. Even in the USA, the transparency body highlighted, audits are allowed to be completed within a minimum of three years.
Oxfam warned however that even a three-year deadline is not advisable for developing countries such as Guyana, given the limited financial and human resources that are likely to delay the audit process. Further, the organisation noted that it is equally important to keep an eye on record-keeping provisions in the petroleum contracts and tax laws. It said, “Oil companies should be required to keep all their records in-country for easy access by the auditors during the audit period.
For his part, speaking at a news conference by the Alliance for Change, Dr Adams said, “The AFC joins the countless number of concerned Guyanese and the international community in calling out what could only be described as negligence by the PPPC Government against its people, in its nonchalant declaration not to audit Exxon’s $9.5 Billion bill, due to failure to meet the audit deadline; a non-action that could conceivably become a give-away of Billions of dollars to mega rich Exxon, with the robbery of every single Guyanese citizen of millions of dollars”.
According to Adams, the excuse of not having the expertise to conduct such an audit is a “highly incredulous excuse” since the AFC is well aware of a highly qualified firm, owned by a Guyanese in the Diaspora, that submitted a bid to conduct the audit. He questioned, “Is the Government speaking with forked tongues when it extols itself as so badly wanting the help of the Guyanese Diaspora, but at the same time signaling that they are not being counted as Guyanese.”
The former EPA head said that the government’s attempt to escape this backlash, is to distract the public with an empty promise to build capacity to hopefully get Guyanese to perform such tasks, but this is nothing less than a promise that is contrary to its own philosophy and practices. Adams explained, “Firstly, we all know the trustworthiness index of the Government keeping promises, especially when it comes to Exxon which was described by the Opposition Leader as “international bullies” with the “Government being under Exxon’s hammer.”Secondly, there are too many unanswered questions about this promise, since the fact remains that there is no provision in the Agreement for reopening the audit after its two-year expiration period”.
He quoted sections of the agreement with ExxonMobil where it was settled that “the Govt shall not amend, modify, rescind, terminate, declare invalid, require renegotiation, compel replacement or substitution…without the prior written consent of the Contractor”.
In light of this, the former EPA head questioned how would the Government then keep its promise. He inquired, “Is the Government making this promise with Exxon’s consent per the Agreement; or without consent, in violation of the Agreement which the Government holds as sacred? And does the Government now find itself being “hoisted by its own petard” with being forced to re-negotiate this sacrosanct Agreement?”
As a consequence, Adams noted that as a proven fail-safe way of saving face of its dilemma, the AFC is calling on the Government to not approve the Yellow-Tail project until Exxon agrees to the Audit. According to him, a similar demand of the EPA under the previous administration proved to be successful in obtaining unlimited liability assurance coverage from Esso Exploration and Production Guyana Limited (EEPGL) as a condition for approving the Liza 2 project; but unfortunately, the PPPC Government promptly reversed that decision.

SATURDAY

Guyana loses $$$M annually on log exports while Chinese manufacturers gain
…as GFC misrepresents data to disguise overharvesting—Dr. Bulkan
The Guyana Forestry Commission (GFC) is allegedly deliberately misrepresenting its data in order to present a glossy image of its management of Guyana’s forests and the export of logs. Additionally, the country is losing hundreds of millions through ‘transfer pricing’ involving Chinese operators locally.
This is according to British Colombia University’s Associate Professor, Dr. Janette Bulkan who, in response to GFC’s condemnation of civil society group, Article 13’s call for an immediate ban on the export of logs, adumbrated that not only is there unsustainable forestry practices taking place in Guyana, but that the regulatory body appears to be deliberately misrepresenting the figures.
Compounding the situation, the Guyanese born Professor of the University’s Department of Forest Resources Management said that the cumulative misrepresentation of figures and disproportionate export of certain types of lumber have also led to local shortages.
Dr. Bulkan—in a recent public missive—explained the way Guyana loses millions annually in the manner logs are exported by Chinese companies, locally, through a practice commonly referred to loosely as ‘transfer pricing.’
She elucidated that during the period January to July 2020, the average declared FOB (Freight on Board) value of a cubic metre of log was US$172 or G$34,401 and that 31,435 m3 of ‘logs’ were exported with a declared value of US$5,407,066.
To this end, the Professor reconciled the export value placed on the item when it leaves Guyana with the cost on arrival in China.
According to Dr. Bulkan, the Cost Insurance Freight (CIF), “at a Chinese port is generally three or four times higher.” As such, “Chinese manufacturers gain, Guyana loses.”
The Professor has since also accused the GFC of using “the same grossed-up treatment of data in its statements about the forest management.”
Growing Worse
Regarding the export of logs, Professor Bulkan noted that while the GFC criticizes the call for an immediate ban on log exports as ‘misinformed, emotional and nonfactual,’ “local sawmills and lumber yards have had increasing difficulties in procuring logs of their preferred timbers.”
She cited as examples, Greenheart, Purpleheart and Kabukalli and questioned rhetorically, “if the GFC is managing the State Forests as sustainably as it claims; why is the shortage of preferred timbers becoming more obvious locally?”
Moreover, she expounded that while the GFC claims that only 20 percent of logs are exported and 80 percent processed locally, the “overall quantities would not prevent a high proportion of the Purpleheart, Kabukalli, Tatabu, Shibadan, Darina and Locust from being exported, and only species like Keriti that are not desired by log traders being easily available locally.”
She accused the Forestry Commission of allowing Barama, in the past, to move from a focus on plywood production, to being the main exporter of raw logs to China, concentrating on just a few species, “and so, heavily exceeding the sustainable rates for Purpleheart.”
We know this, she said, not because GFC released the information, but because Barama’s parent company, SamLing Global Ltd., disclosed the information in its Initial Public Offering on the Hong Kong Stock Exchange in 2007.
According to Professor Bulkan, “this selective over-harvesting was continued by Bai Shan Lin, the company partly owned by the Government of China, and contrary to the guidelines on forestry issued by the Chinese Ministry of Commerce.”
She has since opined, that the consequence of this continued and unsustainable drain on the best timbers of Guyana is evident in the local shortages “which have been growing worse.”
Come Clean
Dr. Bulkan has since publicly challenged the commission to defend against her allegations saying, “if the GFC disagrees with this evidence and reasoning, it should disclose the timber-specific volume and price data for each species and logging/exporting company in its return for the Third Annual Report to the Extractive Industries Transparency Initiative (EITI), with independent audit verification.”
She further said to the GFC that it should return to publishing data each month, even while cautioning, “we should note the unreliability of export data, as shown in the first annual EITI report for Guyana for the year 2017, which included reports of timbers known to grow only in West Africa being exported as logs from Guyana.”
According to Professor Bulkan, “if the GFC will not publish accurate and verified supporting data, it cannot expect that the people in Guyana will believe its claims.”
Relative to the GFC’s release of forestry, logging and export data, the Professor outlined that from 2005 up to 2018 the GFC’s Forest Sector Information Report—half-yearly or annually, and the GFC’s own Annual Report up to 2017—were publicly available.
Between the periods 2007 up to April 2019, “for most months, we could also read a monthly report for forest products.”
She laments, however, that “…these sets of reports became briefer and less informative over time, with less and less information about individual timbers.”
Compounding the situation, Dr. Bulkan pointed out that some data on production and export of the more popular timbers could only be had some two to three years later, when published by International Tropical Timber Organization.
Therefore, she posits, “evidently, the GFC is happy to see our prime timbers exported unprocessed to China and India, rather than implement the National Forest Strategy and Plan, which call for greater in-country processing.”

---

---