Money in Budget to review Exxon’s 5th Project this year

Feb 09, 2022 News

…audits outside of Stabroek Block to be undertaken

Kaieteur News – Government over the years has been criticised for the way in which it has been approving Field Development Plans (FDP) for the oil and gas sector as well as the manner in which it has allowed timelines with regard the audits of exploration costs by the oil companies operating here.
Only Tuesday this publication reported that as ExxonMobil forges ahead with its US$9B development of its fourth project the Yellowtail Development, the Guyana Government had selected one of the oil giant’s clients to undertake a review of that FDP. To this end, it was disclosed to the National Assembly during the scrutiny of allocations for the Ministry of Natural Resources on Tuesday that the administration has in fact allocated money this year to pay for the review of ExxonMobil fifth development in the Stabroek Block—Urau-1 and 2 Discoveries.

Minister of Natural Resources, Vickram Bharrat

Urau-1, the 16th discovery at the offshore deep-water Stabroek Block, was touted as likely to be developed to support a fifth drillship while the Turbot, ExxonMobil’s fifth oil discovery, is earmarked to support a sixth ship. The development of Urau-1 was confirmed yesterday as Exxon’s fifth development proposed in the Stabroek Block. The information was supplied to the National Assembly’s Committee of Supply by Substantive Minister, Vickram Bharrat.
He was at the time providing the Members of Parliament with a disaggregation of a $200M World Bank funded programme under his Ministry, namely the Petroleum Management division, formerly the Department of Energy.
According to Minister Bharrat, having taken a look at the work programmes submitted by the oil companies, there is expected to be a heightened level of activity this year and as such $88M has been allocated for the review of Field Development Plans and identified Exxon’s Urau location. Minister Bharrat told the House too that $22.4M is allocated this year for the hiring of a law firm for legislative and regulatory support.
He reminded that the government is on record as saying it intends to have a model internationally recognised Production Sharing Agreement (PSA), “that will bring far more fiscal benefits to the people of Guyana.” He noted that unfortunately, we have not had a discovery in other blocks of commercial quantities until recently, referencing the discovery by CGX at its Kawa-1 exploration well.
According to Bharrat, “work will have to continue to ensure we have a model PSA better than the current Stabroek Block PSA.”
He used the opportunity to indicate too that under the $200M World Bank Project there is money allocated to update the Petroleum Production and Exploration Act of 1986.
Additionally, he said money has been allocated for the completion of Guyana’s third and fourth Extractive Industries Transparency Initiative (EITI) reports.
Further, it was noted that in addition to $10.7M allocated for the audit of exploration expenses in the Stabroek block 2018 to 2020 and prior years, government would also this year be looking to finally audit expenses for seven other oil blocks that had been awarded. These include the Kanuku, Orinduik, Canje and Kaietuer Blocks among others. To this end, the minister was adamant: “I want to say clearly that the government of Guyana is 100% committed to ensuring that we conduct this audit because it is our responsibility to ensure we audit the expenses.”
He conceded “…everyone knows there has been a slight delay in starting the process. We also know we want to build local capacity. You can’t bring local content legislation catering for food, welding and fabrication then outsource auditing.”
As such, he disclosed that government has since been working with four leading local firms that have since come together to form a consortium that will work with an identified international company in order to build local capacity.
Minister Bharrat told the Committee that the local consortium teaming up with the international firm is training for building capacity of domestic auditors, “so in future we can have local firms conducting full audits of expenses in the oil and gas sector.”
According to Minister Bharrat, not only was the administration looking to not have to wait until years later to conduct audits but to in fact move to a stage where audits are done quarterly or half yearly “because we have the local capacity in Guyana.”