Oil companies recover US$355.7M for decommissioning costs in two years

Jun 17, 2022 News

– more to be taken out annually

Kaieteur News – For 2020 and 2021, ExxonMobil and its partners, Hess Corporation and CNOOC Group, have recovered a whopping US$355.7M for decommissioning costs which would be incurred in another 18 years for the Liza Phase One Project.

The Liza Destiny operating in the Liza Phase One Project

Decommissioning entails the removal of all equipment used for the extraction and production of oil and gas resources as well as the safe abandonment of wells involved. The activity takes place when the life of the project comes to an end.
Based on its 2021 financial statements, Exxon’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) recovered $15.2B in 2020 and $17B in 2021 for decommissioning costs associated with the Liza One Project. It therefore means that its total take for the two years was US$160M.
Its partners also recovered monies too. Though their financial results have not been made public as yet, Kaieteur News was able to calculate their take based on the percentage of working interest they hold in the Stabroek Block. With Hess’ 30 percent stake, it recovered approximately US$106.7M while CNOOC’s 25 percent working interest would be equivalent to US$89M being recovered for decommissioning.
During a recent engagement with media operatives, ExxonMobil Guyana acknowledged that decommissioning funds are not needed until 20 to 30 years down the line. Be that as it may, the company noted that the provisions of the 2016 Stabroek Block deal allow for early recovery. The oil giant assured nonetheless that when Guyana needs that money for clean up. It said the country would not be left to handle same.
It said too that a Decommissioning Security Agreement is being sorted with government to ensure only the companies are held liable and that the country is indemnified. The company said, “This agreement will ensure all the funds are in place to pay for the costs when they are needed couple decades from now.” EEPGL concluded that neither the people Guyana nor the Government have no reason to be worried.
In a previous interview, Vice President, Dr. Bharrat Jagdeo had said that he has no qualms about early recovery of decommissioning costs as long as the companies are using it to reduce loans taken to support the Stabroek Block development. Once it is put to productive use, the VP said he has no issue. “It is all fungible,” he had said.
WARNING
Given the magnitude of the money to be recovered annually for decommissioning, Guyana has been warned by international actors to put the necessary provisions in place to ensure what is being deducted is not inflated and that when the time comes, Guyana would not be left to foot any part of the bill.
Such a warning has been issued time and again by Director of Financial Analysis for the Institute for Energy Economics and Financial Analysis (IEEFA), Tom Sanzillo. If Guyana does not safeguard itself, Sanzillo warned that Exxon could easily walk away with more than it deserves on decommissioning.