Latest update December 18th, 2024 4:47 AM
Commonwealth Secretariat issues new guide to help governments manage high cost to restore ocean floor
– cautions oil and gas assets could become uneconomic sooner than expected, resulting in “stranded assets”
Kaieteur News – The Commonwealth Secretariat has released a new practical guide to help governments manage costly oil and gas decommissioning activities, which are expected to surge as a result of the global energy transition.
In its newsletter, the Secretariat explained that decommissioning is a complex and costly process at the end of the economic life of an individual oil and gas project. Decommissioning involves the safe plugging and abandoning of oil wells, removal of structures and restoration of the surrounding areas.
“For many oil-producing developing countries, the decommissioning process could cost billions of dollars, and if monies are not specifically set aside to pay for these activities, taxpayers may have to foot the bill,” it was stated.
According to the Secretariat, if poorly executed, decommissioning can also have disastrous consequences for the environment and communities. The Commonwealth cautioned that as the world transitions away from fossil fuels and the demand for oil and gas declines over the long-term, it becomes increasingly likely than many oil and gas assets could become uneconomic sooner than expected, resulting in “stranded assets”.
As such, it was stated that having robust systems in place to deal with decommissioning is therefore critical.
Furthermore, it was stated that the toolkit was developed as part of the Commonwealth Secretariat’s Natural Resources Programme, which aims to support governments in managing the risks from decommissioning, containing several key elements like: an overview of the key issues and implications for governments; practical recommendations to effectively manage decommissioning; a checklist to identify areas for strengthening the existing legal requirements and model decommissioning provisions that can be adapted to countries circumstances.
Guyana has been a member of the Commonwealth since 1970. The Commonwealth Secretariat assists its member countries to sustainably manage their natural resources, in the ocean and on land, for the benefit of current and future generations. It provides technical assistance and support member countries in the development of policies, laws, design of fiscal regimes and strengthening national institutions as they seek to implement the Sustainable Development Goals (SDGs).
An oil rig in the ocean (Commonwealth Secretariat photo)
The Secretariat stated that Commonwealth countries are endowed with immense and precious natural resources. These include millions of square kilometres of ocean space, significant renewable (wind, solar) and non-renewable resources (oil, gas, minerals). It was underscored that when managed equitably and sustainably, the exploitation of natural resources bolsters national resilience to economic and social crises, improving prosperity for all citizens.
The Commonwealth Secretariat’s guide to decommissioning comes at a time when American oil giant, ExxonMobil’s affiliate, Esso Exploration and Production Guyana Limited (EEPGL) has been taking out money from Guyana’s oil production for decommissioning. It should be noted that the money coming out is being controlled by the company.
Exxon’s affiliate, EEPGL is the operator of Guyana’s lucrative Stabroek Block which has over 11 billion proven barrels of oil. Under a signed deal – the Production Sharing Agreement (PSA) – the oil giant has been taking out money from the first day of production (2019) to set aside as a decommissioning fee.
Based on its 2021 financial statements, for 2020 and 2021, ExxonMobil and its partners, Hess Corporation and CNOOC Group, have recovered a whopping US$355.7 million for decommissioning costs which would be incurred in another 18 years for the Liza Phase One Project.
During an engagement with the media in June, 2022, 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. However, the oil giant assured nonetheless that when Guyana needs that money for clean-up, the money will be handed over.
- Commonwealth, gas, ocean, oil, oil rig
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