ExxonMobil says… Guyana must pay decommissioning cost even if equipment is abandoned on seafloor

Feb 08, 2023 News

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Kaieteur News – Guyana has already commenced the payment of decommissioning fees, even though the ExxonMobil’s subsidiary and operator of the Stabroek Block, Esso Exploration and Production Guyana Limited (EEPGL) may abandon the subsea equipment on the seafloor.

Anthony Jackson, the Projects Manager of EEPGL, commonly referred to as ExxonMobil Guyana, said on Monday during a public scoping session for the sixth project that these costs must be deducted even though decommissioning is not a fixed plan.

Decommissioning, for those unfamiliar with the term, refers to cleanup and restoration of the environment, following the life of an oil project. At previous consultations, Exxon said it may leave its equipment on the seafloor as marine life often tends to make this its new habitat. Removing these may actually cause more harm than the good the operator believes.

In the meantime, it must be noted that in 2020 and 2021, Guyana paid ExxonMobil and its partners, Hess Corporation and CNOOC Group, some US$355.7 million for decommissioning. This is only the beginning as more costs are to be deducted annually.

Kaieteur News had asked Jackson to explain why Guyana is paying these costs before the decommissioning plan is established, since in his presentation on the sixth project, he made it clear that this is still to be determined.

Jackson in response explained, “Decommissioning plan is not fixed and firm but if you were to go and look in the Field Development Plan, you will see a specific number listed for decommissioning…it is possible that we have either over or underfunded that decommissioning and that is simply something that we have to accept as part of our initial uncertainty.”

The Projects Manager noted that the cost for decommissioning is agreed to by government in the License, thereby paving the way for it to be recovered.

He said that at the end of Exxon’s operations, the government can say that the assets are working well and have no intention to decommission. It is also possible for the equipment to be handed over to interested stakeholders too, rather than be dismantled he said. In such a situation, Jackson posited that the decommissioning fund would not be necessary.

He was keen to point out that as the operator, ExxonMobil will be obligated to handle decommissioning, in accordance with the License, to the satisfaction of the government of Guyana, irrespective of if the sums set aside were enough.

Additionally, he assured that decommissioning will be done in adherence to the governing regulatory body- the Environmental Protection Agency. There are also international agencies that have specific guidelines and requirements to ensure that decommissioning is done responsibly by the oil company.

The Projects Manager was then asked to explain what Guyana would be paying for, if the equipment would be left on the seafloor. To this, he outlined, “It’s two things we are paying for, first no matter what, if we do have to decommission the FPSO [Floating Production Storage and Offloading vessel] that is a cost and that is independent of the SURF [subsea umbilicals, risers, and flowlines].”

Jackson said that even if the equipment will be abandoned on the seafloor, at the very least, ExxonMobil must detach the risers which are the equipment that goes from the seabed floor to the surface of the FPSOs. After that is removed, he said the lines will be purged to ensure there is no water, oil or gas left there.

Thirdly, he said that the wells must be capped thereby plugging to abandon it, after it has reached its production timeline. It must be sealed to ensure there is no release of hydrocarbons to the environment.

He assured, “We have had decades of experience working in subsea development so the methodology for responsibly decommissioning subsea equipment is established in the industry…we are going to be following prudent and rigorous standards within the offshore decommissioning guidelines. We have a reputation to maintain.”

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.

ExxonMobil Guyana had 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 cleanup. 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.

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• cleanup, decommissioning, EEPGL, ExxonMobil, oil

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