Guyana yet to audit US$9B Payara costs

Mar 06, 2023 News

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Two years after approval…

– country may have to accept costs as is due to contractual obligations 

Kaieteur News – Two years after approving ExxonMobil’s US$9B budget to produce 600 million barrels of oil from the Payara project in the Stabroek Block, Guyanese authorities are yet to commence a critical audit that would ensure the country is not paying more than it should.

The PPP/C Administration had approved the project on September 30, 2020. But even before this was done, ExxonMobil Corporation’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) was already signing key contracts to ensure the project’s scheduled start-up this year experienced no delays.

Vice President, Bharrat Jagdeo was asked recently about the projected start of the audit, but he indicated that he was not aware of the state of play on this front. He directed this newspaper to seek further clarity from the Natural Resources Ministry.  The 2016 Production Sharing Agreement for the Stabroek Block only furnishes the government with a two-year deadline to complete critical audits of Exxon’s expenses. If it fails to do so, it would have to accept costs as is.

According to documents submitted to the Environmental Protection Agency (EPA) by EEPG), the Payara development will be located in the eastern area of the Stabroek Block which is approximately 190 km (118 miles) from Georgetown. The operator notes that oil production from Payara is expected to last at least 20 years with the startup of the facilities expected to occur approximately in mid-2023.

EEPGL noted that it will drill approximately 35 to 45 wells offshore to support the extraction of the oil from below the seafloor. It said that each well will be drilled using a floating drill ship. Also, each well will be directionally drilled to specific reservoir targets generally 4,000 to 5,500 meters (m) below the sea level.

Further to this, EEPGL said it will install some of the oil production facilities on the seafloor at approximately 1,500 -1,980 m (4,900-6,500 ft) water depth. It said that these subsea facilities include various types of pipes and hardware. Kaieteur News understands that the subsea facilities allow the oil from the wells to be gathered and moved to the surface of the ocean for further processing. EEPGL will then install other oil production facilities on a vessel that floats on the surface of the ocean. The vessel is called a Floating Production, Storage, and Offloading (FPSO).

It will be moored on location in approximately 1,800-1,980m (5,900-6,500 ft) of water depth and will remain on location throughout the life of the facility. EEPGL said that oil production facilities on the FPSO will further process the oil extracted from below the seafloor.

The operator also stated that the FPSO will have the capacity to produce approximately 180,000 to 220,000 barrels of oil per day. During the early stage of production operations, the FPSO is anticipated to produce up to an average of approximately 5,700,000 to 6,600,000 barrels of crude oil per month. These estimates are preliminary and are subject to change.

FDP REVIEWS

Guyana’s review of Field Development Plans for Payara spanned two administrations. The former David Granger administration had contracted the UK firm, Bayphase, to review it despite ExxonMobil forming part of Bayphase’s clientele.

The former Government had expected the review to be completed in early 2020, but the contentious General and Regional Elections took centre stage and prolonged government’s approval of the project.

When the Irfaan Ali administration took over in August 2020, it asked Canada to assist it with the review. That consultation resulted in former Alberta Premier, Alison Redford, being accepted to lead the review of BayPhase’s work. She worked with a team of technical experts, funded by Canada. Despite questions about Redford’s capability to review field development plans (FDP), as well as ethical concerns fuelled by her political history, the administration allowed her to complete the review.

Experts, including Petroleum Consultant, Dr. Jan Mangal, and International Lawyer, Melinda Janki, had spoken against approving Payara so rapidly, in less than two months to be exact. They had said that Guyana should take all the time it needs to review Payara, with Dr. Mangal explaining that proper reviews require large teams of technical experts and may take many months, even years.

Following the review, the Ministry of Natural Resources laid out new stipulations for the handling of environmental issues that plagued the first year of operations at the Liza Destiny vessel.  A new penalty was instituted for gas flaring beyond the commissioning period. There were also stipulations for the discharge of produced water to be done in accordance with international best practices. The government stated that it is committed to managing and harvesting Guyana’s resources in keeping with internationally recognised acceptable environmental standards and transparency.

 

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• EEPG, EEPGL, EPA, ExxonMobil, FPSO, Guyanese authorities, Stabroek Block

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