Latest update January 17th, 2025 6:30 AM
Oil companies will have to produce gas for export or give resource back to State – new draft contracts
Kaieteur News – Guyana’s gas is less talked about than oil, but there is a tremendous amount of it offshore Guyana, and it is very valuable. The Haimara and Pluma discoveries, which were made by ExxonMobil, for example, are teeming with rich gas which could have made Guyana a lot of money at the genesis of Russia’s war against Ukraine. But ExxonMobil has decided that it will produce oil for export, with little word on when it plans to commercialise the gas.
With the new model contracts that the government has put up for consultation, oil companies will not be allowed to hold on to their gas discoveries without tapping them.
If the new terms applied to the Stabroek Block, ExxonMobil subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) would have already submitted a field development plan to the government for the purpose of exporting the gas from the Haimara well. If it did not do so, it would have had to give the gas back to the government.
The new terms are still in draft, but Vice President Bharrat Jagdeo has often said that the government’s policy is for the resource to be produced as quickly as possible. With the new terms, there is little discrimination between oil and gas in terms of the government’s priority.
To understand the terms, it is important to distinguish between associated gas and non-associated gas. Gas is associated when it is discovered in an oil field, that is, a field that contains more oil than gas. Gas is non-associated when it is the majority resource in a hydrocarbon discovery. Haimara is an example of a gas field, and the gas is non-associated.
The drafts are clear that the government wants commercial discoveries to be appraised. They state: “the application for a Petroleum Production Licence and the accompanying Development Plan shall be submitted no later than one hundred and twenty (120) days prior to the expiration of the corresponding Appraisal Period.”
If not, it states “the Minister may direct that the Petroleum Prospecting Licence shall cease to have effect in respect of the relevant Development Area…”
These terms provide a clear picture of the government’s vision for the exploitation of non-associated gas. For associated gas, the drafts state that the resource shall be priority used for the purposes related to the operations of production and production enhancement of oil fields, such as gas injection, gas lifting and power generation.
The drafts go on to state that if there is excess gas, the oil companies that own the block will have to furnish the government with a feasibility study to inform the utilization of the excess gas. If the gas is commercial, the companies will have to develop it. If not, the Minister can decide to take the gas free of charge, but he will have to bear the cost of putting in infrastructure to handle and transport it.
If the government opted to apply the new terms to the Stabroek block, ExxonMobil would be required to develop the 17 trillion cubic feet of gas it discovered there. But the government has repeatedly refused calls to renegotiate the Stabroek Block Production Sharing Agreement (PSA).
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