AFC: ExxonMobil violates sanctity of contract as no evidence of feasibility for gas project available

Apr 23, 2023 News

Kaieteur News – The Alliance for Change (AFC) is accusing oil giant, ExxonMobil of violating the sanctity of contract, for failing to conduct a feasibility study on the utilization of excess gas in the Stabroek oil block, as required under the contract it signed with the government in 2016.

AFC Executive Member, Dr. Vincent Adams

Executive member of the party and former Head of the Environmental Protection Agency (EPA), Dr. Vincent Adams told reporters during a media conference on Friday that he believes the company has violated the said principle that is hindering the government from renegotiating the oil deal, as there is no evidence of this document.

Exxon has entered into an agreement with the Government of Guyana (GoG) to transport the natural gas in the Liza One and Liza Two fields offshore, which are to be used to generate some 300 megawatts of power to supply the national grid.

The project is currently pegged at around US$2.1 billion and accounts for the single largest investment ever undertaken by the nation. Be that as it may, this project lacks a vertebra as there is no evidence of a feasibility study to confirm its viability.

Flagging this issue, Dr. Adams argued, “No feasibility study has been done at that location (Wales, West Bank Demerara). As a matter of fact, it (Exxon) violated this sanctity that this administration keeps talking about. They violated the sanctity of the contract…it says before any gas project is implemented, there has to be a feasibility study and there was no feasibility study.”

He continued that Vice President Bharrat Jagdeo has merely given assurances that the project is a “no-brainer”. Dr. Adams, a Petroleum Engineer however noted, “Every project starts with planning and it ends with planning,” adding that this detailed plan would craft the necessary steps regarding possible changes in the economics of the country, taking its development and other factors into consideration.

Article 12.1 (b) of the Exxon contract states the requirement of a feasibility study for the utilization of excess gas in an oil field.

The AFC member maintained, “None of that was done except that this no-brainer stuff, I don’t know what it means, but there was no feasibility study which is in violation of the sanctity of the contract which calls for a feasibility study before any gas project was supposed to be implemented.”

Article 12.1 (b) of the Exxon contract states, “…If there is any excess Associated Gas in the Oil Field after utilisation pursuant to Article 12.1(a) the Contractor shall carry out a feasibility study regarding the utilisation of such excess Associated Gas of such Oil Field.”

The same clause explains that if the feasibility study was completed before the submittal of the Field Development Plan for the location, this document shall be added to the Plan. The contract also states that in the event the contractor’s feasibility study on the utilization of excess associated gas is not completed before the submittal of the Development Plan, the contractor shall provide the Ministry with regular updates on the progress of such feasibility study. Upon completion, the study shall be submitted to the Ministry of Natural Resources and the Guyana Geology and Mines Commission (GGMC). According to the agreement, the contractor’s feasibility study shall be completed no later than 5 years following the submittal of the Development Plan.

Efforts made by this publication yesterday to clarify whether the feasibility study conducted by ExxonMobil Guyana were unsuccessful.

Pre-feasibility study

Back in 2018, the Inter-American Development Bank (IDB) partnered with the State to conduct a feasibility study of the planned natural gas pipeline. The primary objective of the study, which was executed by Energy Narrative for US$70,000—an international entity that provides strategic market analyses and advice was to determine the overall feasibility of transporting natural gas from offshore Guyana, building a Natural Gas Liquids (NGL) separation plant and a Liquefied Petroleum Gas (LPG) production plant to market the liquids from the natural gas stream, as well as building a new electricity generation station to use the remaining dry natural gas.

The AFC is adamant that this study considered the project at a combined cost of US$478 million; whereas the project today now stands in excess of US$2 billion.

The party maintains that this document must inform the future of the Wales Gas-to-Energy project.

• Contract, feasibility, GTE, SANCTITY, violates