Latest update April 4th, 2025 5:55 AM
Professor Hunte: Exxon 5th project will produce oil at third highest cost compared to other countries
…says Gov’t must explain acceptance of poor evaluation, as oil could be depleted in less than half the time company claims
Kaieteur News – The cost of oil production at ExxonMobil Guyana’s fifth development is estimated as the third highest, compared to other top producing states around the globe.
This was recently brought to the fore by Former Ambassador and Professor, Dr. Kenrick Hunte in a letter to this newspaper. In his missive, published in Tuesday’s edition, Dr. Hunte, who holds a Ph.D in Economics / Rural Finance Markets, a Masters in Economics from the Ohio State University, and M.Sc. and B.Sc. in Agricultural Economics from the Utah State University explained that the government must explain how this poor project evaluation was accepted.
Former Ambassador and Professor, Dr. Kenrick Hunte
The former Lecturer used a table to explain his conclusion, plugging variables shared by the oil operator, pertaining to the fifth offshore project. He explained in his analysis that the project is pegged at US$12.7 billion and will produce 812 million barrels of oil over a period of 20 years at a rate of 250,000 barrels per day, commencing 2027.
He however pointed out, “While no breakdown of how this project cost has been determined, it can be inferred that the average capital spending for a barrel of oil is US$ 15.64 (US$12.7 billion /812 million barrels of oil).” Dr. Hunte added, “In comparing this capital spending of US$15.64 per barrel of oil with other countries, this level of spending is the third largest amount. Only Brazil and the UK have higher costs.”
Professor Hunte, as seen in the table attached, compared the cost per barrel with countries such as Venezuela, Russia, Iraq, Iran and Saudia Arabia, all of which spent less to develop their oil reserves.
The former Ambassador also showed that the 20-year project life as claimed by Exxon for the fifth project, Uaru is grossly padded. He believes that the resources could be drained from the field in less than nine years. While referencing an article published by this newspaper on May 13, 2023, see link below: https://www.kaieteurnewsonline.com/2023/05/13/after-approving-fifth-oil-project-govt-now-asks-exxon-to-study-what-it-will-do-with-excess-gas/, Professor Hunte said, “What caught my attention in this article was the fact that the production life of the project of 20 years was highly misleading and horribly wrong; and here is the proof: Since Uaru has an inventory of 812 million barrels of oil; and since 250,000 barrels of oil will be produced daily, this implies that the oil will be fully extracted in 3,248 days or 8.899 years, assuming 365 days per year.”
Further, he pointed out that if the oil company employs debottlenecking technology, as was utilized in the two current producing projects, then the life of the Uaru project will be reduced further to 6.18 years with higher risks.
He also shared, “Moreover, reflecting on the comments (KN: 5/14/2023) made by ExxonMobil Corporation’s Senior Vice President and Chief Financial Officer (CFO), Kathy Mikells who said that “…the oil giant is sparing no effort in maximising value from Guyana on all fronts, as quickly as possible…” I was again disappointed that the people of Guyana, in broad daylight, were being taken advantage of, given the small share of the total revenue (14.5%) that Guyana will receive from a non-renewable resource that will be exhausted in or before 2034.”
To this end, Professor Hunte urged that the government explain how this poor project evaluation was accepted.
In a previous missive, the former diplomat argued that the cost per barrel of oil produced by Exxon is both questionable and unacceptable. https://www.kaieteurnewsonline.com/2023/03/09/the-average-cost-per-barrel-of-oil-produced-by-exxon-is-questionable-unacceptable/#:~:text=In%20contrast%2C%20Venezuela%2C%20Brazil%20and,%2452.86%20per%20barrel%20in%202021.
This table was used by Dr. Hunte to compare the estimated cost to develop a barrel of oil in Uaru, compared with projects in other countries around the world.
He has been contending that since Guyana is advertised as a low-cost producer, given that it has sweet crude oil that is in high demand, together with only two percent royalty, this relatively high-cost outcome for a barrel of oil is “surprising”. The educator urged that government “must fix this inequity imposed by EEPGL”.
Exxon’s fifth project was authorized by the Environmental Protection Agency (EPA) on April 27, 2023. It is expected to startup in 2027.
Mitsui Ocean Development & Engineering Company (Modec) has been contracted to deliver Guyana’s fifth floating production, storage and offloading (FPSO) vessel for the Uaru project. This newspaper reported only days ago that the US$115 million contract was awarded in 2022, prior to the development receiving requisite approvals.
Similar Articles
THE BLUNT OF THE DAY
Sports
Features/Columnists
A coalition of shared disgrace
Peeping Tom… Kaieteur News- The APNU and the AFC deserve each other. They deserve to be shackled together in a coalition... more
The U.S. “Joining” the Commonwealth: an unreasonable expectation
By Sir Ronald Sanders Kaieteur News- Recent media stories have suggested that King Charles III could “invite” the United... more
Weekend Cartoon
