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Guyana’s royalty for 2022 is almost three times less than what Exxon took out for cleanup costs
Kaieteur News – In 2022, oil giant ExxonMobil took out some $49,790,273,570 towards cleanup activities while Guyana received a mere $18,892,021,213 in royalty payments from the company in 2022. This means Exxon took out more than two times what it gave Guyana in royalty for a single cost.
ExxonMobil Guyana President, Alistair Routledge
According to the Production Sharing Agreement (PSA), the APNU+AFC Coalition Government signed with Exxon, Guyana received a meagre two percent royalty on the resources sold. The contract also enables the contractor to control the decommissioning funds, until it is needed. Decommissioning refers to the cleanup and restoration of the ocean floor, following the life of an oil project. It involves the removal of the subsea umbilicals, risers, and flowlines (SURF) and other technical equipment used during the process of oil extraction.
Guyana has been paying billions of dollars each year toward this cost even though the funds will not be required until after a project ends. According to Exxon’s financials, it took $17 million in 2021 towards this cost. With a noticeable spike in the decommissioning costs, this newspaper reported only yesterday that in 2022 the oil companies deducted monies from the country’s revenue to pay for decommissioning activities for the third and fourth oil projects in the Stabroek Block though oil production is yet to commence there.
Importantly, the third Stabroek Block project, Payara will commence production activities in the last quarter of this year. Meanwhile, the fourth development, Yellowtail is not expected to start up until 2027. The oil projects each have an expected life of 20 years, meaning the funds will only be required more than a decade later.
Kaieteur News has been on the forefront highlighting the numerous ways in which the country can be cheated out of its resources when it comes to this single expense. Notably, the Commonwealth Secretariat earlier this year cautioned its member countries in the oil and gas industry of the uncertainty of decommissioning costs, which can result in the price tag to restore the ocean floor, easily moving from US-millions to US-billions.
As such, the body urged Governments to ensure they implement policies and regulations that would require oil and gas companies giving regular estimate on decommissioning costs. It was stated that decommissioning cost, like development cost can vary significantly from project to project and that it can easily amount to billions of US-dollars to restore the ocean floor.
In February of this year during a public scoping meeting for the sixth planned development in the Stabroek Block, Projects Manager for ExxonMobil Guyana, Anthony Jackson explained that even though the operator may abandon its equipment on the seafloor, the country still has to pay these costs.
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. Jackson explained, “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.”
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.
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