Guyana paid US$703M for four drillships in 2023

Mar 18, 2024 News

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…majority of oil producing nations, including Suriname do not pay exploration cost

Kaieteur News – While several oil producing nations including neighboring Suriname, do not allow oil companies to recover exploration costs, it is allowed in Guyana.

As such, the cost incurred for exploration activities offshore Guyana, ExxonMobil Guyana and its partners in the Stabroek Block, will be able to recover from cost oil. ExxonMobil Guyana has a Commercial Enabling Agreement (CEA) with American drilling company, Noble Corporation for four drillships that are being used in the Stabroek Block.  Under the CEA, they are four state-of-the-art drillships operating namely the Noble Bob Douglas, Noble Sam Croft, Noble Tom Madden, and Noble Don Taylor.

Last year, Noble made some US$703 million from its operations in Guyana. Notably, the company generated an income of US$2.589 billion in 2023, compared to US$1.413 billion in 2022 – that year the company earned US$469 million from its operations in Guyana.  Last year, it was announced that Exxon had extended its CEA with Noble for the drillships from the fourth quarter of 2025 to the second quarter of 2027. The drill ships are executing an aggressive drill campaign in the Stabroek Block. In fact, ExxonMobil’s Upstream President, Liam Mallon recently stated during his address at the opening of the 2024 Guyana Energy Conference and Supply Chain Expo that: “six drilling rigs and their crews are at work every single day 24/7 throughout the block, drilling and exploring, preparing Yellowtail and Uaru for startup tirelessly developing the existing resource base and seeking to find even new discoveries.”

Exxon is presently conducting a 35-well drilling initiative. The company has sought approval from the Environmental Protection Agency (EPA) to drill 12 wells in the Canje Block. Beyond exploration and appraisal drilling, Exxon is engaged in development drilling for the Payara, Yellowtail, and Uaru projects, making 2024 a particularly active year for offshore drilling in Guyana. This surge in activity is supported by six drillships contracted by Exxon for operations in offshore Guyana, with four provided by Noble and the remaining two by Stena Drilling.

Noble stated that a substantial portion of its business is dependent on several customers as well as dependent on several geographic areas. It was noted that the disruption of business with any of these customers or disruption of business within these geographic areas could have a material adverse effect on our financial condition and results of operations.

“Operations in Guyana, the Gulf of Mexico, and the North Sea accounted for approximately 27.2%, 16.9%, and 17.0%, respectively, of our consolidated operating revenues for the year ended December 31, 2023,” the company stated.

Moreover, Commenting on Noble’s outlook, Robert Eifler, President and Chief Executive Officer, of Noble Corporation, “We expect to realize improving financial results in 2024 compared to 2023, with mid-year contract start-ups for several floaters and jackups expected to drive stronger financial performance in the second half of the year. Meanwhile, commercial visibility for 2025 and 2026 is highly encouraging based on recent months’ step-change increase in open demand, which is a positive indicator for future backlog development. Against this favorable backdrop, we look forward to growing our return of capital to shareholders as free cash flow improves over the course of the cycle.”

Furthermore, this publication recently reported that Noble said it will fight vigorously over audit claims amounting to US$172.1 million as of December 31, 2023. Some of the claims is in relation to what was discovered by auditors in Guyana, who checked Exxon’s spending between 2018 to 2020.

Guyana/Suriname

Notably, owing to the 2016 Production Sharing Agreement (PSA) Guyana signed onto with Exxon – all of the company’s expense will be recovered. Under the deal, Exxon receives profits after 75 percent is withdrawn to cover its expenses, which includes monies paid to its contractors. This publication had reported that Guyana’s leaders are so determined to grant extremely generous fiscal terms to oil companies, that they have agreed to forfeit billions of United States dollars. Two of those generous concessions include an agreement to pay oil companies uncapped interest rates on loans they (the oil companies) take to fund petroleum operations offshore Guyana and an agreement to repay these companies for “pre-contract costs.”

Meanwhile, Guyana’s neighbour to the east, Suriname, has done a much better job of securing the value in the prolific basin that these two countries share. Suriname’s model Production Sharing Contract (PSC) explicitly states that pre-contract costs and interests on loans are not recoverable. In the Accounting Procedure of the Suriname model PSC, it is stated that “costs incurred before the Signing Date including the purchase of seismic data” and “Interest incurred on loans raised by the Contractor” do not qualify for cost recovery.

There are pre-contract costs under several agreements with oil companies operating offshore Guyana. The heftiest pre-contract cost is for the Stabroek Block agreement, including costs owed to ExxonMobil. Section 3 of the Accounting Procedure of the Stabroek Block agreement lists many expenses recoverable by the contractor. These costs include “contract costs, exploration costs, operating costs, service costs and general and administrative costs and annual overhead charge as those terms are defined in the 1999 Petroleum Agreement,” according to the 2016 contract. There are pre-contract costs under several other contracts. Unlike the Stabroek Block agreement, a number of these agreements don’t even define pre-contract costs, leaving the public to wonder what it is paying oil companies millions of dollars for.

 

 

 

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• drillships, Exxon, Guyana, Noble, Oil and Gas

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