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Guyana nowhere close to paying off ExxonMobil as company applies for 7th project
President, ExxonMobil Guyana Limited, Alistair Routledge
Kaieteur News – The early repayment of expenses to allow this country to benefit from a greater portion of oil revenue has been further delayed as ExxonMobil Guyana Limited (EMGL), the operator of Guyana’s resource-rich Stabroek Block is seeking approval for a seventh project, Hammerhead.
Hammerhead was announced as Exxon’s ninth commercial discovery in August 2018. The Hammerhead- 1 well was drilled in a new reservoir, encountering approximately 197 feet (60 meters) of high-quality, oil-bearing sandstone reservoir. The well was safely drilled to 13,862 feet (4,225 meters) depth in 3,773 feet (1,150 meters) of water.
Exxon’s Media Advisor, Kwesi Isles confirmed that an application for Environmental Authorization was filed with the Environmental Protection Agency (EPA) on Tuesday. Isles explained that the project will target between 120-180 thousand barrels per day (kbd). Exxon is aiming to commence production activities by 2029, following the requisite approvals.
Vice President, Dr. Bharrat Jagdeo
Notably, the daily production capacity being targeted is significantly lower compared to the last three projects sanctioned, which each target over 200 kbd. Exxon’s Media Advisor noted that while previous projects tapped multiple discoveries, it was too early to say whether Hammerhead will be the lone well targeted under this project. Similarly, the cost of the project is yet to be determined.
Hammerhead-1 is located approximately 13 miles (21 kilometers) southwest of the Liza-1 well and follows previous discoveries on the Stabroek Block at Liza, Liza Deep, Payara, Snoek, Turbot, Ranger, Pacora and Longtail.
In April, Exxon received green-light from the EPA as well as blessings from the Government of Guyana (GoG) to develop a sixth deep water project, Whiptail.
The application made to the EPA for the Hammerhead development will be screened to determine whether an Environmental Impact Assessment (EIA) is required for the project. Should the regulator determine an EIA is required, Exxon will be expected to hire an independent consultant to conduct the study on its behalf, following consultation with the Guyanese public. However, if the EPA decides an EIA is not required, citizens will have at least 30 days to appeal the Agency’s decision. These appeals will be heard by the Environmental Assessment Board (EAB), chaired by Head of the Guyana Energy Agency (GEA), Dr. Mahendar Sharma.
As of the end of December 2023, ExxonMobil said some US$29B has been invested into the Stabroek Block, of which US$19B has been recovered, using Guyana’s oil.
The 2016 Production Sharing Agreement (PSA) allows the company to deduct 75% of the monthly revenue towards cost recovery. The remaining 25% is then split with Guyana as profits.
In the absence of a ring-fencing provision, the company can use profits generated in producing fields to pay for projects that are yet to come on stream. Guyana to date could have been receiving a greater share of profits from the Liza One, Liza Two and Payara projects, which are producing over 640,000 barrels of oil per day, as the costs recovered by Exxon could have repaid the sum invested into the three projects.
The government has however argued that the lack of a ring-fencing provision will not only allow Exxon to recover its investments early, but will also position the country to benefit from massive profits as early as 2027.
Earlier this month, Vice President, Bharrat Jagdeo during his weekly press conference explained the country is positioning itself to gain “much more in the outer years”.
This has however been questioned by stakeholders considering oil prices are likely to decrease in the future, as demand for the commodity reduces with the global shift to renewables.
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