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ExxonMobil and partners deducted monies to decommission 4th project, yet to startup – 2023 Financials
The ‘One Guyana’ FPSO to operate the Yellowtail project has not even arrived in-country yet.
Kaieteur News – In 2023, ExxonMobil Guyana Limited (EMGL) and the Stabroek Block partners billed Guyana US$177M for decommissioning or cleanup costs to restore the ocean floor, following its deepwater oil production activities.
Included in the decommissioning bill was money to decommission wells for the fourth project, Yellowtail, which is yet to start producing oil. This was highlighted in CNOOC’s 2023 Annual Report obtained by this newspaper.
The document states, “During the period ended December 31, 2023, additions to decommissioning and restoration provisions include the cost for one new development well in Liza Phase 1, two new development wells in Liza Phase 2, sixteen new development wells in Payara and ten new development wells in Yellowtail that spud during the year.”
The Chinese oil company was keen to note that the total decommissioning and restoration provisions was estimated by ‘Management’ based on the Branch’s net ownership interest in all wells, estimated costs to “reclaim and abandon the wells and facilities” and the estimated timing of the costs to be incurred in future periods.
When asked to address this state of affairs during his weekly press conference on Thursday, the Vice President, Bharrat Jagdeo refused to comment, since according to him, “I think it is not accurate.”
He however pointed out, “but if the project hasn’t started as yet, my assumption is that you can’t deduct from it for decommissioning if it hasn’t even been commissioned as yet.”
Jagdeo was clear that oil companies should not be deducting costs to decommission a project if it has not yet been commissioned. At the conclusion of his formal engagement with media representatives at Freedom House, Robb Street, Georgetown this newspaper showed the Vice President a screenshot of CNOOC’s financials displaying the information above.
To this end, Jagdeo explained that the costs reflected were to cap the wells until production activities commence at the project. The VP was adamant that decommissioning wells was vastly different from decommissioning a project, since the latter involved the removal of the Floating Production, Storage and Offloading (FPSO) vessels, among other technical steps.
His interpretation of decommissioning was however dismissed by Petroleum and Environmental Engineer, Dr. Vincent Adams.
Adams, who previously headed the Environmental Protection Agency (EPA) told this newspaper that the Vice President’s explanation was misinformed and incorrect.
He explained that decommissioning is a process which takes place only upon completion of the project. “Capping and plugging is part of decommissioning which is what you do when you are done producing oil at a well. That’s asinine to say you are decommissioning a well before you start producing from it,” the former EPA Head said.
While Jagdeo told this publication that the costs reflected in the financial statement was to cap the wells until production commences, the Petroleum Engineer noted that those activities are included in the development cost, rather than decommissioning.
To this end, he argued, “This man gets up there and talks a lot of nonsense. Sometimes I hear all the time he says stuff that he has no idea what he’s talking about. He bluffs his way. He has no idea.”
Furthermore, Dr. Adams pointed out that the oil companies should not be deducting monies to decommission wells before the project commences production activities.
Notably, each project has an estimated life of about 20 years. Three projects to date have been commissioned in the Stabroek Block, while the fourth development, Yellowtail is yet to come on stream; the project is expected to startup in 2025. In fact, the ‘One Guyana’ FPSO to operate the development has not even arrived in-country yet.
According to the companies’ financials seen by Kaieteur News ExxonMobil billed Guyana $10,857,314,009, while Hess also added $13,072,707,068 and CNOOC $11,393,140,000 for decommissioning in 2023. In total, the companies charged the country $35,323,161,077 or US$176,615,805 for decommissioning last year.
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