Latest update December 3rd, 2024 1:00 AM
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Exxon says US$2.5B spent to purchase oil ships is a ‘win’ for company
—Jagdeo confirms company will recover cost from Guyana’s oil
Kaieteur News- President of ExxonMobil Guyana Limited (EMGL) Alistair Routledge has said that the US$2.5 billion that was spent to purchase two Floating Production Storage and Offloading (FPSO) vessels from Dutch shipbuilder SBM Offshore is a more cost-effective approach for both the company and Guyana.
Routledge made that statement during a recently aired interview by the Energy Perspectives Podcast. Last year, Exxon purchased the Liza Unity from SBM for US$1.3 billion, a few months before the end of its maximum lease term in February 2024. Similarly, on November 7, SBM announced that it had completed the transaction with EMGL in relation to the purchase of the FPSO Prosperity, ahead of the maximum lease term, which would have expired in November 2025. The purchase involved a total cash consideration of US$1.23 billion.
FPSO Prosperity. (US$2.5B spent to purchase oil ships)
When asked about the company’s decision to purchase a second FPSO, Routledge said, “It’s really primarily a financial matter. It’s more financially-efficient for the investors and for the country to purchase the FPSOs at this stage.”
He explained that while early and construction leases can help ensure efficient and high-quality project completion, long-term leases typically involve higher financing costs. “We found that model to be a very effective one, but a long-term lease is generally a more expensive financing option for the country and for the investors than purchasing the FPSOs,” he said. Routledge added that with the vessels already proven to be operating “very well” at this stage, Exxon feels comfortable that it’s the right time to purchase.
President of ExxonMobil Guyana Limited (EMGL) Alistair Routledge.
It should be noted that before the end of the year, Exxon is expected to purchase a third vessel from SBM – FPSO Destiny.
At his press conference a few weeks ago, Vice President Dr Bharrat Jagdeo reminded that the US$2.5 billion that was spent by Exxon to purchase the vessels will be recovered by the oil company from revenues generated from the Stabroek Block. At his November 14, press conference Jagdeo said, “That’s all part of the cost oil, it’s part of cost oil, every cent that goes into or is spent, it goes to cost oil…” the Vice President noted.
Vice President Dr Bharrat Jagdeo
Under the 2016 Production Sharing Agreement (PSA) that requires Exxon and its partners Hess and CNOOC to pay no taxes to Guyana, 75% of the revenues generated from the Stabroek Block go to Exxon to cover operational expenses. The remaining 25% is then split between Guyana and the oil companies – out of that share Exxon pays a 2% royalty to Guyana.
(Exxon says US$2.5B spent to purchase oil ships is a ‘win’ for company)
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