Latest update December 21st, 2024 1:52 AM
Exxon purchases third oil ship from SBM
Kaieteur News- ExxonMobil Guyana Limited (EMGL) has finalised the purchase of a third Floating Production Storage and Offloading (FPSO) vessel from Dutch shipbuilder SBM Offshore. The announcement was made by SBM on Thursday.
“SBM Offshore and ExxonMobil Guyana Ltd, an affiliate of Exxon Mobil Corporation, have completed the transaction related to the purchase of FPSO Liza Destiny, ahead of the maximum lease term, which would have expired in December 2029. The purchase allows ExxonMobil Guyana to assume ownership of the unit while SBM Offshore will continue to operate and maintain the FPSO up to 2033,” the company said in a statement.
FPSO Liza Destiny.
The transaction comprises a total cash consideration of US$535 million. This will bring the total cost spent to purchase the three FPSOs to just over US$3 billion.
The FPSO Liza Destiny has been on hire since December 2019 and since 2023 has and will continue to be operated through the integrated operations and maintenance model combining SBM Offshore and ExxonMobil’s expertise and experience delivering outstanding operational performance.
In August, this publication reported that EMGL was considering the purchase of the Prosperity and Liza Destiny FPSOs ahead of the end of their maximum lease terms in November 2025 and December 2029, respectively.
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. The purchase involved a total cash consideration of US$1.23 billion.
President of ExxonMobil Guyana, Alistair Routledge, has said that the purchase of the FPSOs is a more cost-effective approach for both the company and Guyana. Routledge made that statement during an interview aired by the “Energy Perspectives” podcast.
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.
Notably, at his press conference a few weeks ago, Vice President Dr Bharrat Jagdeo reminded that the money (US$3 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.
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 purchases third oil ship from SBM)
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