MORE than six advisers will be contracted by the Department of Energy as it sets the foundation for Guyana’s budding oil and gas sector.

The country is expected to begin oil production in 2020, and the Energy Department is positioning itself to ensure efficient, effective and transparent management of the industry.

At a news conference on Monday, Director of the Department of Energy, Dr. Mark Bynoe said his department will continue to build its human resource capacity through the recruitment of experts in the field. At the end of the first quarter of 2019, it is expected that the Energy Department will enlist the services of a Development Adviser, a Crude Marketing Adviser, a Gas Adviser, a Commercial Adviser and Legal Advisers.

A number of persons would be hired to act as “shadow” to the advisers. Additionally, the Energy Department will be recruiting economists, econometricians, and Local Content staff. Currently, the Energy Department has a single adviser in Matthew Wilks, who is the Oil and Gas Adviser.

Zooming in on Associated Gas and Crude Marketing, Dr. Bynoe disclosed that the department is in the process of developing its Crude Marketing Plan, which will include a Terms of Reference (ToR) for the marketing of Guyana’s crude. “Transparent tendering to market Guyana’s crude base on a fee or barrel structure is likely to be applied. This will allow transparency on all cost related to crude sales,” he told reporters.

He noted that the Energy Department has been moving to put in place procedures and processes to manage the oversight of the Production Sharing Agreements (PSAs) and the Oil and Gas Contracts.

Overall, the energy director said that his department is building its regulatory capacity. It is the intention of the Energy Department to conduct reviews of a number of field development plans, inclusive of Liza 2.

“The review of the application for Liza 2 Consultancy was carried out using the World Bank, and the National Procurement Tender Administration Board (NPTAB) processes. For the expression of interest, 17 firms applied, four were shortlisted and one was chosen, that is Bayphase,” Dr. Bynoe detailed.

Bayphase, a UK based Oil and Gas Consultancy firm, will assist in the review and approval, with knowledge of the Liza Phase Two field development plan.
Dr. Bynoe noted that the evaluation was conducted by both the Department of Energy and the Guyana Geology and Mines Commission (GGMC).

“This allowed for the most efficient and effective way of conducting this particular evaluation,” the energy director said, while noting that because the review is being financed by a World Bank loan, no objection had to be sought by the department in every step of the way.

The Liza field, located in the Stabroek Block, is estimated to contain some three billion barrels of oil. Currently, ExxonMobil and its partners, Hess Corporation and CNOOC Nexen, are developing Phase 1 for oil production in 2020.

Cost Recovery Audit was among other areas deliberated upon by the energy director. He noted that a joint institution evaluation was conducted by the Guyana Revenue Authority (GRA) and the Audit Office of Guyana.

“Once again it was carried out applying the World Bank and NPTAB tendering processes. For this review, 13 firms had submitted expressions of interest, five firms have been shortlisted, and we are currently awaiting the technical and financial proposals for evaluation, with a possible award of contract expected by the ending of March 2019,” he told reporters.

Last year, the Government had come under criticism over its perceived failure to do the necessary verification of the pre-contract and development costs for the exploration of the Stabroek Block, and the ongoing development of the Liza Phase 1 project.

“The increase in pre-contract costs, beginning with US$100,000 in 1999, to a cumulative total of US $460 million in 2015, is indicative of the general cost of offshore exploration activity. Though it is a large figure, the US $460 million is not surprising, given that the significant deep-water, oil-exploration efforts such as those that occurred in the late 2000s and mid 2010s are costly. For example, just the drilling of Brazil’s deep-water discovery Tupi well in 2007 is said to have been US $270 million, and the costs leading up to the drilling would be much higher,” an expert had reasoned.

Exxon’s subsidiary Esso Exploration and Production Guyana Limited said they spent approximately $140 million for seismic surveys on 20,000 km of ocean floor and more than $65 million to pay geologists, geo-scientists and engineers to identify promising oil formations. It also cost $230 million just to drill the first exploratory well at the Liza site.

Cost recovery allows companies to recoup all of the costs, without profit or mark-up, for exploration and development — mostly in the first few years of production – from the initial oil produced, and before profit oil is shared between the government and the consortium.
That aside, the Energy Department is currently discussing the development of a depletion policy, as the government seeks to ensure that the country optimises extraction of the petroleum resource.