US$9B Payara project gets ‘green light’
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The official signing of the Payara agreement
The official signing of the Payara agreement

– prohibition of routine flaring, US$400,000 for auditing, update of base design for water injection agreed to

AFTER weeks of intense consultations and negotiations, the Government of Guyana has granted approval for global oil giants, ExxonMobil to commence its US$9 billion Payara Development Project, offshore Guyana.

The Government of Guyana officially issued the licence for the project, which was signed by both parties, on Wednesday.
The project located in the Stabroek Block, is expected to produce up to 220,000 barrels of oil per day after startup in 2024, using the Prosperity floating production, storage and offloading (FPSO) vessel. The US $9 billion Payara development will target an estimated resource base of about 600 million oil-equivalent barrels and the largest single investment in the history of Guyana.

A review of the Payara Development Project, which is the company’s third field development in the Stabroek Block, was previously conducted by the Bayphase Oil and Gas Consultants contracted by the Department of Energy (DoE) under the previous administration.

The new People’s Progressive Party/Civic (PPP/C) administration, however, decided to review the work already undertaken by the DoE to ensure that the interests of all Guyanese are protected and are in keeping with international transparency and accountability standards. The current review is being done by a team of international experts, headed by Canadian Queen’s Counsel Alison Redford.

From the onset of the review, President, Dr. Irfaan Ali, had said government wants to strike a balance by ensuring the country gets more for local content, brings natural gas to shore, protect the environment and ensure the lives of all Guyanese are improved significantly.
Judging from the history of previous contracts, which critics believe shortchanged Guyana, it was imperative that a better contract be negotiated so that the country can derive the full or adequate benefits for its valuable resource.

Redford and other experts assessed the project to ensure that all relevant regulations are complied with and that they can be enforced.
The assessment included a review of the environmental standards and reservoir management to safeguard the interests of the people of Guyana, and ensure that their resources are developed in a sustainable and responsible manner to the benefit of the country.

In the licencing agreement, the government has insisted that routine flaring is strictly prohibited without the approval of the Environmental Protection Agency (EPA). It is stated that flaring to maintain oil production will not be permitted. And, the company will pay the government for the cost of gas wasted during flaring and will also be subject to fines under the EPA related to emissions from flaring.

The fine will be calculated by applying the government’s profit gas and royalty percentage share for a given month to the flared volumes, multiplied by the lower of the following: Inside FERC Henry Hub Index price as published by Platts- a Crude Oil Marketwire- each month; or the sales price agreed for gas from the Stabroek Block.
According to the agreement, ExxonMobil is also required to update its “base design” for the project to include “tie-in points” and space for produced water injection equipment.
Within 30 days of the date of the environmental permit, the company will submit to the Minister of Natural Resources, Vickram Bharrat, and the EPA for approval, terms of reference for a study detailing the costs, benefits and feasibility of implementing a system for the re-injection of produced water.
Minister Bharrat is also expected to supervise a study conducted by the company to examine the safe and efficient re-injection of produced water, including the effects on the reservoir. This process is expected to be completed by the first quarter of 2021.
Also, 60 days prior to the beginning of the new year, the company will have to submit a local content plan which shall detail its objectives.

Additionally, ExxonMobil will have to facilitate and fully cooperate with annual audits of safety critical drilling and production operations, including waste management and compliance conducted by a “chief inspector”.

“Within 30 days of the licence and annually, on such date thereafter, for a total of five consecutive years, the company shall pay to an account controlled by the government, the amount US$400,000 to be used by the government for the procurement of the third party auditors to supplement the chief inspector’s resources and development institutional capacity for the ongoing conduct of audits under this paragraph,” said government in its agreement with ExxonMobil.

The company’s expenditures and operations are, however, still to be fully audited, and Vice-President, Bharrat Jagdeo, had said government will aggressively pursue costs incurred by the company.

“Exploration costs up to 2017 are now being audited, so there are large opportunities to agree or disagree with cost…We see areas where we do not believe that expenditure made now or before is part of cost oil and should not be there,” he said.

Jagdeo had promised that government will remain aggressive in its negotiations with any company, especially ExxonMobil.

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