–according to licence agreement

FOR the next five years, ExxonMobil Guyana will be required to pay Guyana an annual sum of $83.6 million to finance independent audits of the Payara Development Project offshore Guyana.

This means, that within the next five years, Guyana’s Oil and Gas industry will benefit from additional $418,004,800 in accumulated payments. These expected payments are in keeping with contents of the Payara Petroleum Production Licence, signed between the Government of Guyana and ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL).

“The company shall pay to an account controlled by the government, the amount US$400,000 ($83.6M) to be used by the government for the procurement of the third-party auditors to supplement the chief inspector’s resources and development of institutional capacity for the ongoing conduct of audits,” according to the Payara Petroleum Production Licence, which was signed on September 30, last year.

The finalisation of the agreement followed weeks of intense consultations and negotiations, between the Guyana government and the oil company. The US$9 billion Payara Development Project, located in the Stabroek Block, offshore Guyana, is expected to produce up to 220,000 barrels of oil per day after start-up in 2024, using the Prosperity floating production, storage and offloading (FPSO) vessel, which is currently under construction at the Keppel Shipyard in Singapore.

Once operational, the Payara development is likely to target an estimated resource base of about 600 million oil-equivalent barrels.

Also addressed in the Payara licencing agreement, was the issue of flaring. 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, according to reports, 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.

The Payara Development Project, estimated to cost more than one trillion Guyana dollars, is said to be the largest single investment in the history of Guyana. And, it is slated to bring with it, not only the natural bounties which lie below the seabed offshore Guyana, but also new and industry-leading technologies such as the fibre-optic sensing system, which was developed by Halliburton and TechnipFMC.

As it is, ExxonMobil’s first offshore project at the Stabroek Block, Liza Phase One, began producing in late 2019, well ahead of the industry’s average for development time. Liza Phase Two remains on track to begin producing oil by early 2022.

Liza Phase Two will produce up to 220,000 barrels of oil per day at peak rates, using the Liza Unity FPSO. First Lady of Guyana, Mrs. Arya Ali, was officially designated as the Liza Unity’s “Godmother,” which is already en route to Guyana from Singapore.

So far, Guyana has recorded in excess of US$344,161,633 in direct earnings from its petroleum sector. And, with oil prices on the rise globally, Guyana could see the returns from its burgeoning petroleum sector growing,

As a matter of fact, Guyana’s nine billion plus oil finds are projected to double by 2025, largely owing to a massive exploration campaign that is preparing to take shape within the coming months. This is likely to see Guyana’s Natural Resources Fund soon surpassing US$500 million.

Speaking last month at the Offshore Technology Conference (OTC) hosted in the United States, Vice-President, Dr. Bharrat Jagdeo, had recognised that because of the climate change imperative to decarbonise the world, it was important that Guyana pursues an aggressive mission of “getting as much oil out of the ground as quickly as possible.”

The former President reasoned that Guyana has to maximise the benefit from the industry and use those benefits to change lives of every Guyanese. “We don’t know how swiftly we’ll get to a decarbonised world, but we have to make use of this period when there is still demand to get as much as possible out of the ground and that is why we support the rapid pace of the industry, but it must be done safely,” he posited.

On a local radio programme called, ‘Guyana’s oil and you’, Jagdeo had said, pointedly, that even with the environmental concerns relating to oil production, Guyana does not have the option of leaving the oil in the ground.

“There are many people saying now that we should not be producing oil. We don’t have that option in Guyana. Our people badly need development and we have to make sure that we produce the oil and get as much development out of it for our people to invest long term in other sectors so that they can get wealthier and have a decent life.”

The former Head of State, who has been globally recognised for his efforts to fight against climate change, indicated his government’s intention to rely on the advice of experts to ensure that its decision to continue oil production was sound.

“We can’t shut down the industry as some people have been calling for. We are going to be driven by the technical expertise. The oil and gas industry will be vital to our future and we have to do it well,” he said. “We have made it clear that we are going to try, as far as possible, to ensure that Guyanese benefit from these resources,” he reiterated.

The Dr. Irfaan Ali-led government has repeatedly pledged to utilise Guyana’s petroleum earnings to transform and modernise a number of non-oil sectors; more importantly, agriculture. The President has also said on multiple occasions that all measures are being put in place to ensure that Guyana does not fall prey to the dreaded ‘Dutch Disease’ that has brought doom and gloom to many other countries that have been relying solely on their oil revenues.