It will not be left up to ExxonMobil to decide the pace at which the oil fields in the Stabroek Block will be developed. According to President David Granger, this will be decided by the Government of Guyana.
At a press conference held on Friday, the Head of State said that his newly-established Department of Energy is reviewing all development plans for the Stabroek Block which were submitted by ExxonMobil. He said, “So it is not a matter for Exxon, it is our sovereign right.”
This move by the President would be in keeping with at least part of the advice of the United Nations Development Programme (UNDP) in one of its reports. That document was prepared by Anthony Paul, Principal Consultant of the Association of Caribbean Energy Specialists Ltd.
Paul in the report said that there is an immediate need for the Government of Guyana to review the upcoming plan of development by ExxonMobil.
The Chatham House Advisor said, “It is important that the Government has its own capability to evaluate the plan provided. There is no single unique way to develop an oil or gas field. The core objectives of investors and governments are quite different and can lead to competing approaches, which can erode value for one or another stakeholder. This requires adept negotiating, based on very good data and analysis. Investors are intent on making as high a return on their investment and as quickly as possible.”
The Energy Strategist continued, “Governments, on the other hand, want to extract as much of the resource as possible, all things else being equal.
This is the stated objective of many countries, Norway included. Several variables impact the cost, rate of recovery and ultimate recovery (some oil and gas is always left in the ground) and choosing from the options can mean the difference of hundreds of millions of dollars or barrels of oil.”
The Local Content Consultant said that these variables include the number and location of wells, both producers and injectors; rate of depletion; location and timing of injectors to enhance recovery; and the design of facilities (FPSO, wellheads, umbilicals, etc., in this case).
Paul said that making and defending these choices require strong technical capacity, which includes economists, contract analysts, modelers, tax legislation, cost data, project plans, market data, training, existing models (commercial/off the shelf).
Further to this, Paul said that the implications of full field vs. partial development (early production) must be well understood. In this regard, the geophysicist said that the government needs to consider that there are pros and cons. He said that the authorities need to ask crucial questions, which include: what will drive the decision-making? Does Guyana have a strategy/priorities to choose between these trade-offs? Does Guyana want to approve a partial development before Lisa Three is drilled? Is there a communications strategy to manage public perceptions?
Paul said that local content and capacity development strategy, plans and procedures, along with targets, should be part of the Plan of Development for ExxonMobil.
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