Sep 30, 2020 News
– IDB estimates development cost to exceed US$6B
ExxonMobil’s Payara development, for which approval seems imminent, will see a commitment of US$3.6B this year from the oil major, says Norwegian business intelligence firm, Rystad Energy.
Meanwhile, a model from the Inter-American Development Bank (IDB), in its recent report titled ‘Traversing a Slippery Slope: Guyana’s Oil Opportunity’, pegs the cost of the Payara field development at US$6.5B.
This cost would be similar to Payara’s predecessor, Liza Phase Two, given the project similarities.
Exxon is expected to make the Final Investment Decision after the Government of Guyana gives the green-light.
Guyana has been reviewing the project’s Field Development Plan (FDP) since late last year. The review has fallen under the purview of the second administration, the People’s Progressive Party Civic (PPP/C). The new government took a decision to review the work of the former on the plan, delaying the approval.
Several environmental issues plague the FDP. The government is also facing increasing calls to renegotiate the lopsided Production Sharing Agreement (PSA) under which the Payara development would be governed.
Guyana’s Minister of Natural Resources, Vickram Bharrat, expects to approve the project soon. He told Kaieteur News recently that the findings of the review will be made public, and that the current agreement has several safeguards in place, including stiff fines for flaring gas and failure to treat reservoir water, according to international standards, before discharging it.
Despite this, experts commenting in favour of Guyana say that a comprehensive review process would take many more months, even years, and with a diverse array of technical professions.
Nevertheless, ExxonMobil and its Stabroek block partners had told the public during their 2020 Q2 earnings calls that both major parties had already granted assurances of approval a long time ago. This is likely why the company invested in contracts for preparatory works for the project last year, before it had even submitted the FDP to government for approval.
Rystad called Exxon’s arrangement with its shipbuilder, SBM Offshore, “an advanced commitment” for the Floating Production, Storage and Offloading (FPSO) vessel, to be named ‘Prosperity’.
Chinese shipyard, Shanghai Waigaoqiao Shipbuilding (SWS) already supplied the hull to SBM in Singapore, a month ago.
Rystad said that the topside modules are to be built by Dyna-Mac and Keppel, but Exxon claims everything has been put on hold, pending the government’s say-so.
The project would add US$6B to an already crowded cluster, charging Guyana now with bills of exploration and development costs exceeding US$15B.
A major point of concern is whether Guyana will have the capacity to audit all of it, given that it hasn’t even started an audit on Liza Phase One. According to Rystad, the coming decade will see Exxon attempting to foist about US$50B more of development costs on Guyana.
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