Latest update April 19th, 2024 12:59 AM
Jun 06, 2022 News
…Economist says country’s interest must be separate from ExxonMobil
By Zena Henry
Kaieteur News – Economic and Youth Policy Advisor at the Office of the Leader of the Opposition, Elson Lowe has raised his voice in support of Guyana controlling its own oil and gas clean-up money.
The youth advisor, in an interview with the Kaieteur News yesterday expressed his concern toward Guyana not ensuring that decommissioning money necessary for the removal of subsea oil production material is available for the work that has to be done some 20 years into the future.
Based on the Production Sharing Agreement (PSA) ExxonMobil has with Guyana, the company is allowed to extract incremental sums from profit oil for the decommissioning of oil wells within the Stabroek Block even before a cent is spent. However, while industry norm does not permit the oil company to access the clean-up money in the manner it is currently, Guyana seems to be allowing the removal of the funds to be re-injected into the offshore project. Guyana will eventually repay project financing as cost oil.
Vice President Bharrat Jagdeo told media operatives at a press conference last week that the clean up funds are “fungible” and that he suspects Exxon is utilising the money in reducing their cost of borrowing. This he said is a productive use of the cleanup money. Lowe is among local and international commentators who believe however, that “We (Guyana) should have control of the decommissioning funds.”
He explained that uncertainty of future events would support any need for Guyana to manage its own clean up money to ensure that it is available when needed. The economist explained that while ExxonMobil is recognised as a strong company and one of the biggest names in the global oil and gas industry, one can never be sure of what adverse possibilities can befall the agency. He said that ExxonMobil has other oil ventures around that world, “what if they end up in a big scandal or they have an oil spill, like the (US$7B) Valdez spill, in some other part of the world?”
They may face financial difficulty and Guyana may be left without the money needed for cleanup, Lowe opined. He noted too, that any using of the cleanup money should be done by Guyana since it is the portion of oil sale that will be used to clean up the Stabroek Block, which remains property of Guyana after the operators are gone.
Lowe believes also that while Guyana should be in control of the money for cleanup, it should have started to put the sums aside at some point half way of the projects life. He indicated that Guyana could have been utilising the cleanup money and increasing its value. “Maybe ten years later, we could have started putting the money aside.”
Money has time value, the Economist continued, and it would make no sense setting it aside with the possibility of it not having the same value when time to be used. Lowe said that Guyana must resist exposing itself to vulnerabilities of counterparty risk, where the oil operator may be unable to fulfill its contractual obligations.
Lowe has insisted that, “the country’s interest must be separate from the corporation’s interest.” He believes that Guyana must do what it must to secure itself against whatever event that may arise with the operator over the two decade lifespan expected at the fields.
Director of the Institute for Energy Economics and Financial Analysis (IEEFA) Tom Sanzillo is among the first set of experts who sounded off against the unusual situation. The international analyst is concerned that should ExxonMobil walk away from its oil venture; sell it, and especially to a weaker company, Guyana may be left with the huge bill to clean up the seafloor. Sanzillo said it is against industry standards that ExxonMobil is receiving some US$3.2 billion as part of decommissioning costs to be deducted.
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Apr 19, 2024
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