Mar 08, 2023 News
…says company was able to bring in oil ships, production ahead of schedule
Kaieteur News – American oil giant ExxonMobil Corporation’s Chief Executive Officer (CEO) Darren Woods, during a discussion on Tuesday at the annual S&P Global CERAWeek conference held in Houston, Texas, boasted about “the story of success” Guyana. Woods was also proud to highlight the company’s rapid pace of development in the country.
Exxon’s boss and S&P Global Vice Chairman Daniel Yergin, had a discussion on future investment strategies in the energy sector, when Yergin stated, “So let me ask you, mega projects, you did mention Guyana. I mean that’s pretty incredible how fast that developed.”
To this, Woods responded, “Yes it is…Yeah I mean if you look at that it’s really a story of success, and I would also tell you that we are very focus as we grow that production.”
Exxon’s affiliate Esso Exploration and Production Guyana Limited (EEPGL) is operator and holds 45 percent interest in Guyana’s lucrative Stabroek Block, which is 6.6 million acres and has 11 billion of proven barrels of oil. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Petroleum Guyana Limited holds 25 percent interest.
Speaking about Exxon success in Guyana, Woods shared that the company was able to move from first discovery to first oil within five years, beating industry record. “We brought that like from discovery to first production in five years which is of not industry record is pretty close to it. When you think about what typically the timeframe (is), (it) typically (takes) the industry about 10 years,” Exxon’s CEO said.
He continued: “If you then look at what we have delivered since that timeframe, we are bringing in those ships [Floating production storage and offloading vessels] and that production ahead of schedule, we’ve beaten schedule for the two ships [Liza Destiny and Liza Unity] that we’ve got and the third one [Prosperity] that we are working on, that is expect to beat schedule.”
Woods bragged about EEPGL being able to run production, “at a higher level than we have anticipated when we made those investments and staying focused,” adding that the company is also focused on, “helping reducing emissions.”
Exxon CEO also shared that the company is working on the US$2B Wales gas-to-energy project with the Government of Guyana (GoG) to bring gas onshore. He said, “We got a project that we are working on with the Government of Guyana to bring gas onshore to back out some of their higher emission intensity power to substitute that with gas. So we lower emissions and get better more reliable power to the people that’s a real win-win situation.”
Guyana signed onto a Production Sharing Agreement (PSA) with the oil major, which has been heavily criticised for being lopsided and benefiting the oil company more than the country.
The 2016 deal gives Guyana an industry-low 2% royalty. Presently, Guyana shares revenue with ExxonMobil after the company deducts 75 percent towards the cost incurred to develop the resources in the Stabroek Block.
This arrangement, with the lack of ring-fencing, sees Guyana paying for projects that are yet to commence production activities. Each month bills from future producing developments are added to the list of expenses to be cost recovered by Exxon. After the 75 percent is deducted to pay back the oil company, Guyana then shares 50/50 of the 25 percent remaining with Exxon as profits. This amounts to 12.5 percent of profits from the operations.
Also, under the signed deal, Guyana has agreed to, under the taxation provisions, to pay ExxonMobil’s share of Corporation and Income Tax. As such it would mean, that Guyana foregoes each year, billions of US dollars. On top of this, documentation to this effect is then provided to the US based company allowing it to not have to pay any taxes in its home country for its earnings overseas.
Though Vice President Bharrat Jagdeo has maintained that the mere 2 percent royalty, massive tax breaks, and the absence of a ring-fencing provision, are three key flaws of the 2016 Stabroek Block PSA, his government will not seek to renegotiate the deal.
Last month, President of ExxonMobil’s Upstream Company, Liam Mallon boasted about the breakneck speed with which ExxonMobil was able to cut the time in half to move from exploration to production in a deepwater project. Mallon was at the time speaking at the second International Energy Conference and Expo 2023 being held at the Guyana Marriott Hotel.
He underscored that since the first discovery in 2015, the estimate of Guyana’s resource has grown to nearly 11 billion barrels, which makes it the largest in industry in the past decade.
He continued, “And really critically, we moved from the very first Liza 1 exploration well to first production nearly three years ago in under five years. That is roughly half the industry average time for a typical deepwater development.”
Exxon’s performance is in line with Vice President Jagdeo’s request for the oil and gas companies to accelerate exploration. Importantly, while the Government has been pushing for the oil companies to go faster, the country is without full liability insurance from the oil and gas majors.
This publication had reported that, according to Mallon, in total, the oil major anticipates having six projects online with a capacity of more than 1.2 million barrels per day by end of 2027. However, he highlighted, “It is not just about pace. This story is way beyond pace. It’s also about developing responsibility.”
During his address, Mallon disclosed that what Exxon achieved in Guyana is “absolutely unique.” Expounding further, he stated that in his 40 years of working in the oil and gas industry, around the world and on almost all mega projects, “I have never in my career seen anything like this.”
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