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Govt. admits oil could be drained before the 20-year lifespan of projects
Minister of Natural Resources, Vickram Bharrat.
…oil minister says it’s a good thing for the country
Kaieteur News – Minister of Natural Resources, Vickram Bharrat has admitted that oil from the three projects currently in operation could be depleted ahead of the 20-year lifespan due to the optimization of production at the Floating Production Storage and Offloading (FPS) vessels.
Bharrat during a news conference told reporters that while the operator of the Stabroek Block, ExxonMobil Guyana Limited (EMGL) has ramped up production offshore, the technical teams at the Ministry and Exxon are working to ensure that the activities do not affect the environment.
He was however asked by this newspaper to explain how the optimization works could affect the 20-year estimated project life for each of the developments.
Bharrat explained that while the oil at a specific project could be depleted before its estimated lifespan, it was also possible for the projects to produce beyond this time.
He said, “Yes it can finish before the 20 years or it can even go beyond because as a reservoir matures, you can get more out of it and then as we have more discoveries, we can add those wells to the existing development too.”
Bharrat pointed out that ramping up oil production has now become a trend in oil-producing states since this could prove more financially viable for a country- in this case, Guyana.
According to him, “Ramping up production and producing the oil in a reservoir at a faster time than you can is actually good for a country because it comes back to the window that is available for fossil fuel to survive and the price that will be available.”
He explained that the market would be crowded with suppliers even though the demand would go down. Consequently, he noted, “So if you have this large supply of fossil but a small demand, the price will go down so much that it will make no sense for countries to produce oil and gas anymore.”
The Minister recalled that the price for oil went down to $10-$20 per barrel, which makes perfect sense for the government to take advantage of the current oil price of about $80-$85. In fact, he boasted that the administration should be commended for the position it has taken with regard to the ramped-up oil production.
It was reported that all three FPSOs in the Stabroek Block are producing above the safe operating limits outlined in the Environmental Impact Assessments (EIAs).
The Liza Destiny FPSO was approved to produce 120 thousand barrels per day (kbd) while the Unity and Prosperity vessels were designed to produce 220 kbd.
Data from the Ministry of Natural Resources however indicates that the Liza Destiny is producing about 160 kbd while the Liza Unity is producing 250 kbd and Prosperity 230,000 bpd.
It should be noted that the government has refused to ring-fence the Stabroek Block projects, with the objective of benefitting from a greater share of profits in the future. Ring-fencing would ensure that each oil project pays for itself and allow Guyana to enjoy more profits after the cost of the project has been repaid. In the absence of a ring-fencing provision, the companies have the authority to use the income from producing oil projects to pay for other projects that are yet to commence producing oil.
The lack of ring-fencing, coupled with the ramped-up production activities have created fears that the country’s resources could long be depleted before it begins to enjoy a fair share of benefits from the sector, as the government continues to refuse to amend the lopsided terms of the 2016 Production Sharing Agreement (PSA).
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