ExxonMobil recovers full cost of 1st project offshore Guyana

With a total of some US$30 billion in investments offshore Guyana, United States oil major, ExxonMobil has already recovered the cost of its first oil producing development in the Stabroek Block.
The development cost for the 120,000 barrels per day Liza Phase 1 project is pegged at some $3.7 billion – nearly US$1 billion or 21 per cent less than the initial US$4.4 billion sanctioned estimates in 2017.
To date, however, Exxon’s local affiliate, Esso Exploration and Production Guyana Limited (EEPGL) and its Stabroek Block coventurers Hess Corporation and China National Offshore Oil Corporation (CNOOC) have earned back their investment sums.
“…it all goes into the same cost bank but we have now recovered costs that would be equivalent to the original investment for Liza Phase 1. [This was] especially helped by the price environment last year,” President of ExxonMobil Guyana Alistair Routledge disclosed during a media briefing last week.
The Liza Phase 1 Development is located approximately 120 miles offshore Guyana in water depths of 1500 to 1900 metres. The project, which began producing oil in December 2019 using the Liza Destiny floating production, storage and offloading vessel, includes four drill centres with a total of 17 wells, including eight production wells, six water injection wells and three gas injection wells.
With regards to the Liza Phase 2 development project, Routledge explained that while the cost has not been fully recovered, a significant sum was regained.
“It’s on that order of magnitude of costs to date, which is why I have that confidence of saying we’re above the Liza Phase 1 initial development cost and we’re probably still working our way through Liza Phase 2,” the Exxon country Chief told reporters.
Cost recovery is one of the controversial features of the 2016 Production Sharing Agreement signed between the oil major and the former A Partnership for National Unity/Alliance For Change (APNU/AFC) coalition Administration to develop the country’s resources offshore.
The 2016 oil contract also continues to be heavily criticised for its low royalty – a meagre two per cent and lack of ring-fencing provisions, among other features.
Routledge has defended the PSA saying that any new changes could be very “destructive to investor confidence” in the Stabroek Block.
With both the Liza Phase 1 and Phase 2 projects producing oil offshore Guyana, investment monies are being recovered from both developments.
In May 2022, the Guyana Government signed a contract with a consortium of local auditors and an international company to audit US$9 billion in cost oil from ExxonMobil’s operations in the Stabroek Block.
The cost recovery audit contract covers profit oil from the years 2018, 2019 and 2020.
Earlier this month, National Resources Minister Vickram Bharrat disclosed in the National Assembly that the auditors have already submitted an initial report and a second report is expected in another two months.
He further explained that the audit was meant to be concluded within 120 working days, which would equate to mid-2023, hence, the final report is due in March 2023.
Currently, the United States oil major is operating two FPSOs – Liza Destiny and Liza Unity – in the Stabroek Block. They are producing in excess of 380,000 barrels of oil per day.
Exxon’s third project in the Stabroek Block, the Payara Development, is expected to start up later this year using the Prosperity FPSO, which is scheduled to leave Singapore for Guyana this quarter. The Prosperity vessel will have an initial production target of 220,000 barrels of oil per day and an overall storage volume of around two million barrels.
The Yellowtail Development is Exxon’s fourth project offshore Guyana and is set to come on stream by 2025 with the One Guyana FPSO, which will enter drydock in April. The company’s fifth development called Uaru is currently with the Guyana Government for approval.
The Whiptail Development, the sixth development, is slated to be sanctioned early next year pending approval from the Guyanese authorities.
With these six FPSOs in operation, it is estimated that Guyana’s oil production will ramp up to about 1.2 million bpd by 2027.
However, ExxonMobil anticipates at least 10 FPSOs operating offshore Guyana by the end of this decade.
The oil-rich Stabroek Block, where oil is being produced offshore, is 6.6 million acres (26,800 square kilometres). Exxon, through EEPGL, is the operator and holds 45 per cent interest in the block. Hess Guyana Exploration Ltd holds 30 per cent interest, and CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds the remaining 25 per cent interest.
Guyana, with ExxonMobil as the operator, began producing oil on December 20, 2019, in the Stabroek Block, where there is an estimate of more than 11 billion barrels of oil equivalent (boe) recoverable resource. Since 2015, more than 30 discoveries were made in the block – nine of which were found last year and one so far this year. (G8)