…applies to EPA to flare for 36 days
United States oil giant, ExxonMobil Guyana will have to pay the Guyana Government in excess of US$1.3 million for excess flaring of gas at its Liza-1 operations in the Stabroek Block offshore.
Just over a week ago, Guyana’s Environmental Protection Agency (EPA) modified the Environmental Permit for the Liza-1 Development Project to include, among other things, a fee of US$30 per tonne of excess carbon emissions that is flared.
During a press conference on Friday, Vice President Bharrat Jagdeo disclosed that the oil major has since applied to continue flaring for a 36-day period. He explained that this application takes effect from May 26, hence Exxon will have to pay for the excess flaring from that day, for the next 36 days.
Based on calculations, the Vice President disclosed that this 36-day flaring will rack up a fee of some US$1.3 million.
“They say they’re flaring about 15 million cubic feet per day now. That would be equivalent to about 1152 tonnes of CO2e (Carbon Dioxide equivalent) …It should take us to 1.3 million US dollars,” he noted.
It was explained that the oil company has to make an application to flare beyond 48 hours, and in this case, Exxon was given 14 days after signing the modified permit for the 36-day application to take effect.
“So, they’re saying we will need [36 days to flare] …By that time, they expect probably the parts will come back and fix the problem and stop the flaring. So, they would have to flare, they’re saying, for 36 days,” Jagdeo further told reporters on the side lines of Friday’s press conference.
Meanwhile, the Vice President had previously reiterated that this payment that the US oil major will be making to the Government will not affect the Stability Clause under the Production Sharing Agreement (PSA) or be recoverable against cost oil.
While there is no mutual agreement on this, Jagdeo contended that “…we have a method of disallowing this when it comes up. They haven’t claim it.”
He added too that, “The interest rate might be crucial but so far, there has been no demand from Exxon to recover interest rate on the project from cost recovery.”
Exxon has come under fire over its increased flaring activities in recent years with environmentalists up in arms over its harmful effects on the environment.
Earlier this year, the company had sent its gas compressor for repairs in Germany after it developed technical issues resulting in increased flaring. But after reinstalled in April, technical issues were still encountered, forcing the company to significantly drop production.
It was reported that ExxonMobil’s oil production had plummeted to 30,000 barrels of oil per day (bpd) in mid-April, as the gas compressor that had been in Germany for much of February being repaired after developing technical issues, and which only recently returned to Guyana, once again failed.
The oil giant had explained that other problems in the discharge silencer were detected during the final testing phase of the reinstalled flash gas compressor on board the Liza Destiny FPSO vessel.
It was explained that a team from SBM Offshore, MAN Energy Solutions and ExxonMobil are on site to assess repairs, supported by engineering experts in Europe and the United States of America (USA).
Nevertheless, in a subsequent update on April 21, Exxon had said production was back up to 100,000 to 110,000 bpd accompanied by a flare level of below 15 million cubic square feet of gas per day.
In an update last week, Exxon’s Advisor Janelle Persaud had said the company plans to have its faulty equipment repaired and reassembled for a “safe start-up” of operations on the Liza Destiny Floating Production Storage and Offloading (FPSO) vessel in June.
“ExxonMobil Guyana remains fully committed to resolving these technical challenges as quickly as possible, and remains engaged with relevant Government agencies to ensure operations are executed safely taking environmental, technical and economic factors into consideration,” Persaud said.
It was against this backdrop that the EPA and Exxon’s local affiliate, Esso Exploration and Production Guyana Limited (EEPGL), signed the modified Environmental Permit for the Liza 1 Project.
The permit was recalled and modified to include specific regulatory requirements for flaring of associated gas offshore Guyana, in accordance with the EPA’s legislation. These were missing from the original permit that was issued under the previous APNU/AFC Administration.
Meanwhile, Natural Resources Minister Vickram Bharrat earlier this month said EEPGL will switch the manufacturer of the compressor equipment it uses, to ensure there is no flaring during future projects.
“This now has forced us to enter into engagements with Exxon to ensure that the Unity FPSO that is coming later in this year, and then Prosperity in early 2024, that we don’t have this issue with those FPSOs… So, we have gotten that assurance that General Electric will be used as the manufacturer to ensure that the compressor, there is not a recurring problem on those FPSOs with the gas compressor,” Bharrat told reporters.
General Electric is a US multinational company.
The Minister said the adjustment needed to be made since both the Liza Unity and Prosperity are designed to produce 220,000 barrels of oil per day – almost twice the amount of the Liza Destiny.
In the meantime, Bharrat said the Government has been in contact with Exxon daily to ensure that a swift resolution is reached for the challenges on the Liza Destiny. (G8)
