Govt grants approval for Payara, licence includes supply of gas for power generation

…ExxonMobil to start production in 2024

The Government of Guyana has granted its approval to the US$9 billion Payara development project offshore Guyana, signing a 20-year licence on Wednesday that now allows oil giant ExxonMobil to make its Final Investment Decision (FID) and prepare for oil production in 2024.

The licence was signed by Natural Resources Minister Vickram Bharrat, with the FID granted soon after. According to a statement from the Natural Resources Ministry, the licence was approved after several reviews and consultations with both local and international experts.
Approval also took into account the assessment of Exxon’s Field Development Plan (FDP), which was undertaken by British firm Bayphase Oil and Gas consultants. Bayphase’s review was evaluated by a team of Canadian experts, at the invitation of the People’s Progressive Party/Civic (PPP/C) Government.
The Ministry made it pellucid that routine flaring, which Exxon was doing since last year, was strictly prohibited under the licence unless approval was granted by the Environmental Protection Agency (EPA).
“Flaring to maintain oil production will not be permitted. Esso Exploration and Production Guyana Limited (EEPGL) will pay the Government for the cost of gas wasted during flaring and will also be subject to fines under the EPA related to emissions from flaring,” the release states.
The EPA, it noted, will establish a framework for a price on carbon to conform with international standards. “Additionally, the Government has insisted that EEPGL manage produced water to an international standard to minimise the effects of discharging produced water.”
According to the Ministry, EEPGL also has to update its base design to make provision for produced water injection equipment. This equipment will then pump the produced water back into the oil reservoir using an injection well to increase pressure and maximise oil production.
“EEPGL will carry out a study overseen by the Minister of Natural Resources to be completed by the first quarter of 2021 to examine the safe and efficient reinjection of produced water, including the effects on the reservoir. This is in keeping with Government’s commitment to preserve marine life and water quality,” the Ministry also announced in the statement.
The Ministry added that the Guyana Government remained committed to managing and harvesting Guyana’s oil and gas resources sustainably in keeping with internationally recognised acceptable environmental standards and transparency for the benefit of all Guyanese.

Permit
A perusal of the actual permit reveals that the Minister has mandated Exxon must supply petroleum or any related product to the extent specified by the Minister, to meet Guyana’s requirements. When contacted by Guyana Times, Minister Bharrat confirmed that this provision was inserted to ensure that Exxon supplied available gas for Guyana’s gas-to-shore project.
The licence also mandates that Exxon supply daily production statements to the Minister in respect to the Stabroek Block. The statements must include disaggregated figures for gas and petroleum production.
According to the particulars of the permit, the licence is for a duration of 20 years, similar to the duration granted for the Liza Phase One and Two production permits. According to the licence, Exxon must comply with any orders made by the Minister that relate to refining, disposal, or sale of petroleum in the Payara field.
The licence also stresses that Exxon must stick with its Field Development Plan and “not carry out any other development plan either in the licensed area or elsewhere, except with the consent in writing of the Minister in accordance with the development plan which the Minister has approved.”
The licence mandates that Exxon must submit its development and operating cost estimates for the Payara field within 90 days from the date the licence is issued. In addition, Exxon has to submit a breakdown of the actual operating costs for the first year of the Liza Phase One field, which began producing oil last year. This must be done within 180 days of the Payara licence being issued.
Another provision in the licence is that Exxon must give the Minister advance and reasonable notice whenever it is conducting measurements of the oil it is producing. This includes giving the Minister or his representative an opportunity to be present.

Local content
When it comes to local content, Exxon is mandated to submit an annual local content plan not less than 60 days before the beginning of each year. This plan shall detail Exxon’s objectives, activities and programmes for production.
In addition, Exxon has to submit a final Local Content Plan for approval within 21 days of receiving any proposed recommendations to modify the annual plan – recommendations Exxon has to include.
According to the permit, final approval of the plan lies in the hands of the Minister. The permit also provides for Exxon to report on its progress in achieving its local content goals at half-year and yearly intervals. In addition, the company must permit an agent of the Minister to assess its records.
This publication had reported last week that the Government reached an agreement with Exxon on Payara after multiple rounds of meetings between the oil giant and Guyanese Government officials, technical staff and regulatory agencies, and that the agreement was just awaiting Cabinet approval.
Exxon had previously been aiming to start production in 2023. But approval of its FDP for the project had been delayed by various circumstances, including COVID-19 and the political instability before and after the March 2 elections.
The Payara project is expected to produce 220,000 barrels of oil per day after start-up, and will feature up to 45 wells inclusive of production and water and gas injection wells. The development will target an estimated resource base of approximately 600 million barrels of oil equivalent, using the Prosperity Floating Production, Storage and Offloading (FPSO) vessel still under construction.
Payara is Exxon’s third FDP in Guyana to gain approval. The first FDP that the Guyana Government approved was for Liza Phase One, while Liza Phase Two is expected to start up in 2022. Thanks to Liza Phase One, Guyana has received well over US$100 million in cargo lift and royalty payments.
EEPGL is the operator and holds 45 per cent interest in the Stabroek Block. Hess Guyana Exploration Ltd holds 30 per cent interest, and CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds 25 per cent interest. (Jarryl Bryan)