Government has debunked claims that decommissioning has not been included in the agreement it signed with U.S oil giant ExxonMobil, cautioning citizens to be careful of so-called pundits.
Natural Resources Minister Raphael Trotman has said that Guyanese must equip themselves with the necessary knowledge to be able to determine right from wrong, and who is telling the truth.
Natural Resources Minster, Raphael Trotman
The Minister was referring to recent comments made by former Parliamentarian Charles Ramson Jr, who claimed that no provisions were made to exclude decommissioning costs from “cost oil.”
ExxonMobil is expected to use revenue from its production in order to recoup its capital investment. This will be categorised as “cost oil”. Whatever remains of this is the ‘profit oil,’ which Guyana will have to split between the oil company and its associates.
Decommissioning, on the other hand, is a process consisting of the removal of industrial installations and any relevant structures that have come to the end of their productive life in a certain industry, particularly oil.
Trotman said, “Everyone has pronounced himself or herself an expert, and I don’t know if the Ministry (Natural Resources) could try to answer every so-called expert every day.
“But it would be absurd that we won’t consider decommissioning …the Petroleum Exploration and Production Act deals with that. It states how the decommissioning should be done.”
According to him, ExxonMobil has a licence which deals with the decommissioning. In fact, the Minister explained, the cost will be shared by both parties when that time has arrived.
In fact, Article 5 of the oil agreement signed between the two parties speaks to relinquishment, referring to several sections of the Petroleum Exploration and Production Act which deals with decommissioning.
Ramson had said that in an offshore production, such as where Guyana’s well is located, the costs can range in the region of a few million dollars to over US$500 million per oil and gas reservoir, for which plugging and abandonment is one of the highest cost factors – representing about 60 per cent of the total decommissioning cost.
The former MP had claimed that ExxonMobil can write off any decommissioning cost as expenses and that would significantly lessen future revenue for Guyana, or ExxonMobil could seek partial funding from the Guyana Government to offset that cost, as is being done in the UK.
Ramson also alluded to Guyana missing out on a chance to have a stake in the venture, as a partner with Exxon. He noted that because of this, the country had lost revenue, not to mention a chance to be recognised at an international level.
But it was impossible for Guyana not to include decommissioning in its laws, especially when this process is legally governed by an international regulatory framework.
On the decommission dealt with at international level, the main legal international principles (meaning principles not covering decommissioning within the States’ territorial waters, where it is entirely regulated by national laws) are contained in the 1958 Geneva Convention on the Continental Shelf and the 1982 United Nations Convention on the Law of the Sea, among others.
There is also a human rights aspect to the decommissioning, especially since there is consideration of the dangerous nature of these activities on the environment and human life. And if decommissioning is not done to standard, it represents a huge risk for the life of the companies involved.
For such reasons, in recent years, oil and gas companies have become increasingly active in paying proper attention to the international legislation addressing the care and protection of human rights.
The 2013 Oil and Gas Sector Guide on Implementing the UN Guiding Principle on Business and Human Rights, issued by EU, aims at identifying a set of human rights affected by the activities in the oil and gas sector, as well as at providing guidance on how to spread knowledge about their existence with a view to promoting their protection through proper risk management activities.
