Govt to forge ahead with cost oil audit – Minister

…underscores importance of thorough but timely audit

Underscoring the importance of auditing the pre- and post-contract costs that ExxonMobil has claimed as cost oil, Natural Resources Minister Vickram Bharrat has said that the Government will be forging ahead with the audit.
In an interview with this publication, the Minister noted that the Energy Department was previously focused on the Payara Field Development Plan (FDP) and permit, which was a priority. But he assured that the cost oil audit will be completed in the shortest possible time.
“We’re going to ensure we complete that in the shortest possible time. So, we’re going to move ahead with that in the new week too. Cause that’s important. It’s definitely going to happen; I can assure you that. We just got to ensure it happens in the shortest time,” he said.
Last year, the Energy Department had contracted the services of British consultancy firm IHS Markit, at a cost of US$300,000 ($62.6 million). The contract had to be extended in May of this year without cost, owing to the COVID-19 pandemic. At the time, Energy Department Head, Dr Mark Bynoe had said that this was due primarily to the flight restrictions.
IHS Markit is the product of a 2016 merger between two companies, United States (US)-based IHS and London-based Markit. Its data and information services business caters to industries such as automotive, energy, financial services, defence and maritime.
The company is no stranger to Guyana’s oil sector, having published a number of write-ups and analyses on Guyana’s efforts to develop its capacity. This includes “Guyana’s deepwater areas will remain competitive, despite changes to fiscal terms (IHS Markit, 2018)” and “How activity in the Guyana mini basin is booming with five exciting discoveries since 2015 (IHS Markit, 2017)”.
According to Annex C of the Production Sharing Agreement (PSA) Guyana signed with Exxon, pre-contract cost “shall include four hundred and sixty million, two hundred and thirty-seven hundred thousand and nine hundred and eighteen United States Dollars (US$460,237,918) in respect of all such costs incurred under the 1999 Petroleum Agreement prior to the year ended 2015.”
There is an additional sum of approximately US$400 million from 2016 to 2017, which it is believed will also come under the rubric of cost oil. The former Government – A Partnership for National Unity/Alliance For Change (APNU/AFC) – has received much criticism for agreeing to these costs without an audit being done.
So far, ExxonMobil has made 18 oil discovery offshore Guyana, including two for this year, bolstering the already eight billion oil-equivalent barrels estimated to be contained in the Stabroek Block.
After multiple rounds of meetings with Guyanese Government officials, technical staff and regulatory agencies, the oil giant has also come to terms with the Government on a proposed agreement for the Payara development, its third development after Liza Phase One and Two. The agreement is now awaiting a Cabinet greenlight.
The Payara development plan includes a floating production, storage and offloading (FPSO) vessel, named Prosperity. It is expected to produce 220,000 barrels per day, supporting up to 45 wells, including production, water injection and gas injection wells.