Guyana receives $400M in flaring fees from Exxon

— fees increased to US$45 per ton CO2 as new flaring application granted

United States oil major ExxonMobil has paid approximately $400 million (US$1.9 million) to the Government of Guyana for its flaring of gas at its Liza-1 operations in the Stabroek Block.

This was revealed by Executive Director of the Environmental Protection Agency (EPA), Kemraj Parsaram, during local radio programme – Guyana’s Oil & You – on Thursday.
“We have received roughly about $400 million so far,” he announced.
Contacted on Friday, Parsram told Guyana Times that this fee was paid between late July and early August for the first flaring application that was made. That application, which took effect from May 26, was for a 36-day period.
The EPA was forced to amend the Environmental Permit for the Liza 1 Development Project after the oil company had been flaring excessively following technical issues with its gas compressor on the Liza Destiny Floating Production Storage and Offloading (FPSO) vessel on two separate occasions earlier this year.
The regulatory body engaged Exxon’s local affiliate, Esso Exploration and Production Guyana Limited (EEPGL), to modify the permit back in May 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.
At the time, a cost of US$30 per ton of carbon emission was agreed upon, but the EPA Head has revealed that this fee has since been increased to US$45 during discussions with the operator over the past month.
However, Parsram subsequently told this newspaper that this hike in the flaring fee was agreed upon after the oil company submitted another application to flare – this time, for 90 days.
“They have another 90-day application… That started in August and so that $45 [increase in fee for flaring] will be applied to this current 90-day application,” he explained.
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 US oil giant had sent its gas compressor for repairs in Germany after it developed technical issues resulting in increased flaring. But after reinstallation in April, technical issues were still encountered, forcing the company to significantly drop production to as low as 30,000 barrels per day.
By May, production went up and flaring was at an approximate 15 million standard cubic feet of gas. Over the following months, Exxon has since brought the compressor online and has been able to cut down its flaring by 96 per cent.
Last month, the company’s Production Manager, Mike Ryan, explained that there are six operational gas compressors including the flash gas compressor, two main ones and injection gas compressor, and that flaring was reduced to approximately 6 million cubic feet per day.
“What we found with this most recent testing that we did, when we completed Phase One and Two testing, is that we’re still seeing some of that axial vibration in the third stage compressor… What our focus is right now and it was through our extensive testing and modelling that we did during the Phase One, Phase Two, is to find the right level of the operation such that we minimise the vibration, so that we can keep the machine running, while also minimising flaring,” Ryan said.
During Thursday’s radio programme, the EPA Head posited that while Government’s policy is zero flaring, it is nevertheless satisfied with the commitment and efforts by Exxon to reduce flaring.
“We are not at pilot flaring as yet but based on information provided to us and discussions we have had, the plan is to fix this issue completely by year end. And based on efforts and progress we have seen, so far, we find this reasonable. We have seen the improvements and also the willingness of the operator to make every effort to comply,” he stated.
According to Parsram, it is against this backdrop that the EPA has increased the fees for flaring so as to motivate the oil company to ensure it resolves the issues that are causing flaring above pilot levels as early as possible.
He noted that the agency continues to engage and work alongside the oil company to ensure this is achieved.
“I expect that by year end that this issue will be solved. We have agreed to a plan and that’s what we are working with,” he asserted.
Exxon has already said that a new redesigned flash gas compressor is being manufactured and is expected to arrive in the country later this year that will reduce flaring.
In fact, Natural Resources Minister Vickram Bharrat had previously said Government engaged Exxon to ensure that the UnityFPSO that is slated to arrive later this year, and then Prosperity in early 2024, do not encounter the same issues as the Liza Destiny.
The Minister had pointed out that the adjustment is needed since both Liza Destiny and Prosperity are each designed to produce 220,000 barrels of oil per day – almost twice the amount of the Liza Destiny.