In a matter of a few days, the Government of Guyana will lift its first share of crude from the Liza Phase One Development, according to the Energy Department’s Director, Dr Mark Bynoe.
“I am sitting here and I can definitively say that Guyana’s first million-barrel entitlement will be shipped in February. You can call that what you wish but that’s a reality,” Dr Bynoe said during an on-air interview on Thursday.
The Energy Head was at the time responding to questions surrounding the deal Guyana has with ExxonMobil and its co-ventures Hess and CNOOC. Dr Bynoe used the opportunity to shed some light on Guyana’s Public Sharing Agreement (PSA).
Guyana’s PSA states that the country receives two per cent royalty in addition to 50 per cent of profit oil. This means, after 75 per cent of the investment cost has been recovered, Guyana will receive 12.5 per cent of the remaining 25 per cent with ExxonMobil, Hess and CNOOC receiving the other 12.5 per cent.
But before profits are divided, Guyana’s two per cent royalty is calculated on the overall 25 per cent of the profit oil. The royalties are paid to the country by ExxonMobil and its covertures, making Guyana’s share of the crude 14.5 per cent or 52 per cent of profit oil.
“Within the petroleum industry, we have what we call a royalty and tax regime or you can have net production-sharing arrangements plus royalties which is what Guyana has or you can have Gross Production Sharing agreements and royalties. The beauty about what Guyana has is that from day one, you start receiving benefits. If you were to go with the Tax Royalty Regime, which is what Suriname has, that is what they have been comparing and neglecting in its totality, the discussion around profit oil,” Dr Bynoe explained.
Additionally, the Energy Department Head said his agency has been pursuing effective contract administration among other things. He further reiterated President David Granger’s position that Guyana would not be pursuing a renegotiation of the contract with ExxonMobil.
“We are under the sanctity of a contract. We see to provide investor confidence and let them understand that the rule of law will always be observed. We are conscious of the fact that there are areas within the existing contract from which Government can be able to extract greater value,” he admitted.
He noted that they are also hiring qualified experts to hone the skills of Guyanese so that they can position themselves to be leaders in the oil and gas industry.
ExxonMobil lifted its first million barrels of oil earlier this year.
In December last year, the DoE announced that Shell Western Supply and Trading, which is Barbados’ branch for Shell International, will be selling Guyana’s crude. According to the Department, Shell was one of the nine international oil companies it invited to bid for Guyana’s crude. It was explained that the companies had face-to-face meetings with the Energy Department to pitch their proposals and answer questions.
Just Monday, ExxonMobil announced its 16th discovery offshore Guyana.
Northeast of the producing Liza field lies the Uaru exploration well, the company’s latest discovery on the Stabroek Block offshore Guyana.
In its announcement on Monday, the supermajor revealed that the well, its first for the year 2020, encountered approximately 94 feet of high-quality, oil-bearing sandstone reservoir.
Uaru, drilled in 6342 feet (1933 metres) of water, is located approximately 10 miles (16 kilometres) Northeast of the Liza field, which began producing in December 2019.
In addition to this latest discovery, ExxonMobil announced that it also upped its estimated recoverable resource base to more than eight billion oil-equivalent barrels.
Production from the Liza Phase 1 development is currently ramping up and will produce up to 120,000 barrels of oil per day in the coming months, utilising the Liza Destiny floating production storage and offloading vessel (FPSO).
The Liza Unity FPSO, which will be employed for the second phase of Liza development and will have a production capacity of 220,000 barrels of oil per day, is under construction and expected to start production by mid-2022.
Pending Government approvals and project sanctioning of a third development, production from the Payara field north of the Liza discoveries could start as early as 2023, reaching an estimated 220,000 barrels of oil per day.
In the meantime, four drillships in Guyana continue to explore and appraise new resources.
A fifth drillship is expected to be deployed later this year.
The Stabroek Block is 6.6 million acres (26,800 square kilometres). ExxonMobil affiliate Esso Exploration and Production Guyana Limited is the operator and holds 45 per cent interest in the Stabroek Block. Hess Guyana Exploration Limited holds 30 per cent interest and CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds 25 per cent interest.
Guyana’s other explorer, British-owned Tullow Oil, has made three oil finds to date at its Joe-1 exploration well, the Jethro-Lobe and the Carapa-1. However, the quality of the oil finds might not be commercially viable.