Dear Editor,
The ‘oil-minded’ are enjoying the use of a new buzzword, ‘Appraisals’; they want to be told the proven oil reserves of the Stabroek Block. Chris Ram has posed the question in his weekly column, and this has been seized upon by GHK Lall, who takes it further: “If the people’s oil cannot be fully disclosed to them, then how does that not amount to a dark conspiracy between Exxon and the PPP [govt]?”
This all sounds reasonable, but when examined, it becomes a load of bunkum.
To understand when appraisals are done and proven reserves need to be ‘updated’, we have to begin with the two agreements Exxon, Hess and CNOOC have with the Government of Guyana regarding the Stabroek Block, an Exploration licence (1999), and a Production Sharing Agreement (2016).
The Exploration licence determines the area of the Block and the amount of exploration that must be done within a specified time; failure to meet exploration minimums leads to automatic relinquishment of a percentage of the block, according to a formula in the agreement. Note that there is a 20% relinquishment regardless of the exploration targets; hence failure to drill the requisite number of exploratory wells would lead to additional loss of valuable acreage for Exxon and partners. There is a current application pending a decision for an extension of the exploration deadlines because delays were caused by the global pandemic 2020-21.
The last update of reserves came after the Lucania-1 discovery in 2022. “The gross recoverable resource for the Stabroek Block is now estimated to be nearly 11 billion oil-equivalent barrels, including Liza and other successful exploration wells…” Discoveries have since been announced and categorized basically “The Sailfin-1 well encountered approximately 312 feet (95 metres) of hydrocarbon-bearing sandstone and was drilled in 4,616 feet (1,407 metres) of water.” With no requirement for appraisal by the exploration licence, the focus is on getting as close as possible to the targets and minimizing loss of acreage.
Wells are appraised to make investment decisions to make it a producer or not; there are currently positive investment decisions on Liza 1/2, Payara, and Yellowtail, there is no current need for expenditure of time, money, and equipment on further appraisals; the Stabroek Block partners are aware of basic volumes available in the other discoveries, and will do appraisals in time for production decisions as need arises. It is a matter of timing. It makes no sense to spend money appraising instead of fulfilling exploration deadlines.
GHK Lall went further and said, “Also, how does Exxon call itself a trusted partner when it conceals and wiggles?” Any two-bit former ‘Wall Street Analyst’ should/would know that Exxon gains (billions) in share value whenever it updates proven oil reserves (Stabroek or elsewhere). Guyana, on the other hand, gains nothing from any update on the ‘People’s oil reserves’. As a consequence of being a publicly traded company, Exxon has to be truthful and responsible in announcing reserves, the announcement must be backed by full appraisal data. The ‘people’ who want to know our oil reserves can make educated guesses based on the metres of hydrocarbon-bearing sandstone made in the discovery announcements, if it helps them to sleep easier at night, 11B, 12B, 13, 20B.
Editor, I believe we are having the wrong conversations based on the lack of knowledge by the newly ‘oil-minded’, who are focused on hindering oil production. What we should be discussing is if we can leverage time running out on the exploration licence as a fulcrum to renegotiate a PSA with improved terms for Guyana; a few percentage points equate to billions of USD, and every avenue should be explored. A word of caution: a renegotiated PSA may not be up for negotiation, this is merely a suggestion, and any new PSA will not be accomplished without giving large concessions, and we will not get the outlandish percentages touted by our new pundits, but it is surely worth a conversation.
Sincerely,
Robin Singh
