Guyana celebrates two years as an oil producer

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Liza Destiny

December 20, 2019, marked a new, historic era for Guyana and its people. It was the day when ExxonMobil began producing light sweet crude offshore Guyana in the world-renowned Stabroek Block.

Since then, not only has Guyana benefitted from billions of dollars in revenue and investment from this lucrative sector, but massive, transformative opportunities have presented themselves for the country, its people and indigenous businesses.

Attaining such positive welfare for the country and its citizens was not an easy feat – especially when one recalls that when the People’s Progressive Party/ Civic assumed government, the oil and gas sector was bereft of mechanisms to ensure maximum benefit and prospects for Guyanese. This mismanagement was a consequence of the former APNU+AFC administration, despite having five years to prepare for first oil.

In stark contrast, the PPP/C government has committed to prudently, transparently and accountably managing Guyana’s oil and gas sector. It is making good on this promise, that massive legislative and technical reforms have been implemented these past 16 months under the current administration.

Some specific achievements made under the Irfaan Ali-led government in Guyana’s oil and gas sector include:

  •  The review of the US$9B Payara Licence: When the PPP/C government assumed office, it saw that the review of the Payara field development plan had been moving at sloth’s pace under the APNU+AFC administration. It quickly brought in a new, expert review team and was able to close the review process for the US$9B project, in a matter of weeks. The Payara permit included improved environmental regulations for issues such as flaring and the dumping of produced water.
  • Amendments to the Liza One environmental permit: These changes saw ExxonMobil paying a fee to the government for its increased flaring offshore Guyana. Initially, the amendments saw the oil giant paying a fee of US$30 per tonne of carbon emitted offshore. The government later moved to have this fee increased to US$45 per tonne and as a consequence of this, the Environmental Protection Agency (EPA) has collected $900 million from the oil giant for its flaring.
  • Creation of beneficial ownership register: Transparency, a tenet of the PPP/C government, is critical to the management of the oil and gas sector. In keeping with this, the government is looking to establish a beneficial ownership register in line with Guyana’s obligations to the Extractive Industries Transparency Initiative (EITI). A Ghanian beneficial ownership expert has since tendered an Expression of Interest with the government to secure this project.
  • Establishment of the gas-to-energy task force: This body was created to fast-track planning for the US$9 billion project which will cut the cost of power by 50 percent in the next three years. Government has gone a far way in deciding on critical aspects of the project so studies could begin on the project design, with the EPA conducting a full month of consultations with the public on the project’s Environmental Impact Assessment (EIA).
  • Amendments to the Petroleum (Exploration and Production): These amendments provide a framework for ExxonMobil to operate within when it starts to lay the onshore aspect of the gas-to-shore pipeline and the fibre optic cable. The fibre optic cable would provide connectivity, which would allow the government to monitor offshore operations.
  • Training for locals: The Guyana Online Academy of Learning (GOAL) announced this year that it is offering training for technical work in the oil and gas industry, through its academy. The programme is targeting about 150 students in technical pathways such as rigging and erecting, SMP (Safety Management Pack), operative, fabric maintenance, coating, and scaffolding.
  • The successful renegotiation of oil lifts: Such success has resulted in the government collecting in excess of US$300M this year alone. Currently, US$534M sits in the Natural Resources Fund (NRF), and not a cent has been spent by the PPP/C. For 2021, there were nine oil lifts.
  • Enhanced bilateral relations with oil-producing countries: The government recognises that Guyana is still unfamiliar with the oil and gas sector. It is against this backdrop that the government has renewed and enhanced its bilateral relations with other oil states such as Suriname, Ghana, and Saudi Arabia. Agreements have been inked with these countries to ensure the transfer of skills, training and knowledge in this specialised sector.
  • Tabling of the Local Content Bill: Local content is a way of ensuring that the locals and their businesses receive the benefits of the oil and gas sector. A critical mechanism that ensures the reality of such profits is a robust local content policy. To this end, the government has prepared and tabled the Local Content Bill which lays out 40 different sectors for which Guyanese will provide services and employment. In the Bill, the government proposes the establishment of a Local Content Secretariat to oversee local content operations in Guyana. Notably, the Bill proposes hefty fines of $10 to $50 million for oil companies and their sub-contractors who are in breach of the Act.
  • Tabling of the Natural Resources Fund (NRF) Bill: The new NRF Bill 2021 emphasises transparency and strengthened oversight. The Bill, too, proposes the addition of a Board of Directors of the Fund, which would consist of three to five members, serving for a period of two years. They will be responsible for the overall management of the Fund, reviewing and approving its policies, monitoring its performance, ensuring compliance with its approved policies, exercising general oversight over all aspects of its operations, and ensuring that its management is in compliance with the law. Further, the Bill seeks to put an anti-corruption mechanism in place, which would prevent the appointment of someone who would have a conflict of interest. It also caters for a Public Accountability and Oversight Committee comprising of nine members.

President Ali and his government recognises the impact of climate change, especially on small developing states like Guyana. Committed to playing its part in the fight against this serious threat and understanding the critical role of transitioning to cleaner energy, the Head of State launched the Low Carbon Development Strategy (LCDS).

This initiative, which is an upgraded and expanded programme to the one launched by former President Dr. Bharrat Jagdeo, creates a low-carbon economy in Guyana by establishing incentives that value the world’s ecosystem services, and promoting these as an essential component of a new model of global development with sustainability at its core. The document, in its draft stage, is up for national consultation. This comes to an end in February 2022.

History of the Stabroek Block

The Stabroek Block, located approximately 120 miles offshore Guyana, is 6.6 million acres. The block is equivalent in size to 1,150 Gulf of Mexico blocks and contains multiple prospects and play types representing additional multi-billion barrel exploration potential. ExxonMobil is the operator, while Hess has a 30 per cent interest and Chinese company CNOOC holds a 25 per cent interest.

The Stabroek Block currently has an estimated 10 billion barrels of oil equivalent with multi-billions of barrels of additional exploration potential. The discoveries on the block to date have established the potential for at least six floating production, storage and offloading (FPSO) vessels by 2027 to develop the current discovered recoverable resource base.

The Liza Phase One development, with a production capacity of 120,000 gross barrels of oil per day, delivered first production in December 2019 utilising the Liza Destiny FPSO.

The second phase of the Liza development, sanctioned in May 2019, will utilise the Liza Unity FPSO, which sailed to Guyana in October, and comes equipped with gross production capacity of approximately 220,000 barrels of oil per day, with start-up expected by early 2022.

A third phase of development, at the Payara Field was sanctioned in September 2020. First oil is expected in 2024. Payara will utilise the Prosperity FPSO, which will have the capacity to produce up to 220,000 gross barrels of oil per day.

A fourth development, Yellowtail, has been identified on the Stabroek Block with anticipated startup in 2025, pending government’s approval and project sanctioning. [Extracted from DPI]

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