Following the granting of a production licence by government here, ExxonMobil yesterday announced that it has made a final investment decision to proceed with the first phase of development for the Liza field at a cost of US$4.4B.
“We’re excited about the tremendous potential of the Liza field and accelerating first production through a phase’s development in this lower cost environment,” a release from the company quotes its President Liam Mallon as saying.
“We will work closely with the government and co-venturers and the Guyanese people in developing this world class resource that will have long-term and meaningful benefits for the country and its citizens,” he added.
Among other things, the US$4.4B caters for a FPSO facility which is designed to produce as much as 120,000 barrels of oil per day.
The company said that production is expected to start by 2020.
ExxonMobil believes that the Liza Phase 1 development has the potential to provide “significant benefits to Guyana, including jobs during installation and operations, workforce training, local supplier development and government revenues to fund infrastructure, social programnes and services.”
The investment decision has left government exultant boasting that it was “the largest investment in Guyana’s history”.
Mini-ster of Natural Resources Raphael Trotman also said that he was “very happy” that Exxon and its partners have made their financial investment decision (FID) to proceed with the phase one development of the Liza field.
On Thursday evening government announced that it had issued a production licence to ExxonMobil for the Liza Field in the Stabroek Block, saying that while quantifying oil in the well is not yet completed, it is estimated that there is as much as two billion barrels. “I wish to report that government has taken the decision to issue a production licence,” Trotman told the National Assembly his presentation on the Petroleum Commission of Guyana Bill, which was also debated but sent to a special select committee for analysis.
“It is believed Mr Speaker that the estimable barrels of oil in the Stabroek Block maintained by Exxon may be equal to as much as two billion barrels of oil,” he added.
An almost simultaneous announcement was made by his ministry, in the form of a press release, which said that the licence granting was an important milestone towards the first phase of oil production at the Liza field offshore Guyana.
And while government has developed a local content draft, which it has since sent for analysis to stakeholders countrywide, it yesterday said that ExxonMobil has to also furnish it with a local content plan of its own within six months. That agreement formed part of the requirements of the granting of the production licence, Trotman told government’s Department of Public Information/ Government Information Agency.
“So that we will know how local content, both in terms of employment and procurement, and the provision of goods and services will be phased into this project over the next three years going into production,” the agency quoted Trotman as saying.
Trotman pointed out that the draft Local Content Policy has already been shared with the private sector as part of facilitating consultations before it is brought to the National Assembly.
“This is a raw draft; it is not a perfect document; I know it has weaknesses I need your help to tell me where to give it strength and so we’re getting some comments coming back from them,” Trotman said he expressed to the private sector.
The Local Content Policy is expected to be finalised by August.
The agreement with ExxonMobil which was signed by the People’s Progressive Party/Civic government back in 1999 and catered for a subsumed 1% per barrel-of-oil royalty was changed by the David Granger administration and will now take a hybrid format where royalties of 2% on the gross will feature. There is also a 50-50 split of the profit oil.
While government has not released the adjusted contracted, Trotman reiterated that not many changes were made to the original contract since his government believed it was a fair agreement, after review and analysis of similar agreements by other countries, but the royalties aspect was changed.
The Stabroek Block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is the operator and holds a 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds a 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds a 25 percent interest.
Exxon has already submitted to government its plans for the Liza 1 field, scheduled to last for at least 30 years, and mapped out a systematic plan of its proposed offshore subsea systems, drilling, floating production operations and vessels to be used among other details. The plan speaks only to the Liza field and the technical aspects of how it would be ‘brought to life’.
