No gas flaring except for testing, Trotman says

-as part of gov’t commitment to ‘green’ development

Raphael Trotman

Except for necessary testing, government has assured that there will be no flaring of natural gas found offshore, in keeping with its commitment to developing a “green state,” according to Natural Resources Minister Raphael Trotman.

“We also determined that under no circumstances… there will be flaring of the gas,” Trotman told attendees at the recent ExxonMobil contract release forum. “It is common industry practice that there is flaring and we determined that given the green commitment and approach made by His Excellency, that Exxon will not flare the natural gas that would accompany the find,” he added.

Trotman singled out Commissioner of the Guyana Geology and Mines Commission Newell Dennison for taking the lead in ensuring that the environment is protected from the greenhouse gases emitted through flaring and thanked him publicly.

Trotman noted that when flaring was used to test the flow and composition of the oil from the Liza-1 well, it caused quite a commotion with the coast guard and maritime authority because Caribbean Airlines had reported that a ship was on fire. “Most people might not know this but we have to test the pressure flow and quantum…,” he explained before adding that “We determined that we would flare to test only and we will not flare for continuous daily 24-hour work.”

The extraction of crude oil also results in raw natural gas associated with the oil being brought to the surface and flaring of the associated gas is commonly used to dispose of it in the absence of infrastructure to make use of it.

According to online oil and gas encyclopedia Petrowiki, “Associated gas is generally regarded as an undesirable byproduct, which is either reinjected, flared, or vented.”

It informs that the need to produce oil and dispose of natural gas, as is the case with associated gas, requires unique approaches in the field-development plans and it is with increasing focus on sustainable development, flaring may cease to be an option.

Testing was carried out on Exxon’s Liza well in the Stabroek Block offshore Guyana, where production is expected to begin in 2020, and it was determined that it is an associated gas well that comprises both crude oil and natural gas.

The Petroleum Contract Agreement with ExxonMobil at Article 12 also speaks to associated and non-associated gas and flaring. “If Contractor’s Notice includes a proposal to flare the excess Associated Gas in the Development Plan, then the Minister shall have the option to propose an extension of the response period provided in Article 6.6 for the offtake election to Contractor, until such time as the Minister can provide Contractor with a binding alternative proposal for development and use of the excess Associated Gas,” it states.

“If the Parties agree that the excess Associated Gas of an Oil Field has no commercial value, then such Gas shall be disposed of by the Contractor in the most economic manner consistent with good international petroleum industry practice, provided that there is no impediment to normal production of Crude Oil. All costs and expenses incurred by the Contractor in the production, use and/or disposal of the Associated Gas of an Oil Field as stipulated in Article 12.1 and those incurred in carrying out any feasibility study on the utilization of the excess Associated Gas shall be charged to the Development Cost of the Oil Field and shall be Recoverable Contract Costs. All costs incurred by the Government for the infrastructure and handling of excess Associated Gas which are not included in an approved Development Plan shall be at the sole risk and expense of the Government and will not affect the amount of Cost Oil and Profit Oil due to Contractor. The construction of facilities for the utilization and production of excess Associated Gas, if any, shall be carried out while a Petroleum Production License continues in force,” it adds.

ExxonMobil has repeatedly said that it is not commercially feasible for it to bring the natural gas from the well onshore and it will use the gas for reinjection during production.

However, the APNU+AFC government is forging ahead with plans to pipe the excess natural gas onshore to cater for this country’s energy needs and given the size and demand this country has it would be feasible.

Site for pipelines

Minister of Public Infrastructure David Patterson recently said that sometime this month the government will select a site for the proposed pipelines to land. He explained that the primary concern is moving the recovered gas onshore to have it converted from natural gas to electricity, which can then be used to supplement the national grid. “We are not out of the woods but we do have a plan. So that selection should be made final in January,” Patterson said, while pointing out that after the selection is made, other technical studies will follow. He identified the end of the first quarter of 2018 as a possible timeline for completion of the technical studies.

The minister explained that the government is being guided by studies and said that the Inter-American Development Bank (IDB) is currently being engaged to do further studies for the entire spectrum of natural gas development, including other options going forward.

The Government of Japan is also currently doing a study for the country and when all the studies are finished they will be made available, Patterson indicated.

When questioned on whether ExxonMobil or another company would be contracted to administer the project, Patterson said that the government has not ruled out the idea of contracting someone else to run the pipeline.

“When we determine where we will go, there will be several aspects, such as the distance away from residents, its environmental challenges and so then we shall move further with the study,” he stated.

Late last year, the Guyana Power and Light Company also said that it was seeking a 50-megawatt (MW) natural gas generating plant.

The Exxon contract says that the Associated Gas produced from any oil field within the contract area shall be with priority used for the purposes related to the operations of production and production enhancement of oil fields, such as gas injection, gas lifting and power generation.

“Based on the principle of full utilization of the Associated Gas, and with no impediment to normal production of crude oil, a plan of utilization of the associated gas shall be included in the Development Plan of each Oil Field. If there is any excess Associated Gas in the oil field after utilization pursuant to Article 12.1 (a) the contractor shall carry out a feasibility study regarding the utilization of such excess Associated Gas of such Oil Field. Such feasibility study, if completed before submittal of the Development Plan of an Oil Field, shall be included in the developmental plan. In the event that contractor’s feasibility study on the utilization of excess Associated Gas is completed before submittal of the Developmental Plan, Contractor shall provide the Ministry with regulate updates on the progress of such feasibility study then, upon completion, said study shall be submitted to the Ministry and the GGMC. Contractor’s feasibility study shall be completed no later than 5 years following the submittal of the Developmental Plan,” it states.

“If the contractor believes that excess Associated Gas of an Oil Field has commercial value, the contractor shall be entitled, but not required, to make further investment to utilize such excess Associated Gas subject to terms at least as attractive as those established for Crude Oil in Article 11 including, but not limited to, cost recovery as Recoverable Contract Costs for such further investment. If the contractor believes improved terms are necessary for the development of excess Associated Gas, the Parties shall carry out friendly negotiations in a timely manner to find a new solution to the utilization of said excess Associated Gas and reach an agreement in writing,” it added.

The contract says too that if contractor provides notice to the Minister that the Development Plan shall not include a plan to develop and utilize excess Associated Gas, the Minister shall have an election to offtake the excess Associated Gas free of change at the outlet flange of the Contractor’s separator facility.

“All elections and decisions by the Minister with regards to its potential utilization of excess Associated Gas under this Article shall not impact Contractor’s normal development or production of Crude Oil under the subject Development Plan. This is subject to the following: The Minister’s offtake election shall be postponed until such time as the feasibility study in Article 12.1 has been completed and until Contractor confirms by Notice to the Minister it will not include development of excess Associated Gas in Development Plan,” the contract reads.

Article 17, which deals with Domestic Supply Obligation, states that if the natural gas requirements of the domestic market in Guyana (the “Natural Gas Domestic Demand”) exceed the Minister’s total entitlement from all Natural Gas production in Guyana, then the Contractor shall be obliged together with any third parties which produce Natural Gas in Guyana to supply and sell a volume of Natural Gas to be used for such Natural Gas Domestic Demand in Guyana. This, it says, has to be calculated on the basis of the ratio which the Contractor’s Lifting Entitlement of Natural Gas bears to the sum of Contractor’s Lifting Entitlement of Natural Gas plus the total entitlement of all other producers in Guyana subject to Article 17.2 of the contract.

“The volume of Natural Gas which the Contractor shall be required to sell under this Article shall not exceed the Contractor’s share of Profit Gas. The Minister shall give the Contractor notice on or prior to April 1 of the year preceding the Calendar Year in which the Government will have the said requirement and the term of the supply shall be on a Calendar Year basis unless otherwise agreed. For the purpose of this Agreement, Natural Gas Domestic Demand shall consist of those quantities of Natural Gas used for domestic residential, commercial and industrial consumption, including fuel used for domestic power generation,” it states.

It makes clear that natural gas liquefied or compressed in Guyana for export or used as feedstock for other exports, such as methanol and fertilizer, shall not be considered part of Natural Gas Domestic Demand.

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