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Guyana has yet to pay ExxonMobil, which has applied for a seventh project
Alistair Routledge, President, ExxonMobil Guyana Limited
Kaieteur News – Plans to reimburse fees early to enable the country to benefit from a greater share of oil revenues have been further delayed as ExxonMobil Guyana Limited (EMGL), operator of Guyana’s resource-rich Stabroek Block, seeks approval for a seventh project, Hammerhead.
In August 2018, ExxonMobil announced that it had discovered its ninth commercial oil field at Hammerhead. The Hammerhead-1 well was located in a new reservoir and discovered approximately 197 feet (60 meters) of high-quality, oil-bearing sandstone. The well was safely drilled to a depth of 13,862 feet (4,225 meters) in 3,773 feet (1,150 meters) of water.
ExxonMobil media advisor Kwesi Isles confirmed that an environmental authorization application had been submitted to the Environmental Protection Agency (EPA) on Tuesday. Isles explained that the project has a target production of 120,000 to 180,000 barrels per day. ExxonMobil plans to start production activities in 2029 after obtaining the necessary approvals.
Dr. Bharat Jagdeo, Vice-President
It is worth noting that the target daily production capacity of this project is significantly lower than the three previously approved projects, all of which have a target production capacity of more than 200,000 barrels per day. ExxonMobil’s media consultant pointed out that although the previous project developed multiple discoveries, it is not yet possible to assert whether Hammerhead is the only target oil well of the project. Similarly, the cost of the project has not yet been determined.
Hammerhead-1 is located about 13 miles (21 kilometers) southwest of the Liza-1 well, which also includes previous discoveries at Liza, Liza Deep, Payara, Snoek, Turbot, Ranger, Pacora and Longtail in the Stabroek block.
In April this year, ExxonMobil received approval from the U.S. Environmental Protection Agency and support from the Guyana government to develop its sixth deepwater project, Whiptail.
The Hammerhead development application to the EPA will be reviewed to determine whether the project requires an Environmental Impact Assessment (EIA). If the regulator determines an EIA is required, ExxonMobil will hire an independent consultant to conduct the study on its behalf after consulting the Guyanese public. However, if the EPA decides an EIA is not required, citizens will have at least 30 days to appeal the agency’s decision. These appeals will be heard by the Environmental Assessment Board (EAB), chaired by Dr. Mahendar Sharma, Director General of the Guyana Energy Agency (GEA).
ExxonMobil said that as of the end of December 2023, it had invested about $29 billion in the Stabroek block, of which $19 billion had been recovered by utilizing Guyana oil.
The 2016 Production Sharing Agreement (PSA) allows the company to deduct 75% of its monthly revenue to recover costs. The remaining 25% is split with Guyana as profit.
Without the ring-fencing clause, the company could use profits generated from producing fields to pay for projects that have not yet come on stream. Guyana would have received a greater share of profits from the Liza One, Liza Two and Payara projects, which produce more than 640,000 barrels of oil per day, by now, because ExxonMobil would have recovered costs that would have repaid the amount invested in the three projects.
However, the government argues that the lack of earmarked protections would not only allow ExxonMobil to recoup its investment early, but would also allow the country to reap huge profits as early as 2027.
Earlier this month, Vice President Bharrat Jagdeo explained at his weekly press conference that the country is preparing to “get more in the coming years.”
However, this has been questioned by stakeholders who argue that oil prices are likely to fall in the future as the global shift towards renewable energy reduces demand for commodities.
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