Exxon contract permits blank cheque spending
May 07, 2021 News
…says if Minister disagrees company can still go ahead
Kaieteur News – Guyana inked a Production Sharing Agreement (PSA), commonly referred to as a contract with Esso Exploration and Production Guyana Limited (EEPGL) and its partners, for the exploration and development of the Stabroek Block in June 2016 and the provisions of the arrangement permits carte blanche spending for exploration.
This, if the Minister with responsibility for the sector or his delegate—identified in this case to be the Guyana Geology and Mines Commission (GGMC)—disagrees with a proposed work programme and budget, it would still be deemed as adopted.
Article Six of the PSA for the Stabroek Block provides for delegation [by the Minister] and co-operation between the Contractor and GGMC. The article provides that the Minister authorises GGMC to provide support in relation to monitoring the petroleum operations carried out by EEPGL and its partners.
This would include the reviewing of a number of reports submitted by the Stabroek Block Contractor, such as, exploration work programmes and budgets. With respect to the submitted work programmes and budgets, the PSA stipulates that should the Minister or delegate wish to make any proposals with regard to what is submitted, then these are to be provided to the Contractor within a reasonable timeframe.
Additionally, the PSA stipulates that they would meet and endeavour to come to an agreement and that the Contractor should take into account the Minister’s proposal and attempt in good faith to reach such agreement. According to the PSA however, if the two fail to find an agreement within two months, the proposed work programme and budget “shall [still] be deemed adopted.”
Exploration costs are recoverable by the Contractor under the Stabroek Block PSA, as long as there is a commercial discovery. The contract also provides that expenses can be recovered from any oil field that is in production in the Block. As such, Guyana has already been presented with a bill in excess of US$460M in pre-contract costs for exploration activities prior to 2015.
EEPGL is also currently moving ahead with plans to spud another well during the course of this month—the Whiptail.
The intention to go ahead with the planned drilling activity for the new well was confirmed this past week, when the US oil major held its earnings call for the second quarter. EEPGL’s parent company—ExxonMobil—Chief Operating Officer (COO), Greg Hill, in giving the announcement, detailed that the Stena Carron drillship has also commenced exploration drilling at the Koebi 1 well and that the exploration well at Whiptail is planned to be spud in May.
He said too, the company plans further exploration and appraisal activities for the second half of 2021 with a total of 12 wells to be drilled. As such, the Noble Tom Madden, the Noble Bob Douglas and the Noble Sam Croft—which recently joined the fleet—will be primarily focused on development drilling, he said.
According to the ExxonMobil COO, the Stabroek Block exploration programme for the remainder of the year will focus on both Campainian Liza Type reservoirs and on the deeper Santonian reservoirs. Additionally, he disclosed that key appraisal activities will be targeted in the South-Eastern portion of the Stabroek Block, to inform future developments.
Speaking to the recent successful discovery at the Urau 2 well, he noted that there were also incremental discoveries at that location, at deeper intervals. According to Hill, that well had encountered approximately 120 feet of high quality, oil bearing sandstone reservoir and was drilled 6.8 miles from the discovery well, implying a potentially large aerial extent.
He noted that too that the Stena Drill Max is currently appraising the Longtail discovery and additional appraisal was planned at Mako and in the Turbot area, “which will help to find our fifth and sixth developments on the block.”
Work is also continuing for the fourth development, on the Stabroek Block at Yellowtail.
ExxonMobil, he said, expects to submit a plan of development to the Government of Guyana in the second half of this year. Pending government approval and project sanctioning, the Yellowtail project is expected to achieve first-oil in 2025.