On the heels of a recent estimation that Guyana would have lost over half a billion dollars to Trinidad and Tobago to date because of its lack of onshore oil and gas services, Natural Resources Minister Raphael Trotman says government is swiftly building capacity to ensure that it can compete.
“I won’t answer individual matters raised but [I] can say that we are working daily to build capacity so that all support is done from Guyana. Guyana hasn’t “lost” money because some services were not available here,” Trotman told Stabroek News.
He was asked to speak to the issue raised by former Deputy British High Commissioner to Malawi Kirk Hollingsworth, who said last Monday at an oil and gas stakeholders’ forum that Guyana has lost over $500 million to Trinidad and Tobago in servicing of ExxonMobil’s wells.
Hollingsworth said he was concerned that at present, ExxonMobil is operating out of Trinidad, a distance of about 40 hours from the Liza wells in the Stabroek Block, while the wells themselves are about 13 hours from Guyana’s coast. Despite being closer, however, Guyana could not provide the needed services.
“In terms of just looking at the logistics of this, I think it is much more straightforward in terms of getting local employment and Guyanese realizing the benefits of the oil and gas industry to have some sort of base here, that can service the Exxon Liza wells,” Hollingsworth said.
“Moreover, the industrial facility will take a few years to complete and in the meantime its millions of dollars. Recently the Oil and Gas… reported that it was estimated that Guyana lost out Trinidad in the region of almost half a billion dollars to date in terms of services the wells,” he added.
Models
The former ambassador also noted that while Guyana will be given many models from around the world to guide its own oil and gas policies, it has to be careful and carefully analyze the similarities and differences before decisions are made.
He said that while some might push Norway as a model for Guyana, it should be noted that it was “heavily capitalized and heavily bureaucratized, regulatory-wise,” when it began its oil investments. “The Norwegian government insisted that 50% of any facility remained with the government…. Within the Norway model they were already industrialized, which facilitated the oil and gas and Guyana has none of these… so, I often believe the comparison to the Norwegian model has severe limitations and we have to be aware of that,” Hollingsworth said.
He made reference to EY Global’s Director for Oil and Gas’ United Kingdom-based consultant Chris Pateman-Jones saying that, among other countries, Guyana can take examples from Norway as it plans it policies and negotiates with business investors here.
“When I look around the world, I see very few opportunities such as the one [you] have here in Guyana, to actually make a true transformational difference and to actually make a difference to local people as opposed to what we often do, which is working on behalf of big oil companies, making them far more wealthy,” Pateman-Jones had told the stakeholders at the oil and gas forum, where he stressed that confidence and a sound long-term strategy would see the country reaping the benefits.
“Exxon can go into production without Guyana building anything onshore. They could do that and they can use other resources, using other onshore bases around the Caribbean. The challenge for you is how much of that pie you want to keep… There is a long-term aspiration and there is a current aspiration and those two should align,” he also said.
The consultant pointed out that it was government’s duty to negotiate terms and agreements that would, over a period of time, see a transitioning of the now used services by other countries, to one that facilitates Guyanese providing a myriad of products and services that would meet the needs of businesses, in the not only the direct oil and gas sectors, but spin off investments. “There needs to be a strategic plan for the infrastructure, those businesses, if they see a long-term plan, they would be more likely to invest,” he said.
“There needs to be a recognition of the regional competition you are going to face and how we can try to centralize those global companies to come and invest and invest over a long period and recognize the challenges they are going to face and help them as much as we possibly can,” he added, as he stressed that local content must be thought of intelligently and simultaneously local companies will need support to compete.
Trotman assured that Guyana was making strides, as it works to have its people ready to meet the demands of jobs and services needed, not only from the oil and gas industry but preparing them for jobs that would be needed as Guyana garners revenue and begins to build its infrastructure to develop the country.
“We are working with ExxonMobil and contractors to ensure more Guyanese are utilized,” Trotman said as he also pointed to the 14 persons qualified to work on the oil giant’s offshore deck.
Trotman also related that at present local companies John Fernandes Limited and Muneshwers are providing port and handling services. The two companies, he said, are also “moving to establish an onshore supply base” here.
With government proposing to construct an onshore base and associated infrastructure in association with the private sector to support the fledging offshore oil and gas sector, Trotman recently announced that his ministry has received 19 applications. Of that amount, half are from local companies, while the other nine are from firms in Dubai, Asia, the United States and the United Kingdom, among other places.
He named Muneshwers, John Fernandes and Toolsie Persaud Limited as those companies he remembered offhand and said that a list of the others could be provided upon request.
He had also noted that by the end of this month or early next month, government would be meeting representatives of international companies who will be coming to present to their proposals for the establishment for an onshore oil and gas facility.
‘Upper end’
Meanwhile, ExxonMobil and its investment partner, Hess Corp, last week held their respective third quarter earnings calls, where they discussed their offshore investment in Guyana.
Both companies informed of the Liza 3 well test, which confirmed that the Liza returns would be on the upper end of the their estimated 800 million to 1.4 billion barrels of oil equivalent.
They said that they are analyzing development studies and are to try and figure out the most optimum way to begin development of the reservoir.
The companies stated too that soon they will be moving to drill another prospect, called the Payara project, which is some 10 miles away from the Liza operation.
“Pre-development planning is underway and we expect to be in a position to sanction the first phase of development in 2017. We believe Liza will offer very attractive economics at current oil prices,” John B Hess, of Hess Corp, said during the call.
“The operator then plans to drill an exploration well at the Payara prospect, located approximately 10 miles northeast from Liza, with results expected by late January. In parallel, we continue to progress predevelopment activities at Liza and expect to be in a position to sanction the first phase of development in 2017.We remain excited not only by Liza, which is world-class in its own right, but also by the significant further exploration potential of the very large Stabroek Block, which as a reminder, is the equivalent of approximately 1,150 Gulf of Mexico blocks,” Executive Gregory P Hill, of Hess Corp, added.
Further, Hill explained that the company has to first finish the current “deepening’ of the Liza 3 well before moving across to Payara to begin drilling. “There, again, depending on what we find, will dictate how long it actually takes to finish the well,” he said.
‘Optimism’
ExxonMobil executives echoed most of Hess Corp’s positions and expressed their optimism about Payara yielding similar results as Liza. However, the oil giant’s representatives said that they did not want to “get ahead of themselves.”
“We also want to make sure in the exploration program that we don’t get too ahead of ourselves. We want to make sure that we’re fully integrating in the learnings into the regional geology, so that we upgrade our potential exploration program going forward. So, it’s a pace programme, it’s making sure that those learnings are being fully integrated, and then making sure that when we do discover additional resources or learn important information like we learned at Skipjack that we integrate that into, not only our expression programme, but the scope of the full development,” ExxonMobil’s Vice President, Investor Relations, Jeff Woodbury asserted.
“As it pertains to our initial phase development, it’s been fairly consistent in the scope as it was conveyed in the application we filed for environmental review with the government, I’ll tell you that this is real time, the organization is looking for ways to further enhance value. And as we progress that development planning and early engineering, we will learn more which will cause us to make adjustments. But very optimistic about the future in Guyana and we think we will bring a lot value to the government and people of Guyana,” he added.
Trotman said that government was told formally by ExxonMobil of the Liza 3 well’s result and that it remains optimistic as ExxonMobil begins drilling of its first exploratory well under its Payara project.
“We have been having weekly meetings with the company and we were notified formally during the week as to the well test…We meet weekly and we were formally written to and the letter handed over at a meeting on Monday…This is in keeping with what we have been doing. We were officially notified on Monday,” he said.
“Government continues to have confidence that we can move to the developing the resource and will be making preparations. That is another prospect that they are going to move to in another few weeks’ time. This is a new opportunity,” he added.
