Crab Island in Berbice is a “very possible site” for an onshore oil base but no confirming studies have yet been done, according to the Ministry of Natural Resources.
“Where the proposed on-shore base is concerned, it must be stated that though the Ministry of Natural Resources has identified Crab Island, Berbice as a very possible site, the necessary feasibility and environmental and social impact studies have not been completed and for this reason there is no sanctioned project,” MNR’s Public Affairs and Communications Officer, Johanne Earle, stated in a letter in Saturday’s edition.
He was at the time responding to a letter from students of the University of Guyana who listed a number of questions about oil and gas that are still to be answered.
Among the students’ concerns was that it was not clear if there was a feasibility study in making a determination about the Crab Island onshore base along with other matters relating to the Government of Guyana’s contractual arrangement with ExxonMobil.
“The exact location has not yet been settled and arrangements are being made to formally approach an international institution to conduct the necessary studies to answer the questions of what type of on-shore base Guyana will need, where it should best be located and how the corporate and financial structures should be configured,” Earle posited.
The latter statement would make it seem that Crab Island is not a sure thing although it was talked up as the onshore site.
Due diligence
The MNR’s response comes even as the Transparency Institute of Guyana Incorporated (TIGI) and citizens have raised concerns about government’s level of due diligence here.
TIGI President Troy Thomas in a statement on April 29 chided the Ministry of Natural Resources for remaining silent in the face of a request on March 29 for clarification on whether ExxonMobil has submitted an economic feasibility study for its proposed Stabroek Block development.
“Considering that the EITI [Extractive Industries Transparency Initiative] is a global standard to promote open and accountable management of oil, gas and mineral resources, and knowing of Guyana’s stated interest in implementing this standard, TIGI wrote to the Minister of Natural Resources,” Thomas explained before noting that a follow up to its request on April 27 yielded acknowledgment of receipt of the letter but no clear response about whether or not a response would be forthcoming.
The text of the letter, which was released by TIGI, noted that several factors made it likely that government was keen that the extraction and production of oil in the Stabroek Block would yield a return that is consistent with the expectations of Guyanese.
“Considering the structural stability of oil prices at low levels and their upward stickiness; the increases in US shale gas production; the ‘bearish’ outlook for oil by industry experts; and the extreme uncertainty about a temporal extension of the Organization of the Petroleum Exporting Countries (OPEC) production cuts and the effectiveness of such an extension if it were to happen; TIGI imagines that the Government of Guyana would want to know with a high degree of confidence that production licences are only issued for projects that are economically feasible,” the letter stated.
It further argued that economic feasibility and the expected return would clearly depend on the size of margins, which in turn would depend, among other things, on the prevailing oil prices, while noting that a March 21 report from Goldman Sachs suggests that between 2017 and 2018, even with an extension of the production cut by OPEC, a record increase in non-OPEC production would prevent any significant increase in oil prices.
Trotman was referred to Section 33 (1) of the Petroleum (Production and Exploration) Act of 1986, which notes that once given notice of the discovery of petroleum that is of potential commercial interest, the minister may, by notice, direct the licensee to carry out, within a period specified in the notice of not less than two years, such prescribed investigations and studies as the minister thinks appropriate for the purpose of assessing the feasibility of the construction, establishment and operation of an industry for the production of petroleum in the discovery block or blocks concerned.
TIGI explains that while this Section of the Act clearly gives the minister an opportunity to direct companies to carry out “investigations and studies” to assess the feasibility of the proposed project, the accompanying regulations make it clear that such investigations and studies include “economic feasibility studies relating to the recovery, processing and transport of petroleum from the discovery block or blocks in the prospecting area (Section 5 (1) (a)) of the Regulations made under the Petroleum (Production and Exploration) Act of 1986).”
‘Slipped’
Contacted for comment, on the TIGI statement Trotman told Stabroek News that his ministry was in no way hiding from TIGI, and that the original correspondence was not known about until Thomas complained. He said that since the story’s publication, he has sent documents needed by Thomas and the two sides are in discussions.
He explained, “In so far as TIGI, it was not intentional at all. I did apologize. The letter slipped through our system but I have since written and we have started a discussion.
“There was never or is any intention to not address TIGI’s requests. We have shared some information and some of what has been raised by them are valid and are matters which are under review now… We continue to be open for suggestions.”
Trotman also addressed a concern raised by University of Guyana lecturer, Thomas Singh, over procuring the services of Australian company WorleyParsons, to review ExxonMobil’s initial development plan, in preparation for Stabroek Block petroleum production come 2020.
Singh had pointed out that the said company had been contracted by Exxon some time back and had even sued Exxon; a litigation that both sides settled.
Trotman said that given the nature of the oil industry and that ExxonMobil was one of the bigger companies in it, it was difficult to find companies that would not have had some crossing of paths with Exxon in the past.
He made clear that government
conducts due diligence on not only explorers but the consultants whom it chooses to give it important advice for its futuristic plans for the oil sector.
Such was the case when WorleyParsons and other companies were chosen, he stressed.
Trotman noted that with Guyana being new to the petroleum industry, it has to get the help of experienced companies to build its expertise and as such had shortlisted some companies to do so.
“We are new to this and needed help and advice for our government …it is difficult to expect that any of the companies selected would not have had some (relationship) with or for Exxon. It is just the way and nature of the business. At the same time we are satisfied that we would have researched and found that this company to be very professional… You will find that in the industry WorleyParsons is a professional and trusted company…,” Trotman added.
He also pointed to another company, the US-based Ramboll Environ, which is expected to assist government in reviewing Exxon’s Environmental Impact Assessment, saying it was yet again looking externally to complement the few skills we have here.
“We are not relying on the little knowledge we have, so we are looking for experts externally. Matters of the environment and its preservation are on the President’s Green Agenda and… looking for expert help is a demonstration that government is treating the environment very, very seriously, thus is reaching out globally,” Trotman asserted.
“We have never had production before and the EPA [Environmental Protection Agency] and the Department of Environment have never done this work before …so we are looking to make this right,” he added.
Trotman praised Singh as being a “patriot” and for his watchdog views on government and the country’s sectors. He said it was views like these that government looks forward to as they show that persons are paying keen interest in what is going on around them and will hold their government accountable.
