The analysis and review of ExxonMobil’s Liza 1 Field Development Plan, which was done by international consulting company WorleyParsons (Intecsea) in collaboration with the Guyana Geology and Mines Commission (GGMC) has been completed and a preliminary report given to government last week.
“Worleyparsons have been working and they gave a preliminary report earlier in the week and they are to give a final report this week,” Minister of Natural Resources Raphael Trotman told Stabroek News last Friday, when asked about the report.
In December of last year ExxonMobil submitted to government its plans for the Liza 1 field, scheduled to last for at least 30 years, and mapped out a systematic plan of its proposed offshore subsea systems, drilling, floating production operations and vessels to be used among other details. The plan speaks only to the Liza field and the technical aspects of how it would be ‘brought to life’.
Intecsea, a subsidiary of WorleyParsons, which specifically deals with deep-water engineering, was contracted by government, this newspaper was told at a US$200,000 price tag, to provide export support to GGMC, while a review of ExxonMobil’s Liza 1 Field Development Plan is undertaken.
On completion, government will critically analyze the document and make recommendations, if need be, so that the plan fits with the country’s vision for the oil and gas sector.
The approval of the plan forms the requirement for government’s granting of a production licence, which would enable the company to commence its planned 2020 first oil operations in the Stabroek Block, where the Liza 1 well is located.
Trotman informed that after the report is submitted by Worleyparsons, and he would have had discussions with experts from the company along with officials of the GGMC, he would then craft a report of his own to be presented along with the document to Cabinet so that it can be perused.
Stabroek News understands that part of government’s discussions with ExxonMobil is that the feasibility study, which was done prior to the company asking for a production licence, be made public.
Government’s latest word on Exxon’s offshore works here comes at a time when Transparency Institute of Guyana Incorporated (TIGI) says that answers it sought from government on operation in the Stabroek Block were not directly addressed, raising more concerns.
TIGI President Troy Thomas had written to the Ministry of Natural Resources for clarification on whether ExxonMobil has submitted an economic feasibility study for its proposed Stabroek Block development.
Thomas had stated 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 licenses are only issued for projects that are economically feasible,” his letter had 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 suggested 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 noted 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 explained 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).”
Trotman had told Stabroek News that he sent the documents Thomas had needed and the two sides were communicating.
But Thomas said his concerns were not addressed and Trotman indicated that the matters raised in his letter were being addressed by GGMC and Worleyparsons.
However, TIGI does not believe that GGMC can raise serious concerns about the development plan if Trotman already made a political commitment to the project.
Thomas posited, “From this response, it would appear that the minister is attempting to delegate his responsibilities as spelt out in Section 33 (1) of the Petroleum (Production and Exploration) Act of 1986 (and the accompanying Regulations) to the GGMC and to Worley Parsons, a foreign company.
“It is important for the minister to realize however that the GGMC would find it difficult to raise serious concerns about ExxonMobil’s proposed development plan should any exist, if the minister has already made a political commitment to the project.
The temporal order of the actions is important for the outcome to be more meaningful than merely the “ticking of boxes” he added.
TIGI not only lamented over the process used in selecting WorleyParsons to undertake the study but that the details of what the company was asked to do were not clear.
“Furthermore, the services of WorleyParsons were presumably procured under Section 49 of the Procurement Act of 2003 which provides for single sourcing “where services to be procured require that a particular consultant be selected due to the consultant’s unique qualifications.” The minister must therefore be so impressed with the unparalleled and indisputable reputation of WorleyParsons (and uninterested in building local capacity) that he would entrust responsibility for Guyana’s patrimony to it. This too is unacceptable, not the least because WorleyParsons would similarly find it to be bad business to raise serious concerns if any exist, unless the contract it has with the GoG holds it legally liable for any problems with the proposed plan,” TIGI said.
“However, we know little about what WorleyParsons is being asked to do, given the absence of public tender and requests for proposals. The selection of this firm lacked transparency. Indeed, it might even be that WorleyParsons itself is advising on what services must be provided, what studies must be undertaken, and the scope of its undertaking,” it added.
Trotman had spoken to criticisms of the selection of WorleyParsons before saying 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.
The minister 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.
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 available 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.
