Government will go to tender either during the current quarter or the next for “a fee-based marketing service” to market its share of crude oil from expected oil production, according to Department of Energy Director Dr Mark Bynoe.
At a press conference yesterday, Bynoe spoke about the sale of crude oil and explained that it will be done via a Free-on-Board (FOB) system, which means that the crude will be sold to the buyer at the exit point of the Floating, Production, Storage and Offloading (FPSO) vessel, and the buyer will be responsible for its shipment.
First oil is expected next year.
The oil will be sold in “million barrel cargos” and a crude cargo lift will be used every eight to 10 days, which will require an efficient and smoothly run process. The Department, he said, has been working on this with its sister agencies and the operators to ensure that a process is put in place that they can ensure is running as efficiently as possible from the first day.
“The government will be selling its own share of exported crude and tender will be issued during quarter three or four of 2019 for a fee based marketing service to market the government’s share of crude oil. The crude lifting agreement is being finalised and the government will be a signatory as a lifter of crude along with the Stabroek co-venturers,” he added.
Bynoe also pointed out that industry standard documents based on the Association of Inter-national Petroleum Negotiators Crude Lifting Agreement is being applied, which is used throughout the industry worldwide and sets up a mechanism for allocating the schedule of crude cargo lifting based on volume entitlements that are calculated, taking into account the cost recovery rules of the petroleum agreement.
As it relates to the measurement of the crude, Bynoe noted that at this point in time they are working along with the Guyana National Bureau of Standards (GNBS) to ensure that their capacity is increased, and going forward, it might be necessary for some amount of third party assistance.
Given that the lifts will only be made every eight to 10 days, which is likely to take between 36 and 48 hours, Bynoe said they have to consider whether someone’s presence will be required there on a continuous basis or whether just for the lifts. This is something the government is actively looking at.
Bynoe noted that the FPSO vessel Liza Destiny is also projected to arrive sooner than expected in Guyana. According to Bynoe, the vessel is expected to arrive within the first week of September, two weeks ahead of schedule. This, he said, is due to the “pretty favourable” sea conditions. He said the latest information stated that the vessel has been docked in South Africa to change the crew.
Bynoe was also questioned on the model Production Sharing Agreement (PSA) that the department has been seeking to construct and he said that they are still going through consultations. The new PSA, he said, is not a revised PSA but a revised best practice PSA template that caters for the three different exploration zones. “Additionally, we are keen to have greater balance and I saw the media giving lots of coverage of recent when I spoke about having a larger take. Persons zeroed in on royalties, but again, it’s a larger take in terms of profit oil as well as royalties because there are certain elements of the basins that have now been used so that allows Guyana to increase its negotiating position. What we are keen on is striking the balance,” he added.
Bynoe was also asked about reports of Qatar Petroleum taking some of French oil company Total’s existing participating interest in the Orinduik Block that is being operated by Tullow.
However, he noted that the issue is currently “substantially unclear” to the Department. However, they have received a transaction letter from Total, which the Government is currently studying.
“But until such time that we understand the full implication, because this is not a normal farm-in that we would’ve seen… What we are finding here is Qatar Petroleum seeking to back in to the Total-Guyana agreement but we can’t go further than that because it is still early days,” he said, while noting that they are in discussions with the co-venturer so that they can be provided with greater clarity.
Bynoe also reported that the Department has received a Field Development Plan (FDP) for the ExxonMobil’s Payara field, offshore Guyana, and has started the tendering process for expert review.
By the end of this year, he noted, the Department should have some “line of sight” as it relates to what it intends to do with the FDP. He said if all goes well, the Payara field is expected to see first oil being produced somewhere between 2022 and 2023.
He also pointed out that a fourth drillship will begin operations later this year and next year it is expected that two drill ships will be drilling development wells and the two others will be focusing on exploration activities.
