Even as it awaits final approval for Payara, its third oil well development, ExxonMobil is pressing ahead with its fourth oil well project offshore at Hammerhead-1 as it aims to ramp up production.
ExxonMobil’s plan means that the government elected after today’s general elections will shortly have to make major decisions on both the Payara and Hammerhead-1 projects. The US multinational is already drawing oil from the Liza-1 well and has already gained approval for Liza-2. At peak capacity, ExxonMobil is expecting to pump 120,000 barrels of oil per day from Liza-1.
In a notice to the public in the state-owned Guyana Chronicle, the Environ-mental Protection Agency (EPA) yesterday stated that ExxonMobil’s subsidiary Esso Explorat-ion and Production Guyana Limited (EEPGL) has submitted an application for Environmental Authorisa-tion to undertake the Hammerhead project. It said that production facilities for petroleum production are estimated to last at least 20 years in the Stabroek Block area.
“The proposed project will be implemented in multiple stages which include the following activities; well drillings and completions, mobilization and installation of subsea equipment, umbilicals, risers and flowlines (SURF), installation of a floating production storage and offloading (FPSO) facility, production operations, and decommissioning. The proposed project will be undertaken in the marine offshore environment within Guyana’s territorial waters and would require land-based activities for support activities at marine shorebases,” the notice said.
“As a result of the intended developmental activities, possible effects to the environment may include impacts on marine water quality, air quality, marine fauna, socio-economic resources, [and] others,” it adds.
The Hammerhead discovery was announced in August, 2018, and was ExxonMobil’s ninth oil discovery in the Stabroek Block. The Hammerhead-1 well was drilled in a new reservoir, encountering approximately 197 feet (60 metres) of high-quality, oil-bearing sandstone reservoir. The well was safely drilled to 13,862 feet (4,225 metres) depth in 3,773 feet (1,150 metres) of water.
Hammerhead-1 is situated approximately 13 miles (21 kilometers) southwest of the Liza-1 well and follows previous discoveries on the Stabroek Block at Liza, Liza Deep, Payara, Snoek, Turbot, Ranger, Pacora and Longtail. Those prior discoveries led to the announcement of an estimated recoverable resource of more than four billion oil-equivalent barrels and the potential for up to five FPSO vessels producing more than 750,000 barrels per day by 2025.
With 16 discoveries to date, Exxon has upped it estimated recoverable resource to over eight billion oil-equivalent barrels.
The company is still awaiting a decision from the government and the EPA on its third development – the Payara project.
The EPA says that in keeping with the Environmental Protection Act and the laws of this country, an EIA is required for the Hammerhead project before any decision to approve or reject its proposal is done, since the project may have significant impacts on the environment.
Written submissions
It is why it wants members of the public to know that they are being given 28 days from the time of the notice to make written submissions to the agency, setting out questions and matters, which they require to be answered or considered in the EIA.
However, while the agency says that a summary of the project could be found on its website, checks by this newspaper up to press time last evening showed that it had not yet been uploaded.
Jan Mangal, former Petroleum Adviser to the President, says ExxonMobil’s Payara oil well development should not be approved until it yields big changes to the much-criticised 2016 deal including a higher royalty rate than the current 2%.
Speaking to Stabroek News on January 25th this year, Mangal said he believes that while the company has been adamant that changes cannot be made to the Production Sharing Agreement (PSA), the fact that the EPA has been able to secure unlimited liability insurance coverage for accidents and spills and ensure it has unfettered access to offshore operations, is demonstrative that the company will give in to what it wants.
“We are seeing EPA announce small wins because those are easy. Exxon hasn’t given up much, and that is Exxon gave what it wanted. These small wins, these are easy things for Exxon. We know that we are making progress when we can get the big wins; the increased royalty, a new contract that doesn’t have a stability clause…a generally fairer contract overall,” Mangal said.
“To get those big wins, we need to get Exxon and partners to the renegotiation table and we have to play hardball. We should not have approved Liza-2 and we should not now approve Payara. We are giving in to Exxon too easily. If we wait, say even in another five years’ time, it will be very difficult, far more difficult to renegotiate,” he added.
The former Adviser on petroleum matters to President David Granger said that he had shared this view with the president during his tenure and wants it to be made clear that even now it is not too late to insist on major changes.
“If we see the government approve the Payara project without a renegotiation of the contact then I believe that there is really no hope for Guyana. But I want it known that it is not too late. It’s never too late. This is a long term industry, something that will go on for the next 30, 40, 50 years. And the longer we wait, it will be so much more difficult.
“I advised not to approve the then projects until we could get a better deal on future projects. Around that time, Bynoe [Director of the Department of Energy Dr. Mark Bynoe] and Wilks [United Kingdom based Adviser Matthew Wilks] came in and they probably recommended that government approve the Liza-2. That was done and it was not the correct thing to do. They should not have done that”, he said. He added that holding approval and getting expert analysis for the project and then using the said information as bargaining leverage would have been a better plan. “It is not just the Stabroek Block but also the Kaieteur and Canje Blocks. Those are things we need to address,” Mangal pointed out.
Meanwhile, the EPA no longer requires that companies drilling offshore submit individual Environmental Impact Assessments (EIA) per well development but instead they can do a single detailed and concise study of their entire offshore block.
“What we have asked them to do is create EIAs per block. So the companies will now have to develop their EIAs based on per block as opposed to per wells or cluster of wells, etcetera,” EPA Executive Director Vincent Adams told Stabroek News yesterday, when contacted.
“It makes more sense that each block have an EIA, so anything within that block will be covered by one EIA. The environmental circumstances are not different. It will take much more time and effort but you do one EIA rather than doing a piece and it piece meal,” he added.
The EPA Director explained that where companies would have already submitted EIAs per well, they will still be used but the new decision will be applied going forward.
“Exxon will still have to do one for the Stabroek Block because the block is a large block and their [prior] EIAs didn’t mean they covered the entire block. So I am asking them to do a block. It is more efficient. It doesn’t make sense that they apply for every well that is being drilled. It is a waste of resources both on their and on our part and it isn’t adding you any value. Whereas, if you do an entire block, you make the worst case assumptions and you cover the entire block,” Adams said.
