With concerns raised by several sections of society as it relates to both the cost and plan for the decommissioning stage of Esso Exploration and Production Guyana Limited’s (EEPGL) developments offshore Guyana, the company says that all associated costs will be their responsibility.
The information was relayed by Vice President and Business Services Manager at ExxonMobil Guyana Phillip Rietema yesterday, following the launch of the company’s financial statements for 2021.
Thus far, $17 billion has been estimated to cover decommissioning costs.
According to the Environmental Impact Assessments (EIAs) for the various developments in the Stabroek Block, a detailed decommissioning plan will be developed nearing the time of decommissioning. The EIAs all have a Preliminary End of Operations Decommissioning Plan for Guyana Development Projects. The plan is intended to provide an overview of the proposed abandonment and decommissioning of development project wells and facilities at the end of their operations, and to describe the anticipated work required to confirm that the abandoned facilities will be left in a condition that avoids harm to the environment.
The major concern with Exxon’s decommissioning plan is the fact that the company proposes to leave risers, pipelines, umbilicals, and subsea equipment on the sea bed after operations have ended. This has attracted major backlash from environmentalists and activists who have been calling for comprehensive marine studies to detail the impact of Exxon’s operations.
Decommissioning, which is not expected in at least the next two decades, will see all risers, pipelines, umbilicals, and other subsea equipment be isolated, de-energized and flushed to remove hydrocarbons and other hazardous materials to a suitable level prior to being taken out of service.
According to the Company’s EIA for its latest approved project –Yellowtail – “It is currently envisioned that the risers, pipelines, umbilicals, and subsea equipment will be disconnected after flushing and preparation and left in situ on the seafloor at the production location unless an alternative strategy is selected based on the results of the comparative assessment.
“Development wells will be permanently plugged and abandoned (P&A). The objective of permanent well abandonment is to prevent the escape of hydrocarbons into the environment. Well P&A is concerned with the isolation of rock formations that have flow potential and is achieved by restoring suitable cap rock via placement of P&A barriers. P&A barriers will be set adjacent to suitable cap rock and establish full lateral coverage (rock-to-rock) across the well bore, and will be of adequate length to contain reservoir fluids and deep enough to resist being bypassed by reservoir pressure”, it said.
The study related that the decommissioning plan and strategy will be based on a notice of intent for decommissioning the production facilities and plugging and abandonment of the development wells, which will be provided to the appropriate Guyana regulators, to obtain approval in accordance with the Environmental Protection Act, Cap 20:05, Petroleum Exploration and Production Act (1986) and Petroleum Exploration and Production (Amendment) Act (1992).
Guyana started producing oil at the end of 2019 and its oil and gas industry is still considered to be in its infancy stage. With over 11 billion proven barrels of oil, Guyana’s oil and gas industry continues to grow. EEPGL is the only operator in the production stage with two floating, production, storage and offloading vessels (FPSO) in operation and that number will be doubled when Payara and Yellowtail development projects become operable in a few years.
Important aspect
Yesterday, Rietema said that decommissioning costs are a very important aspect of their operations and that they are planning for those.
“Under the accounting rule, each year we have to put aside a small amount as we build up to that future value. We estimate, using our best information today, what the value would be in 20-30 years and what you see in the financial statements is a provision for that amount,” he said.
While provisions are made for decommissioning in the company’s statement of financial position, there is no specific fund set aside currently, and negotiations with government on how that will be catered for is not expected to begin for another decade.
“ExxonMobil and our co-venturers are responsible for those decommissioning costs and it is important that over time we put the structures in place to ensure that we can pay for those costs. We have an agreement that is being drafted called the Decommissioning Security Agreement and that agreement will set the principles by which the partners will set aside the funds to pay for those decommissioning expenditures and to ensure that all the funds are in place to pay for the cost when they are incurred a couple of decades from now,” Rietema explained.
He further said that with a current estimate of approximately $17 billion to cover decommissioning costs, the company would revise that figure every three years and adjust as necessary.
“We estimate frequently, every few years we update the estimate using the best info we have available. We have projects all over the world so we have a lot of experience with decommissioning in countries that are further along in the development cycle than Guyana and as we get better information we know more about what the decommissioning will entail here, we’ll firm up the estimates,” he said.
“Decommissioning is permitted expenses under the petroleum agreement and it is put into the cost bank and is cost recovered over time. The funds are then used in the future for the decommissioning expenses when they come to do. The decommissioning liability is the liability of the contracting group and we are responsible for those. There is no debt or responsibility of the people of Guyana or the government,” Rietema added while assuring that the cost of decommissioning is solely on the executing companies and not the government and people of Guyana.
Back in May, Dr Clive Thomas in his Sunday Stabroek column “Guyana and the wider world” said nearly one-sixth of the cost for producing a barrel of crude is devoted to a decommissioning fund. He explained that it contradicts the “noise and nonsense disinformation narrative concerning Guyana’s intended abandonment of its oil-producing structures when the reservoirs are depleted. Similarly, the narrative of the endless burden of gargantuan exploration debt comes up against the reality that, exploration debt is projected to account for only 70 cents or 3.8 per cent of the per barrel cost on the Stabroek Block.”
