As he called on government yesterday to update the nation on the status of oil recovery at the Liza 1 Project, Opposition Member of Parliament, David Patterson said that ExxonMobil had in 2018 given the APNU+AFC government assurances that four years after production and with only 120,000 barrels of oil equivalent (boe) per day, there would have been a 50/50 profit share.
“Exxon has since increased production on Liza 1, by 20,000 per day to 140,000 barrels, a 16 per cent increase. Additionally, oil companies have been making a windfall based on high oil prices for the last two years – it is expected that these two factors combined would have resulted in Exxon fully recovering their production investment, and on the Liza 1 project, the country would now be enjoying 50/50 share of profit oil,” Patterson highlighted as he held up documents from the projects provided by ExxonMobil in 2018 as his evidence in the National Assembly.
The member said if that is not the case, the government should inform the House on the status of oil recovery of the Liza 1 project, “and when are we expected to commence full equality share on this project.”
The MP made the call as he wrapped up his presentation during the debate on the 2023 budget yesterday.
Neither the government nor ExxonMobil has provided segmented information on the Liza 1 and Liza 2 platforms. Financials have been combined for both oil extraction platforms and the cost oil remains as high as 75% of production and profit oil at 25%.
An audit process is currently ongoing on ExxonMobil’s cost oil claims. The audit is being done by RHVE, a consortium of local accounting firms, and is expected to be completed within the first quarter of this year. The contract for the audit was signed in May last year – 22 months after a change in government. The contract is to audit Guyana’s 2018 to 2020 cost oil.
Last year January, Minister of Natural Resources, Vickram Bharrat, had informed the House following questions from Patterson that the audit of US$460 million in pre-contract costs claimed by ExxonMobil’s subsidiary, EEPGL, was still to be completed by auditing firm IHS Markit.
In an updated interview with this newspaper, approximately a month later, Bharrat said it is finalizing queries of “lumped” sums and investigating costs of items such as risers and the process should be completed in weeks.
“Our team at the ministry and EEPGL [Esso Exploration and Production Guyana Limited] are working through some details that should be finished soon. There were some queries and we are working though those and then IHS will finish it from there,” Bharrat had explained,
Some of the expenses were highlighted by government because they were “lumped” together, in addition to time needed to cross-check costs in new and technical oil and gas areas.
“You see what they normally do, is to group or lump certain things together and we don’t have the expertise to check, with regards to all the expenses that are associated with oil and gas, as yet. Certain expenses we are not too familiar with say for example risers. How many risers you will need… this kind of technical information is what is needed. It is not as easy as auditing transportation, fuel usage or food or how much supplies. It is much different than that,” he explained. The IHS Markit audit is still to be released.
Patterson yesterday rapped the government for not having an effective sector in place.
The former Minister of Public Infrastructure under the David Granger-led government, questioned the government’s sloth in completing audits on the post-2016 costs, despite repeated promises, the non-implementation of the limited liability coverage, the absence of a Petroleum Commission and no release of the audit on the pre contract costs.
Patterson contended that the Local Content Act is not completely effective, despite the opposition offer to send it to a special select committee to ensure that the Act would be impactful.
The former minister turned his attention to the gas-to-shore project, which he said was a part of the coalition administration’s energy blueprint, and does not take into account key elements such as the cost for transmission lines crossing over the Demerara River, the necessary transmission grid upgrades, and the cost associated with inland transportation of the LPG (liquid propane gas).
According to Patterson, the cost of the project is likely to rise to US$3 billion as the government has not taken into account the costs for land acquisition, GPL infrastructure, and as well expenses associated with providing redundancy such as fuel storage, and wharves.
Government in December signed a contract for a 300 MW combined-cycle power plant and a natural gas liquids (NGL) facility at Wales, West Bank Demerara, at a cost of US$759 million. US companies CH4/Lindsayca were awarded the project.
The former government minister stated that the cost of their proposed project, a 200MW natural gas-powered plant connected to the FPSO with a 12” pipeline, which also included LPG plant was to be constructed at a total cost of US$700 million.
Location and the PPP
“Our proposal included every single aspect of the PPP Wales gas to shore at 25% of the cost. The same operator [Exxon] would have been constructing the pipeline, the size of the pipeline remains the same, the size of the LPG plant is the same – the only difference is the location and the PPP – these two factors have combined to add an additional US$2B and counting to the project,” he charged.
Patterson said the renewable energy projects which the government is boasting of were “conceptualized, designed and packaged” under his government.
“The truth is that the PPP are visionless, they have no useful and progressive ideas, but like parasites, they exist from others’ vision and energy,” he said. The projects he is referring to are the 1.5MW hydropower facility and the 700KW Moco-Moco hydropower facility, the 1.5MW solar farm in Bartica, and the 0.75MW farm in Wakenaam, as well as the solar farms in Lethem, Mahdia and Linden.
Patterson, on behalf of his coalition colleagues said the opposition is prepared to support the government in defining Constitutional Reform provisions that would result in a bipartisan approach to addressing national challenges and opportunities.
He added that the opposition will also throw its support behind new systems of governance which would facilitate an equitable distribution of the national patrimony, and any budget that raises the standard of living of Guyanese in a real and tangible way.
“..Unfortunately Budget 2023 falls short of these modest measures, and cannot gain our support in its current format,” he concluded.
