Discussions with ExxonMobil have commenced on possible gas production with government eying monetizing the offshore resource as soon as the auctioning of oil blocks is completed, Vice President Bharrat Jagdeo said.
“We are in a discussion with Exxon now. We have 17 trillion cubic feet of associated gas; a lot of associated gas and they were saying they needed to reinject this gas to keep the quality of the wells up. We are having a different conversation now, to move to monetize this gas,” Jagdeo told the Ceraweek 2023 Energy Conference, currently being held in the United States oil capital of Houston, Texas.
“They [ExxonMobil] are doing some studies. We are also getting some external help to do a gas strategy, but we believe that is the next wave. Once we set this firmly on track where the production is already escalating [and] we get out of the bid round, we will start tackling that issue in earnest – the gas strategy – because we believe that Guyana has huge potential for becoming a gas producer”, he said.
Before leaving for one of the biggest events on the global energy calendar, Jagdeo had last Friday told a press conference here that India was helping this country with its national gas strategy plan.
“We have embarked on the Gas-to-Energy project that will utilise some of the natural gas that is produced or we have discovered offshore. We are now pushing Exxon to complete the gas utilization plan. We hope this would be completed very soon and we are working on our own gas strategy…” he said
“We are going to get some of the consultants from India and other places to work with us on having a National Gas Strategy, which will determine what we do with the gas that has been found offshore so far. It then deals with the potential areas for bilateral cooperation in an exploration and developing of our natural resources,” he added while informing that plan should be completed before the end of 2023.
At ExxonMobil’s last public discussion on its Uaru project in the Stabroek Block, the company’s Project Manager, Anthony Jackson, had said that the company was working on a gas utilization plan.
The current Production Sharing Agreement the Government of Guyana has with ExxonMobil’s subsidiary EEPGL, Hess, and CNOOC, outlines the responsibilities of both parties as it pertains to both associated and non-associated gases, the domestic supply obligation for both, and how crude oil and natural gas would be valued. It is on those subjects that this newspaper sought answers from the oil major.
Article 12 of the Production Sharing Agreement (PSA) for the Stabroek Block covers associated and non-associated gas and states that the associated gas produced from any oil field within the contract area shall be “with priority used for the purposes related to the operations of production and production enhancement of Oil Fields, such as Gas injection, Gas Lifting and power generation.”
“Based on the principle of full utilisation of the Associated Gas, and with no impediment to normal production of Crude Oil, a plan of utilisation of the Associated Gas shall be included in the Development Plan of each Oil Field. If there is any excess Associated Gas in the Oil Field after utilisation pursuant to Article 12.1(a) the Contractor shall carry out a feasibility study regarding the utilisation of such excess Associated Gas of such Oil Field,” the PSA states.
“Such feasibility study, if completed before submittal of the Development Plan of an Oil Field, shall be included in the Development Plan. In the event that Contractor’s feasibility study on the utilisation of excess Associated Gas is not completed before submittal of the Development Plan, (the) Contractor shall provide the Ministry with regular updates on the progress of such feasibility study then, upon completion, said study shall be submitted to the Ministry and GGMC. Contractor’s feasibility study shall be completed no later than 5 years following the submittal of the Development Plan,” the PSA adds.
It also states that if the contractor believes that excess associated gas of an oil field has commercial value, the contractor shall be entitled, but not required, to make further investment to utilise such excess associated gas subject to terms at least as attractive as those established for crude oil.
It includes, but is not limited to, cost recovery as Recoverable Contract Costs for such further investment.
The PSA makes room for renegotiation of the agreement to deal with how the gas will be developed and utilized.
Excess
“If the Contractor believes improved terms are necessary for the development of excess Associated Gas, the Parties shall carry out friendly negotiations in a timely manner to find a new solution to the utilisation of said excess Associated Gas and reach an agreement in writing,” the PSA states.
According to the PSA, if ExxonMobil tells government that the Development Plan would not include a plan to develop and utilize excess associated gas, then this country’s government “shall have an election to off take the excess Associated Gas free of charge at the outlet flange of Contractor’s separator facility.”
It makes clear that all elections and decisions by the Minister with regards to its potential utilization of excess associated gas under Article 12, would not impact ExxonMobil and partners’ normal development or production of crude oil under the subject Development Plan.
However, it is subject to the fact that the Minister’s off take election shall be postponed until such a time as the feasibility study outlined in Article 12.1 (b) has been completed and the oil contractor confirms by Notice to the Minister that it will not include the development of excess associated gas in the Development Plan.
Meanwhile, Jagdeo also updated on plans for the upcoming auction and pointed out that government was working to wrap up plans for amending the country’s “outdated” 1986 petroleum legislation to add to the new PSA. He said that a public consultative process on the issue will also give oil companies the opportunities to participate and tell government what they need.
“We are working on a model PSA and also a new legislation to update the one from 1986. It is not fit for purpose today. We want to ensure that even before the bid round is completed, that the potential bidders would see what the new PSA looks like,” he said.
“They would also have a chance, because we will look to open consultations up shortly on the model PSA and also the legislative changes, from oil companies and others, and then finalise those so that they would see exactly what the environment would be,” he added.
The Vice President whose job portfolio includes oversight for the energy sector said government hopes to attract as many large-scale oil and gas producers as possible.
Reuters on Saturday reported Minister of Natural Resources Vickram Bharrat as saying that six big international producers have already paid for seismic data. “Exxon, Qatar Energy, Shell PLC (SHEL.L), Chevron Corp (CVX.N) and Petrobras (PETR4.SA) are among the oil giants that have paid $20,000 to have a copy of the geologic information available on the 11 shallow water and three deep-water blocks,” Reuters reported its sources as informing.
Jagdeo noted that when the PSA and laws are completed, it is hoped that this country “emerges as a predictable environment where our regulations dictate the highest industry standards but they don’t become a humbug to the development of the industry.”
He added. “… the fiscal side, we want a lot of the incentive remaining with people so they can invest in Guyana but at the same time we want a greater take for the country and the people of the country too,” he added.
