Payara approved with several conditions relating to local content, environmental protection

The Government of Guyana has approved ExxonMobil’s $9 billion Payara Development Project with several conditions relating to local content, the environment, and transparency, which the Company must comply with to remain in good standing. The majority of these conditions must be approved by the Minister of Natural Resources.

The agreement was signed by Minister of Natural Resources, Vickram Bharrat; President of ExxonMobil Guyana, Alistair Routledge; representative of CNOOC Petroleum Guyana Limited, Anand Gohil; and Director and Vice President of Hess Guyana Exploration Limited, Timothy Chisholm on Wednesday, September 30, 2020. It acknowledges that the decision was made after a thorough examination of the details and data contained in the application for the granting of the Joint Venture (JV) Petroleum Production Licence (PPL). It now paves the way for the project which targets an estimated resource base of 600 million oil-equivalent barrels and ExxonMobil has made its Final Investment Decision (FID) as a result.

The PPL was granted for a period of 20 years with exclusive rights for EEPGL to carry on prospecting and production operations in the area; sell or dispose of the petroleum recovered and execute all necessary works. However, there is a list of conditions underlined by the Natural Resource Ministry which subjects ExxonMobil to supply petroleum or petroleum products to the extent specified by the Minister to meet Guyana’s requirements; to comply with the orders of the Minister concerning refining, disposal, or sale of petroleum from the area; and communicate with the country’s Chief Inspector before production operations.

Flaring is strictly prohibited without approval. It is only permissible during commissioning and start-up and under special circumstances such as emergencies, maintenance, and restarting operations.

Within 30 days of the date of the Licence, ExxonMobil has to submit the Terms of Reference (TOR) for a study on how it will achieve this while maintaining its projected production. If any aspect of the agreement related to flaring is flouted, the Licencee shall pay fines under the law, the Environmental Protection Agency (EPA), and the framework to be established by the Government as compensation.

“The government has insisted that routine flaring is strictly prohibited without the approval of the EPA. Flaring to maintain oil production will not be permitted. Esso Exploration and Production Guyana Limited will pay the Government for the cost of gas wasted during flaring and will also be subject to fines under the EPA related to emissions from flaring. The EPA will establish a framework for a price on carbon to conform with international standards,” the Ministry stated in a release.

Meanwhile, within 30 days of Environmental Permit, the Company must also detail in a TOR how it will sufficiently deal with produced water and block seismic activity such as earthquakes.

ExxonMobil’s subsidiary, EEPGL, is also required to desist from removing or disposing of petroleum from the area without the Minister’s or Chief Inspector’s written consent and must conduct all of its operations in keeping with the Petroleum agreement entered into in June 2016.

Within 90 days from the date of the Licence, the Company must submit, too, reports on its development and operating cost estimates for the Payara project. Within 180 days from the date of the Licence, the Company must submit a report of the breakdown of actual operating costs for the first year or any other shorter period. The Company must submit daily production statements to the Minister in respect of Stabroek Block production and a yearly Local Content Plan not less than 60 days before the beginning of each year. On the matter of Local content, there must also be half-year and end-of-year Local Content Reports.

In the case of abandonment or decommissioning of a project, ExxonMobil, within 30 days, must submit its draft Stabroek Block Decommissioning Security Agreement. Added to this, the Licence must not be transferred without the written consent of the Minister and ExxonMobil should facilitate and fully cooperate with annual, independent audits.

The agreement also states that ExxonMobil must conduct a study to evaluate appraisal and development planning options for Liza Deep and submit the TOR within 30 days from the date of the Licence for approval by the Minister. There are several other international best practices standards that the agreement holds the Company to regarding measuring and weighing crude oil or gas; health and safety and the environment.

Before the approval, the Government of Guyana had decided to review the work already undertaken by the Department of Energy and Bayphase Oil and Gas Consultants on the Payara Project. This was done in the interest of all Guyanese and is in keeping with international transparency and accountability standards. The review was conducted by a Canadian team of experts.

The Natural Resources Ministry said: “The Government of Guyana remains committed to manage and harvest Guyana’s oil and gas resources sustainably in keeping with internationally recognized acceptable environmental standards and transparency for the benefit of all Guyanese.”

Meanwhile, President of ExxonMobil Upstream Oil and Gas Company, Liam Mallon stated: “ExxonMobil is committed to building on the capabilities from our Liza Phase 1 and 2 offshore oil developments as we sanction the Payara field and responsibly develop Guyana’s natural resources. We continue to prioritize high-potential prospects in close proximity to discoveries and maximize value for our partners, which includes the people of Guyana.”

Payara is the third project in the Stabroek Block and is expected to produce up to 220,000 barrels of oil per day after startup in 2024, using the Prosperity floating production, storage and offloading (FPSO) vessel.