OIL: Exxon may need Guyana more than Guyana needs Exxon – says investors

Seeking Alpha, a forum of international investors and financial industry experts, has published an article stating that ExxonMobil has bet so much on Guyana that the oil major may very well need Guyana more than Guyana needs ExxonMobil.

While Guyana cannot do oil exploration and production by itself, there are other oil majors it can turn to with the technological expertise and track record for the job.

But when it comes to Guyana, its offshore assets and the 2016 deal constitute the jewel in Exxon’s crown. The investor forum said that there aren’t many opportunities like Guyana on Exxon’s pipeline.     

In the article, titled ‘Exxon Mobil: Doubling Down While Facing Peak Oil Demand’, it is stated that ExxonMobil intends to produce 1M barrels of oil per day by 2026 in Guyana alone, which is 25 percent of its current global production of roughly 4M barrels per day.

It also stated that Guyana is the company’s highest Internal Rate of Return (IRR) opportunity of this scale.

The company’s discoveries in the Stabroek Block are among the cheapest in the world to extract.

In addition to that, it boasts a deal with the Guyana government that has been internationally and locally condemned as so lopsided, that Global Witness stated Guyana will lose US$55B over the life of the agreement, and called for an investigation into the circumstances of the award.

The investor forum noted that ExxonMobil has two tangible short-term, upstream growth opportunities. The first is in the Permian basin, a low-risk venture that will likely press forward. The second is Guyana, but the author notes that the Guyana venture is risky.

ExxonMobil is already producing at Liza Phase One, and is powering ahead to produce at Liza Phase Two by 2022. Those two would have a peak production of 340,000 barrels per day. Exxon has been campaigning vigorously for the swift approval of the third development, Payara; attempting to sell the line that late approval would mean billions in losses for Guyana. Experts say that Guyana should not fall for that ploy.

International lawyer, Melinda Janki, for instance, has said that ExxonMobil needs Guyana to give it free oil.

The investor forum noted that all should pay keen attention to what the Government decides on Payara, as “so much of Exxon’s future is riding on this growth.”
Janki said that this is the perfect time to strike at ExxonMobil, and hold back the Payara permit.

—————

Payara on hold – awaiting expert review – Pres. Ali

Click to Enlarge

President Irfaan Ali has informed Kaieteur News that his government is in the process of securing an expert to conduct a review of the Payara Field Development Plan (FDP).

This means that previous plans to decide on the project by August month’s end have been put on hold.
The government had sought the assistance of the Canadian High Commission to find such an expert.   

Speaking with Kaieteur News about this development, Good Governance advocate, Dr. Jan Mangal, said that the review requires a team of experts, not a single one.

He added that these reviews can take months, even years, as there tends to be discussion between the reviewers and the oil company on all the important issues.

Mangal said that if the government approves the development after mere months, then the people will know that the government did not challenge anything substantial to benefit Guyana.

The President noted that he has met with the various local stakeholders, with a view of determining what work has already been done on the project.
A UK firm, Bayphase Limited, had been hired last year to evaluate the plan.

ExxonMobil, meanwhile, had started preparations for development of the Payara field more than nine months ago. Despite receiving no approval from government, the company is actively funding the construction of the Liza Unity Floating, Production, Storage and Offloading (FPSO) vessel, meant to produce as much as 220,000 barrels of oil per day.

It is clear that the company has bet a lot on Guyana and is attempting to pressure the country into permitting a plan it has not sufficiently scrutinized.
The multi-national has attempted to convince the Guyana government that a delay in approval of the project beyond this month-end would result in billions in losses for Guyana. This is evidenced by statements made by the company’s Senior Vice President, Neil Chapman, during its recent Q2 earnings call.

Experts disagree with Exxon’s call for swift approval, and have advised Guyana to take all the time it needs to ensure the FDP is robust.

Guyana has been advised by Dr. Mangal to ensure it renegotiates the Stabroek Block agreement before it approves any further project.

Mangal told this newspaper that the previous government hired inadequate and unknown personnel. So, in this case, he expects that the Guyanese public is shown proof that the persons hired are all qualified (via resumes and track record). The public would have ample opportunity, in such a scenario, to background these individuals and ensure they are sufficient for the job, and not beholden to oil companies.

Mangal added that if the Payara review is mishandled, then Canada as the sponsor will look bad, “and Guyana will be damaged even further.”

Post a comment or leave a trackback: Trackback URL.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s