GUYANA OIL: ExxonMobil says it put Payara FPSO on hold

The Prosperity FPSO hull. [Photo from SWS]

In its recent press statement announcing the Redtail-1 discovery, Exxon noted, of two vessels in Singapore, that the Liza Unity FPSO, meant for the Liza Phase Two project, is under construction, but that work on the third vessel has been stalled.     

“Construction activities,” the release said, “are underway in Singapore on the Liza Unity FPSO. A third production vessel for the Payara development, with production capacity of 220,000 barrels a day, is on hold pending government approval.”

Kaieteur News had noted last week, from several credible media reports that the hull for the Prosperity FPSO had already been delivered to SBM Offshore, the Dutch firm Exxon chose to build the FPSO.

It had the hull delivered from Chinese shipbuilder Shanghai Waigaoqiao Shipbuilding (SWS) about two weeks ago. Reports indicated that preparations had already begun for the installation of the mooring system and topside modules for the vessel.

This means that ExxonMobil took the liberty of greenlighting its own ship design without government approval. Hence, if the government now decides that it wants a new safeguard included in the design to protect the environment, Exxon could claim that it would be too inconvenient to turn back. Or if government decides that the FPSO design should have a wider overhaul, Exxon could claim that it would be too costly.

This was exactly the case when issues of grave environmental concern were pointed out by Executive Director of the Environmental Protection Agency (EPA), Dr. Vincent Adams.

The energy scientist had advocated for Exxon’s FPSO design to be properly configured to ensure limited damage to the environment. Worrying flaws had already been allowed in the Liza Phases One and Two permits. The Irfaan Ali administration a few weeks ago took the decision to send Dr. Adams on leave, removing him at a critical time during the review of the Payara project.

According to Exxon’s Senior Vice President Neil Chapman, during the company’s 2020 Q2 Earnings Call, it was given assurances by both major political parties that they accept the urge to approve the Payara Field Development Plan (FDP) as quickly as possible.

It is “very, very clear” that the Government and the Energy Department understands that, Chapman had said. This assurance was given even before the five-month electoral saga came to a close. The election season’s troubles had delayed the approval of the project, which the former APNU+AFC government meant to give early in the year.

Following the delays, Guyana was treated to statements from industry analysts like Rystad Energy about how much value they claim Guyana would lose if it delays approvals any further. Exxon wants to have the approval granted before September is out, Chapman claimed, as this is the time Exxon wants to sign off on its Final Investment Decision (FDP).

Yet, the company had already handed out a contract to Saipem for the construction of a large subsea facility for the FPSO, since last year even before it handed government the FDP, about the same time it contracted SBM to conduct the Front End Engineering and Design (FEED).

As the FPSO is now on hold, government has an opportunity to make key decisions on the mitigation of risks associated with the Payara project. It is also facing increasing calls and arguments for the renegotiation of the overarching Stabroek Block agreement.
The agreement is rife with provisions criticized as illegal and unfair to Guyana, and can be renegotiated once all parties agree to do so in good faith.

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  • Lall Hardeen  On 09/14/2020 at 9:39 am

    And the dance begins. Ahh ExxonMobil, he who holds the gold. Don’t know what was the “spirit ” of the previous agreement/arrangements, but it appears that someone took something for granted. This appears to be the “mo” of most large western companies as well as those from the far east. Planning ahead is always great but taking things for granted, hmmm. Hang on to your dance partners, the dance has just begun. Que India?

  • brandli62  On 09/14/2020 at 1:15 pm

    The news that Exxon has put the Payara FPSO project on hold is actually very good! Guyana is currently not yet dependent on oil revenues. Hence, she cannot be blackmailed to accept inferior agreements. This action now leaves the Guyanese government ample time to sort out the different issues with the Payara Field Development Plan, such as the missing environmental safe guards that were criticised by the EPA head Dr. Vincent Adams. The government just needs to keep a cool head.

    In my opinion, the government has acted recklessly to send Dr. Adams, a widely recognised environmental expert with years of experience abroad, on leave. I have still not heard any rational justification for this action by the new government. Was he been asking uncomfortable questions?

  • Georgy Porgy  On 09/14/2020 at 2:59 pm

    When you get into bed with the devil prepare yourself for bed bugs.

  • Anthony Persaud  On 09/14/2020 at 3:59 pm

    Exxon shares is going to sink further as it has no good news for it’s investor. That is the most important picture. The government of Guyana has the trump card. Investors will soon start selling off Exxon stocks.

  • IV King  On 09/14/2020 at 6:10 pm

    When all else fail, all in the ‘BIG CHIBAT’. It will be signed before Pompeo leaves. He has to protect his shares and fortify his retirement.

  • Joan Seymour  On 09/15/2020 at 3:35 am

    Is it known in Guyana that Exxon has been dropped from the Dow Jones Industrial averages?? That is important as the posturing by the Exxon chairman in Guyana means nothing. They need Guyana as much as or more than Guyana needs them.

  • brandli62  On 09/15/2020 at 5:42 am

    Joan, your analysis is correct. No need to rush any agreements with Exxon.

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