The timetable for production of first oil has been moved up to December this year, earlier than the previously announced first quarter of 2020, ExxonMobil’s partner in the Stabroek Block, Hess, yesterday announced.
“In terms of development, the Liza Phase 1 discovery is now targeted to start up in December and will produce up to 120,000 gross barrels of oil per day using the Liza Destiny FPSO [Floating Production Storage and Offloading vessel], which arrived in Guyana on August 29th,” Hess’ Chief Executive Officer, John Hess, yesterday said at the company’s 2019 third quarter earnings call.
Hess’ position was confirmed by ExxonMobil, the operator of the Stabroek Block, with the latter company emphasising that while the schedule have been moved forward, it is barring bad weather and other unforeseen conditions.
“Liza Phase 1 is continuing to progress very well with key activities running ahead of plan and there’s a possibility that first oil could be this year. However, there are several factors such as weather that can affect this timeline. Our top priority remains the safety of our project workforce and protection of the environment,” ExxonMobil’s Public and Government Affairs Advisor Janelle Persaud told Stabroek News, when contacted.
ExxonMobil found oil in the Stabroek Block in May, 2015 and a less than five-year development period of the Liza well is seen as fast by industry standards.
Director of the Department of Energy Dr Mark Bynoe is currently out of the country and could not be reached for comment yesterday.
Minister of State Dawn Hastings-Williams told Stabroek News that government was told of the possible early production date and has always been hopeful that the weather holds up and there are no unforeseen issues that can affect the new production schedule.
“We are excited and happy. We have been keeping in communication with the companies and they said the first quarter of next year…and if possible [production] can begin this year. So they would have done their work and told us…,” she said.
Against the backdrop of the early arrival of the Liza Destiny FPSO vessel here, it was Bynoe who had first hinted of an earlier than scheduled production of first oil. At the vessel’s commissioning ceremony last month, the Department of Public Information reported Bynoe as saying that the FPSO’s arrival in the Stabroek Block on August 29, 2019, three weeks ahead of schedule, means that “our timetable has moved forward and, as a policy-related body, the Department of Energy is also called upon to advance its timetable. It means that we move earlier to production of first oil and to seeing the benefits of this industry impact Guyanese much faster.”
Some observers had posited, and this newspaper has reported, that first oil could be pumped as early as the first week of February, a month before this country goes to general elections.
In May last year, Minister of Natural Resources, Raphael Trotman had told the National Assembly’s Sectoral Committee on Natural Resources that his government had two preeminent objectives when it signed the Production Sharing Agreement (PSA) with ExxonMobil and partners and that was to ensure production in the fastest possible time and that it “needed to protect the resource to say this is ours.” He made the comments against the backdrop of Venezuelan aggression towards Guyana. Trotman had also said that President David Granger and his Cabinet sanctioned the 2016 renegotiation of the PSA.
The announcement yesterday signals that Guyana will receive revenues earlier than expected. However, the money will go into the Consolidated Fund and has to go through a rigid process before it can be taken out for spending. With the current political impasse, it would mean that all revenues raked in from the sector would have to wait until after the March 2, 2020 general elections before it can be spent.
Minister of Finance Winston Jordan had in August told this newspaper that he anticipated that just above US$100 million will likely be available for Budget spending in 2020 from this country’s profit share and royalties from the Liza 1 project.
“I don’t know why they call it first oil revenues. When you speak of first oil, first oil is March. The amount of money you will get from first oil, if you take to the literal meaning, is negligible. In [the] whole year of 2020, and using US$50 per barrel of oil, our take will probably be two hundred and something million. And based on the formula that we have for withdrawal and so on, what you may have available to the budget is one hundred and something million,” Jordan had said.
“We did some calculations the other day and we did that figure. Remember, they have to ramp up. They are not going [to produce] 120,000 [barrels of oil] per day in March. They are going to ramp up gradually. That means your take will be increased gradually, until it gets to 120,000 [barrels of oil] and then you get to that three hundred and something million figure. That is the first thing. We cannot sell snake oil. We will not sell snake oil to the population. So no one should use this ‘when the first oil money comes’,” he added.
Hess yesterday said that it will take about three months before the 120,000 barrels per day capacity could be reached.
Jordan had also said that the impression he gets from some persons is that they believe that oil revenues would be significant from next year.
“It gives the impression that like right away, we get US$1 billion available. We don’t, we don’t. We do not have $1 billion unless it accumulates over years. We don’t have a billion United States dollars. That is the first thing we have to understand,” he emphasised.
Further, he added, “Whatever comes will be divided into three parts; whatever comes to the budget, the part we are holding for buffer and the part we are saving for future generations. Don’t give the impression that we get all this money. We are only getting 12.5 percent (of the profit oil) and the royalty.”
Meanwhile, Hess yesterday played up Guyana’s potential saying that operations here was one of the company’s “growth engines” that will ensure it delivers capital returns and hold a strong balance sheet.
Hess said that planning is on schedule and currently, works are ongoing on both the Liza 2 and a third development, the Payara project. Payara will use an FPSO with gross production capacity of up to 220,000 barrels of oil per day with startup expected as early as 2023.
A fourth drill ship, the Noble Don Taylor, is expected to arrive in Guyana next month and will drill the Mako-1 exploration well, which is located approximately six miles south of the Liza 1 well.
The Noble Tom Madden, which is already here, will begin spudding another well named Uaru 1, located approximately 10 miles east of Liza 1.
Still on vessel operations updates, Hess said that the Stena Carron drillship is currently undertaking well appraisal operations at the Ranger well site. Following that, it will move to the Yellow Tail discovery to conduct a production test.
“Our execution continues to be strong. We are on track to deliver,” the Hess chief said.
The Stabroek Block is 6.6 million acres (26,800 square kilometers). ExxonMobil’s subsidiary Esso Exploration and Production Guyana Limited is operator and holds 45 per cent interest in the Stabroek Block. Hess Guyana Exploration Ltd has 30 per cent interest and CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds 25 per cent interest.