Govt to receive Liza One 2020 operating costs from ExxonMobil
– Has two years to explore
By Kemol King
FPSO Liza Destiny is currently producing oil in ExxonMobil’s Lizxon Phase One project (Photo: SBM Offshore)
Kaieteur News – With over US $ 6 billion in bills unchecked by senior oil giant ExxonMobil, the company’s local subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), is set to put yet another Guyana by the end of the first quarter of this year . The new bill will account for the operating costs that ExxonMobil has incurred for the year 2020 to run the Phase One Liza development.
The deadline for submission of these costs is set out in Payara’s production license.
Section (k) of the license, which speaks to Cost Estimates, states that “Within one hundred and eighty (180) days from the date of the License, the Licensee shall report in the form and scale of the details not less than as set out in Schedule X2 (Operating Cost Estimates) as follows: Schedule X2 – Analysis of Actual Operating Costs for the first year (or any shorter period completed at the reporting date) of Stage 1 implementation Liza … ”
In this case, the licensee refers to the joint ventures of Stabroek Block, ExxonMobil (the operator), Hess and CNOOC.
Schedule X2 of the license sets out the categories of operating costs: Operations, Repairs and Maintenance Inspection, Logistics, Good Works, and Overhead Cost.
The operating costs are separate from the development costs for a well. While development costs cover what it takes to acquire and install the equipment to produce it in a well, the operating costs cover what is spent to keep production running.
ExxonMobil is expected to present the annual operating costs for each well it produces as Liza Phase Two and Payara come on the river, in addition to the development costs.
Because all of those costs are expected to be recovered, Guyana is responsible for examining ExxonMobil’s submissions to ensure that it and its partners do not recover unreasonable or otherwise overstated costs. The Stabroek Block (PSA) production sharing agreements give Guyana a two-year window to scrutinize these costs, after which all claims must be accepted as is.
Guyana’s lack of ability to examine the submitted costs of oil companies and at a suitable pace is a business of the media and transparency advocates.
The only audit Guyana has done on Exxon’s costs was contracted to a British company called IHS Markit. The company was accused of auditing Exxon’s first set of costs of US $ 1.6 billion, including pre-contract spending. The previous administration had allowed more than years to pass before it contracted the company to examine the superintendent’s pre-contract costs in December 2019. Despite the fact that this contract was awarded over a year ago, obstacles have been completed.
The Government is expected to review a draft report from Markit – the second report in the process, which it received from the company – after which it will present the document to Exxon and its partners for comment.
The government has made some damaging findings, according to Vice President, Dr. Bharrat Jagdeo, including expense claims, which he does not consider recoverable.
After Exxon’s comments are made, the government is supposed to direct Markit to submit a final report.
Once that is dealt with, the government will have to turn to more than US $ 6 billion of outstanding claims to be examined by ExxonMobil.