Wednesday, August 10, 2022

Analyst urges quick action on approval of Guyana’s largest oil development to date

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Negotiations are underway for the Stabroek block consortium to provide a guarantee that they would have adequate resources to respond to an oil spill. Arthur Deakin, who is energy co-director at Americas Market Intelligence (AMI), said that while this is important to have, it should not hold up approval of the Yellowtail project which is set to deliever billions of dollars more in revenue to the South American country.

He made the comment during a virtual webinar on OilNOW TV.

“It’s good to have that on paper and I think that’s something they’re aligning on right now, but it shouldn’t be a reason to delay the project much further,” Deakin said. “I think it has to move forward and it has to move forward quickly.”

He added that there seems to be a concern, if an oil spill happens, that ExxonMobil will not be able to cover it.

“But that’s just false. Exxon, and the company it’s operating in Guyana, Esso [Exploration and Production Guyana Limited], is more than enough, well capitalized, and contractually obligated to cover any kind of oil spill,” Deakin pointed out.

Notably, it is not the parent companies of EEPGL and the other Stabroek block co-venturers that will be providing a guarantee, but their affiliates. EEPGL President, Alistair Routledge, said the affiliate company guarantees would be collectively valued at US$2 billion.

Deakin said the pace at which Guyana itself has mapped out its infrastructure development in the coming years means that substantial inflows of revenue will be required to finance major projects. And it is from the offshore oil developments that the country intends to get a substantial part of that much needed revenue.

“Right now Guyana is probably the hottest frontier oil market in the world. There are a lot of foreign investors interested in coming to Guyana and spending capital. The country has to take advantage of that while oil prices are high,” he said.

Executive Director of the Environmental Protection Agency (EPA), Kemraj Parsram, told OilNOW last week that full indemnification is being sought regarding EEPGL’s environmental obligations. Vice President Dr. Bharrat Jagdeo said the guarantee would cover the entire Stabroek block.

Parsram had told OilNOW the agreement is expected by the end of the month.

The approval for Yellowtail is also expected in March, according to a February comment from Vice President Dr. Bharrat Jagdeo. Asked last week for an update on the review process, Minister of Natural Resources, Vickram Bharrat said the parties are in discussion.

On the environmental side, Parsram told OilNOW last week that the Environmental Assessment Board (EAB) is currently reviewing the Yellowtail environmental impact assessment (EIA). The board has to advise Parsram on whether the project should receive an environmental permit. Asked whether Yellowtail’s approval depends on the finalisation of the guarantee, Parsram declined to comment.

Yellowtail will be Guyana’s largest offshore project to date. ‘One Guyana’, the floating production, storage and offloading (FPSO) vessel identified for the project, will be able to produce 250,000 barrels of oil per day. The project, once approved soon, is expected to achieve first oil by 2025.

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