CGX prepares to drill Wei-1 well

July 8, 20220

Canadian-owned company CGX Energy Incorporated has undergone major changes at the top, as the time approaches to drill its Wei-1 well in the Corentyne Block offshore.

The new Chief Financial Officer (CFO), George Davis, will be taking over from Hill York Poon, who will be retained as CGX’s Director of Finance. Paul Langlois has been appointed as the new Exploration Manager. Davis has over 20 years of financial and leadership experience, having worked with publicly listed international companies in a variety of sectors including mining, energy, and infrastructure.

Langlois has over 18 years of exploration and development experience across multiple basins including North America, Gulf of Mexico, Middle East, Africa, Europe, and South Asia. Langlois held senior-level positions at Unocal, Chevron, Cobalt and Tiburon and was responsible for numerous international geological assessments and field developments.

According to Gabriel de Alba, Co-Chairman of CGX’s Board of Directors, these appointments will complement the team the company assembled to drill the Wei-1 well, this month at a cost of approximately US$93 million.

“I am pleased to announce the appointment of George Davis as CGX’s new CFO. We are excited to have such a qualified professional fill this important executive leadership role. George’s extensive experience in senior leadership roles in finance and his demonstrated success working with public companies has helped prepare him for this critical role as CGX embarks on the drilling of the Wei-1 exploration well with its partners.

“I am also very pleased to welcome Paul Langlois to the operational team at CGX. His expertise and leadership will add to the superb team that we have assembled to drill the Wei-1 well.“

Executive Co-Chairman of CGX, Professor Suresh Narine was also optimistic that the management shake-up would have a positive effect on the Wei-1 well drill campaign.

“On behalf of CGX’s Board of Directors, management and shareholders, I thank Hill York for the many contributions she made to the company in the transitionary role she has played since November 2021. Ms Poon will take up the position of Director of Finance with CGX, continuing to support the company and George in his new role as CFO. With George and Paul’s addition to the CGX team and Hill’s continuing efforts, the company is well-prepared as it embarks on the Wei-1 drilling campaign.”

CGX and Frontera Energy Corporation, its joint venture partner, had commissioned an independent report which revealed that they were potentially sitting on 4.9 million barrels of oil equivalent (BOE) in the Demerara and Corentyne oil blocks under their control.

In February of this year, the partners had announced an oil find of 177 feet of oil-bearing reserves at the Kawa-1 well in the Corentyne Block. Since then, the company has been making moves to scale back its presence in the other blocks. It was announced that CGX reached an agreement with the Government to relinquish larger sections of the Demerara and Corentyne Blocks, which will potentially go to auction in September.

Both Corentyne and Demerara Blocks were held by CGX without being drilled. In May 2019, the Strategic Joint Venture between CGX and Frontera was approved to farm in to two shallow-water offshore Petroleum Prospecting Licences for the Corentyne and Demerara Blocks. Both blocks are adjacent to ExxonMobil’s Stabroek Block, where multiple discoveries have been made. The farm-in joint venture allowed Frontera to acquire a 33.333 per cent working interest in the two blocks.

 

Strohm deep-water TCP jumper for Liza

July 1, 2022, by Ajsa Habibic

In a first for the Americas region, Strohm has delivered a deep-water thermoplastic composite pipe (TCP) jumper to ExxonMobil affiliate Esso Exploration & Production Guyana Ltd (EEPGL).

According to Strohm, ExxonMobil’s subsidiary plans to install the subsea water alternating gas (WAG) jumper made from TCP on theLiza Phase 2 project in Guyana this year.

The Liza Phase 2 TCP Jumper, which will be used in place of a steel jumper, will be installed in deep-water at depths of approximately 1,700 metres and be utilised for water and gas injection services for the operator’s high-pressure well injection application.

The installation will be followed by a multi-jumper deployment campaign on EEPGL’s and its coventurers’ Yellowtail project using the ‘Jumper on Demand’ procurement model.

Specifically, on the back of the Liza field award for the WAG jumper, Strohm has also secured an additional contract to supply Carbon Fibre PA12 TCP for all WAG jumpers to be delivered to the Yellowtail project in 2024.

The ‘Jumper on Demand’ procurement model takes advantage of volume cost savings in the entire supply chain and involves shipping a continuous section of pipe to the in-country site. The continuous pipe is subsequently cut to length, terminated, and tested by the client, Strohm explains.

In addition to marking the first use of TCP in South America, it will also be one of the first for Strohm’s Carbon Fibre PA12 TCP material group of pipes, the company said.

The TCP jumpers will be manufactured in Strohm’s facility and headquarters in IJmuiden, the Netherlands.

Gavin Leiper, vice president of Americas (excluding Brazil) for Strohm, said: “This first award in the Americas for such a prestigious project as Liza Phase 2 has made everyone at Strohm extremely proud, with the additional contract for ‘Jumper on Demand’ for Yellowtail giving true credibility to the advantages and increasing popularity of TCP around the world.

“This is testament to the multi-disciplined work carried out to date by our company, where every aspect of the jumper design, delivery, and installation has been reviewed, assessed, and agreed. We are very pleased to be supporting this exciting regional first deployment.”

 

 

Stabroek Development to cost over $1 trillion

Jul 15, 2022

Development of the Stabroek Block is expected to cost over a trillion dollars over the next three years, Financial Statements for Stabroek Block Operator, Esso Exploration and Production Guyana Limited (EEPGL). state.

Under its capital commitments, EEPGL committed $489,412,563,110 for its 45 percent working interest in the block to be expended between 2021 and 2024.

In the Financial Notes, last year, the company committed a total of $235.7B. This year, EEPGL committed some $196.3B, while next year $38.8B has been earmarked and another $568.3M for 2024. It would mean that EEPGL has committed for Capital Expenditure between 2021 and 2024 a total of $498.5M for its 45 percent share. The figures represent the amount for the working interest held in the Stabroek Block.

It would mean that the financial capital commitment for the partner with the second largest share—30 percent—Hess Petroleum Exploration Guyana Limited, for the same period would be $326,275,042,074. Hess last year was responsible for $169B of the committed spending while this year $130.8B has been earmarked.  Hess would be responsible for 25.8B in 2023 and $378.8M in 2024. CNOOC Petroleum Guyana Limited which holds the remaining 25 percent share would fund the remaining $271.9B over the period, bringing the total spending on Capital commitments for developing the Stabroek Block during that time to just about $1.1T. With the installation of the second oil field completed earlier this year, it would mean that the bulk of the spending would be directed towards the development of the Payara and Yellowtail oil fields.

Guyana has two Floating Production Storage and Offloading (FPSO) units producing crude oil from the Stabroek Block—the Liza Destiny and Liza Unity. A third, under construction, FPSO Prosperity will be used to produce the Payara development and is the largest of the first three production vessels to be put into operation with a capacity of 220,000 barrels per day. The FPSO will be spread-moored in water depth of about 1,900 meters and will be able to store 2 million barrels of crude oil. The project is part of the Payara development, the third, within the Stabroek Block, located 200 kilometers offshore.

Financial statements filed by the oil companies show over $94B has been deducted as part of the 75 percent cost oil recovery, to repay expenses . Statements filed by Hess Guyana Exploration Limited show, in 2020 the first year of oil production in Guyana, it turned over $131,66,534,497 ($13.2B) while the following year, a sum of $14,834,549,944 ($14.6B). This represents $28,001,084,441 ($28B) over the two years being set aside by Hess for the Prosperity vessel. The monies are reflected as advances to operator in the company’s statement of financial position for the two years.

SBM Offshore the Dutch Floater Specialist that won the contract for the Prosperity, in addition to the Unity and Destiny had disclosed that the vessel for the Payara Project will cost US$1.05B (over GYD $200B). SBM at the announcement had said financing was secured from a consortium of 11 international banks while adding that it expects to draw the loan in full, phased over the construction period of the Prosperity Vessel. The fourth project, Yellowtail was initially pegged at approximately US$9B but it has now jumped to US$10B. The company’s fourth and largest project in the Stabroek Block is expected to produce approximately 250,000 barrels of oil per day from 2025.

ExxonMobil Upstream President, Liam Mallon, following the Formal Investment Decision for that project had said, “Yellowtail’s development further demonstrates the successful partnership between ExxonMobil and Guyana and helps provide the world with another reliable source of energy to meet future demand and ensure a secure energy transition. We are working to maximise benefits for the people of Guyana and increase global supplies through safe and responsible development on an accelerated schedule.”

Yellowtail production from the ONE GUYANA FPSO will develop an estimated resource of over 900 million barrels of oil. The US$10 billion project will include 6drill centres and up to 26 production and 25 injection wells.

ExxonMobil’s ongoing offshore exploration in Guyana discovered a recoverable resource of over 11 billion oil-equivalent barrels. The company anticipates up to 10 projects on the Stabroek Block to develop this resource.

The Liza Phase One development, utilising the Liza Destiny FPSO, began production in December 2019; its production capacity is expected to increase to more than 140,000 gross barrels of oil per day following production optimization work currently under way.
The Liza Phase Two development, utilising the Liza Unity FPSO, began production in February 2022 and is expected to reach its production capacity of 220,000 gross barrels of oil per day later this year as operations are safely brought online. The third development at Payara is on track for production startup in 2024, utilising the Prosperity FPSO with a production capacity of approximately 220,000 gross barrels of oil per day.
At least six FPSOs with a production capacity of over one million gross barrels of oil per day are expected to be online on the Stabroek Block in 2027, with the potential for up to 10 FPSOs to develop gross discovered recoverable resources of more than 10 billion barrels of oil equivalent

 

 

The borrower is slave to the lender.

The faster the oil costs are paid off the better

July 5

Robin Singh wrote a most sensible letter-

Amid calls for the Government of Guyana to renegotiate the ‘oil contract’ is the meaning of the word ‘negotiate’ and the implications of getting a larger share of oil profits via negotiations now on future earnings. Let me elucidate those who would have us make moves akin to a bull in a china shop.

A massive amount of money was outlaid at their own risk by Exxon, Hess and CNOOC for the initial exploration activities that led to the discovery at Liza-1; had no oil been found, those billions would have been paid by the shareholders of those corporations, no cost would have accrued to the Government and People of Guyana.

Guyana’s current Production Sharing Agreement (PSA) allows for a 50/50 sharing of the profit after exploration costs and cost of production have been recovered. The PSA caps the recovery of costs at 75% of production thereby allowing all partners to garner income equally while outlay (cost of drilling, administration, building, and operation FPSO, etc.) is being recovered. In the near future (especially if the current high price of oil is maintained) those exploration costs will be fully recovered and Guyana will be receiving and selling approximately 50% of the oil produced whilst the consortium of ExxonMobil, Hess, and CNOOC would be getting around 16.66% each.

The questions that arise from renegotiation are as follows: Is it in Guyana’s best interest to have the costs recovered as quickly as possible or are we better off with lowering the recovery cap? Are those companies and their respective shareholders who risked their capital initially going to be willing/happy to cede a larger share of the oil to Guyana and what would be the implications of forcing such a change on future foreign investments (of any kind) in Guyana?

In my opinion, the faster the costs are paid off the better for Guyana for the following reasons, we are currently building capacity in all sectors especially oil & gas; the economy is already showing signs of overheating and inflation/cost of living red flags are flying, a massive injection of capital has taken place and we are struggling to absorb same; we are at or have exceeded capacity for infrastructural works and further injection of capital will have a deleterious effect. At 12% our income from oil will exceed USD 1 billion per annum and continue to grow, this amount complements our traditional economy and aids measured progression. There will be unspent money from the 2022 Budget to be returned to the Consolidated Fund because of exceeded capacity, so why the haste for more money now?

Surely we all know that ‘negotiations’ are not simply a matter of one side dictating terms to the other unless we go down the Burnham/PNC route of ‘nationalization’ (we all know how that ends). What would the oil consortium get in return for giving Guyana more? And if the answer is less than they already have, then why would they (or anyone) come to the table. Greed is original sin and should ExxonMobil et al signal a willingness to ‘negotiate’ I would urge extreme caution to my fellow Guyanese and remind you all to be careful what you wish for as it may well come true.

 

 

Esso Guyana paid parent over $2B since 2020

Jun 29, 2022

ExxonMobil Global Holding Investment B.V. is the 100 percent owner of Esso Production Guyana Limited (EEPGL), registered in the Bahamas. Operator of the Stabroek Block, EEPGL/ExxonMobil Guyana is expected to make annual payments to its head office, as reported in its latest filings of financial records.

An amount of $847,407,889 ($800.5M) was due to be paid at the end of last year, while payment for the previous year’s operations was $1,326,315,642 ($1.4B).

Accompanying notes to EEPGL accounts, state “parties are considered related if (a) one party has the ability to control the other party or exercise significant influence over the other party in making financial or operation decisions or (b) the party is a member of key management personnel.”

Payments identified in the financial report represent amounts due to the parent and are considered related party balances.Payment is one of the expenses deducted from oil sold from the Stabroek Block earmarked for repayments or to be recovered.

Under the Production Sharing Agreement, up to 75 percent of the oil produced in the Stabroek Block can be earmarked to be used for deductions. Other costs being recovered and paid for using ‘cost oil’ include, decommissioning fees, Exploration and Production costs, leases and loans, among others.

Despite ExxonMobil deducting 75 percent of Guyana’s oil towards its expenses upfront, the country lacks mechanisms to monitor the US billion-dollar spending of the oil companies.

Vice President, Bharrat Jagdeo, when asked could not state whether the country has mechanisms in place to oversee and authorise spending activity.

Jagdeo was asked by media to specifically say who is monitoring the spending but shifted the discussion to stakeholders in the Stabroek Block.
“We’re a 50/50 business not from a management perspective. You have a different perspective…CNOOC is an investor, Hess is an investor, Exxon is an investor. The three of them own the consortium so then they hire an operator which is the management firm. So even CNOOC who has 25 percent shares and Hess 35 percent shares, they don’t make management decisions.”

He elaborated on the fact that the oil companies own 100 percent of the venture but yet they are not privy to decision-making.

Tom Mitro, former director of the University of Houston’s Global Energy, Development and Sustainability programme and former Chevron executive, argued that the country has been losing primarily through the deductions being made by the operator.

In a Forbes Magazine Energy report captioned,“As Guyana’s Oil Business Booms, Could a Potential New Deal With Exxon Loom?” he highlighted that many other negotiable clauses in the contract were established in favour of Exxon – an approach that most of Guyana’s peers rejected. One provision allows Exxon to recover all interest on loans borrowed to fund the development of related oil projects.

In practice, this means that the operator and its partners are able to charge Guyana for the cost of borrowing from their affiliates with no limits. “Contracts typically have cost recovery mechanisms, but usually with limits,” Mitro said.

Without written limits, companies can abuse the amount of borrowing they do within the conglomerate.

Another provision allows ExxonMobil Guyana to not have to pay any income tax on their profit share and the government will provide a receipt that can be used for tax deduction purposes elsewhere.

A clause allows Exxon the right to get cost recovery oil right from the beginning, to cover the future decommissioning and abandonment of the project at its end. These costs will not be actually incurred for several years.

The current contract was negotiated in 2016 and takes most of the terms of a 1999 agreement, signed by then President, the late Janet Jagan. It splits the oil output at 50-50 between the government and Exxon, and gives Guyana a two percent royalty (the 1999 agreement had a one percent royalty), after first deducting up to 75 percent of gross production as cost oil for recoverable expenses such as exploration and production costs, among others.

 

Exxon to spend US$2B until 2025

Jun 21, 2022

Esso Exploration and Production Guyana Limited (EEPGL)—ExxonMobil Guyana—will spend G$276,434,609, 999 or US$ 1,382,173,049 on operating leases and capital projects or new purchases this year.

Financial statements released by ExxonMobil Guyana state the deductions over the last two years amount to US$355.7M, while the total earnings for the country from the Stabroek Block during the same period was US$607M. EEPGL last year generated US$12B in revenue while the country collected some US$458M, accounting for its share of Profits and the Royalties earned for the entire year.

The company’s after tax profit for that year was recorded at US$634,936,435 or G$132.1B, with its total operating expenditure which is recovered from cost oil for ExxonMobil Guyana at US$586,783,567 or $123B.The amount identified by EEPGL for spending on the two categories this year, is included in the items that have been earmarked to be recovered by cost oil, meaning Guyana’s oil in the Stabroek Block would be used to make the repayments.

The commitment, according to ExxonMobil, for the two categories of spending for this year is pegged at some G$276,434,609,999 or US$1,382,173,050, the next year 2022, accounts for some G$117,137,451,862 or US$585,687,259 and in 2024 G$8,655,139,808 or US$43,275,699 and thereafter G$18,805,838,338 or US$94,029,191.69.

Altogether, EEPGL has earmarked some G$421,033,040,007 or US$2,105,165,200,035 in the near future. The amounts would represent sums to be deducted as part of the recoverable expenses. One of the thousands of costs for the ExxonMobil Guyana’s oil project is costing the country more than half of what it earns in profits and royalty. That single deduction relates to the decommissioning or clean up exercise to be undertaken some 18 years from now.

Juxtaposed with the earnings of the entire country through taxes and other revenue streams including its earnings from the Stabroek Block—US$458M—it would mean that the EEPGL—ExxonMobil Guyana—operations last year earned more than the entire country put together. In 2021, Guyana earned as a country, a total of US$1,690,115,384, or G$351.5B. It means that Stabroek Block production generated more income than the country collectively.

In 2020, the country had earned US$149M in Royalty and Taxes. For the two full years of oil production, the county earned US$607M. One of the costs deducted from ExxonMobil Guyana, decommissioning is pegged at US$355.7M,r considerably more than half of the country’s earnings for the entire year. Based on its 2021 financial statements, EEPGL recovered $15.2B in 2020 and $17B in 2021 for decommissioning costs associated with the Liza One Project. It means that its total take for the two years was US$160M.

Partners also recovered monies . Though their financial results have not been made public yet, it is possible to calculate their take based on the percentage of working interest they hold in the Stabroek Block. With Hess’ 30 percent stake, it recovered approximately US$106.7M while CNOOC’s 25 percent working interest would be equivalent to US$89M being recovered for decommissioning.

Under the signed Production Sharing Agreement, the company has set aside a decommissioning fee. from day one of production. ExxonMobil Guyana has been utilising that money being deducted from cost oil. When confronted with the report recently, Vice President Bharrat Jagdeo told reporters,

“It’s not like Exxon would put the money in there and leave it; the funds are fungible so to the extent that it is utilised and it reduced the cost of say borrowing which is ultimately a cost to be borne by the company then ultimately that would be seen as productive use. …if they use it for private purposes alone then that would not be seen as a productive use.”

Such a situation meant that ExxonMobil is currently deducting money from cost oil for decommissioning at the end of the lift of the project—in another 15 years—and would have been using the money on the project, which is then deducted with interest again, as a loan that has to be repaid by the company.

International experts estimated that throughout the life of the project, over US$3B would be deducted from cost oil to fund the decommissioning of the project.  ExxonMobil is yet to develop a decommissioning plan for any of its projects and signaled its intention to abandon all of its subsea equipment on the sea floor and that it is expected that the production ship—the Floating Production Storage and Offloading Vessel—the Liza Destiny and others, would be towed away.

 

 

ExxonMobil can reclaim royalty

Jun 26, 2022

Petrostates have been robbed of their lawful benefits due, through skullduggery involving taxes and royalties to be paid to the tune of billions of US dollars.As such, when the matter of whether Esso Exploration and Production Guyana Limited (EEPGL)—ExxonMobil Guyana—and their partners, Hess Guyana Exploration Ltd. and China National Offshore Oil Company were recovering the two percent royalty paid to Guyana, it sparked a debate.

EEPGL financial statements lists royalty payments as an expense after which it realised G$132B in profit last year and would have had to be making royalty payments on crude sold since December 2022.
While Guyana’s accounts reflected receipts of royalty payments, ExxonMobil and Vice President Bharrat Jagdeo insisted that the contractor was in fact, reducing its profit in order to make its royalty payment to the country which meant, the country was securing a bigger share of the profits had,
since the formula for profit sharing under the agreement stipulates 75 percent of production be reserved as cost oil to make payments after which the contractor and government would split the profit.

Vice President Jagdeo proffered that the royalty was not cost deductible but was in fact tax deductible.
GRA Commissioner Godfrey Statia confirmed that the Production Sharing Agreement (PSA) signed in 2016 was in fact silent on the matter but a provision allows for ministerial discretion.

On royalty, “Under Article 15.6 of the PSA under review, the contractor pays a Royalty of two percent to the Guyana Government on the value of all petroleum produced and sold. This item (Royalty) is not explicitly mentioned as cost recoverable under Annex C, Section 3.1 (without further approval of the Minister) or 3.2 (with approval of the Minister). Further, it is not mentioned under Section 3.3 of Annex C as a Cost not Recoverable under the Agreement.”

According to Statia, “Even though Section 3.4 of Annex C, vests the power in the Minister to determine the recoverability of an expense not covered under the provisions of Section 3, such discretion has not been exercised by the Minister relative to Royalty.
Section 3.4 of Annex C reads stipulates, “Other costs and expenses not covered or dealt with in the provisions of this Section 3 and which are incurred by the Contractor in the conduct of the Petroleum Operations are recoverable subject to the approval of the Minister.”

According to the GRA Commissioner General, however, “Royalties paid to the Guyana Government is an Expense incurred in the production of income for the contractor(s), but is not allowable in the calculation of Cost Oil. It therefore follows that the 2 percent Royalty payment currently adds to the Government’s take. Hence the Guyana Government presently receives a total of 14.5 percent in Royalty and Profit Oil (2 percent plus 12.5 percent).”

On taxes, the Commissioner General, seeking to clear the air, said, “the 2 percent Royalty paid to the Guyana Government is not a cost in determining Guyana’s share of Profit Oil, but is an expense in determining the contractors’ taxable income.”

 

Guyana gas for EU energy transition

July 12, 2022

Director General of the Americas at the European Union, Brian Glynn stated that the Union has signalled that the use of oil and natural gas will be an essential part of its transition.The use of traditional energy is still necessary for countries seeking transition to greener forms of energy,

On a recent visit to Guyana,Glynn noted that the space had been created through his visit for conversations on this issue. On the role he envisages for Guyana in the EU in the supplying oil and natural gas, he noted that Guyana could not immediately bridge that gap given current production. However, within the next five-to-ten-year period, gas has been identified by the Union as an important element of their transition.

“The more supply of gas there is in the world, the more choices people have about where they get that gas… What we have discovered in the European Union is that one of our principal suppliers of gas… is an unreliable partner so we’re looking to other parts of the world for more reliable partners.”

No direct pitch was made to Guyana and Suriname which have gained prominence in the oil and gas arena, the Director-General noted. However, he had worked to create a space where these issues can be discussed. If there is a follow-up , officials who are directly within those areas will proceed. Asked whether this space has been created here to foster such a discussion, he said,

“yes, we have and it’s a conversation we will be having more and more with Guyana.”

Against this backdrop, Glynn indicated that the 27-member state Union is not directly involved in procuring gas; however, companies within the Union that have invested in the region are interested as they form part of the network in the European Union of energy supply.

BP and Shell are partners in Atlantic LNG and invest in Europe. They can acquire the CNOOC share of Stabroek Block to guarantee gas supply to their Trinidad plant and secure energy for Europe, base of their headquarters.

U.S champions inclusion, transparency

Jul 02, 2022

United States Ambassador, Sarah Ann Lynch said going forward Washington will continue to forge partnership on inclusive democracy, economic development, and citizen security for all in Guyana, now on a unique journey,

“Our commitment to Guyana is to continue to collaborate with you along this fascinating journey and to reinforce your aspirations to realise a safe and prosperous Guyana for all the people of this beautiful country. As such, our partnership will continue to thrive and grow during these historic times in Guyana.” .

Ambassador Lynch and other US senators promoted a more inclusive agenda for Guyana with greater transparency and equity in the distribution of oil wealth.

“Going forward, we will continue to partner with you on inclusive democracy, economic development, and citizen security for all Guyanese, and to promote the public values of transparency, diversity, equity, inclusion, and accessibility, values that inform policies reflecting good governance and a participatory democracy where all voices are heard.”

Guests included President Irfaan Ali, Prime Minister Mark Phillips and Vice President Bharrat Jagdeo. a The government denied claims by the corrupt opposition which accused it of discrimination in its management of the affairs of this country.

Lynch asserted that the United States has been on the development journey with Guyana.

““evidence of our enduring relationship lies in both the public and private sectors. The numbers speak for themselves.” In 2021, the U.S. exported US$565 million worth of goods to Guyana and imported US$1.7 billion worth of goods from Guyana. “As important as the oil and gas sector has been to those numbers, U.S. companies are also partnering in infrastructure, agriculture, health care, education, services and tourism. And, these partnerships span into the public sector to help build the government’s capacity to serve its people.”

Ambassador Lynch said USAID’s Economic Development Accelerator programme is helping entrepreneurs in Guyana’s agriculture sector grow their agro-processing businesses and on the security front,

“we just concluded a critical multi-month port security training for Guyana with inter-agency participation from Guyana’s police, the Revenue Authority, the Customs and Anti-Narcotics Unit, the Maritime Administration, and the Coast Guard. This training provided the tools to strengthen container security protocols and increase knowledge of narcotics smuggling typologies, in collaboration with the United Nations Office of Drugs and Crime.”

Lynch said across the United States, Americans will come together to celebrate their independence with food, family and fireworks, but also to renew their commitment to the values that shaped

“our country – self-governance, equality, justice, liberty and the pursuit of happiness – and, to share those values with other nations around the world.”

She said, looking forward, everyone must recognise that the world is truly at an inflection point right now with multiple interlocking crises impacting our daily lives, causing concern and worry for people around the globe compelling us to focus on critical long-term disruptions caused by climate change, energy insecurity, mass migration, the global pandemic and global food insecurity exacerbated by the Russian invasion of Ukraine. Russia’s unprovoked war on Ukraine has also raised the important question of a country’s right to sovereignty – to develop and join alliances how it sees fit.

“Sovereignty, democracy, pandemic management, migration, climate change, energy and food security – are all issues that are immensely important to the United States as well as Guyana. These are complex issues that no one country can solve alone. These are problems that require partners to come together to discuss, to debate and to solve. And, that’s exactly what the United States and Guyana are doing – addressing these issues together both in Guyana and in the region, all while strengthening and deepening our partnership.”

At the recent Summit of the Americas, hosted by the United States, multiple countries in the Americas came together to discuss shared concerns. Key declarations were made on migration, post-pandemic economic recovery, health care and medical training, clean energy, and climate change.

“The Biden Administration’s new U.S.-Caribbean Partnership to Address the Climate Crisis 2030 (PACC 2030) involves new commitments and the integration of climate adaptation and resilience and clean energy programs across the Caribbean. President Biden also announced the Americas Partnership for Economic Prosperity as part of our efforts to promote an equitable recovery in a hemisphere still reeling from the impacts of the pandemic.”

The ambassador said that at the summit, Guyana was over 20 countries in the hemisphere to sign onto the Los Angeles Declaration, a regional declaration to address the root causes of irregular migration and create a common framework for legal pathways, protection, and humane border management.

“And, importantly, three working groups were formed to drill down on regional concerns in the critical areas of financial security, energy security and food security. Due to Guyana’s leadership role within CARICOM on agriculture and food security, President Ali will serve as a co-chair of the food security working group with U.S. Assistant Secretary for Western Hemisphere Affairs, Brian Nichols.

“Related to this critical issue of food insecurity, at the Summit, the U.S. announced its commitment to a Caribbean Zero Hunger Plan with initial funding of $28 million USD in food security assistance for the Caribbean,”

Lynch updated the gathering, while applauding Guyana’s vision to work on this issue and to be the breadbasket for the region, and the U.S. is ready to partner in this regard.

CNOOC draws over US$2B for Stabroek

Jul 16, 2022

China National Offshore Oil Company (CNOOC) International Limited (BVI) registered in Barbados, parent company of the PRC partner with 25 percent interest in the Stabroek Block loaned its Guyana affiliate over US$2B to finance its share of expenses in the operation.

This includes exploration and development and other ancillary costs associated with the oil fields in the amounts relative to its working interests.

CNOOC Petroleum Guyana Limited—Guyana Branch, is the local subsidiary with which the Esso Exploration and Production Guyana Limited (EEPGL)—ExxonMobil Guyana—has a partnership.

According to the notes to the financial statements for the period ending last year, the Barbados- based parent company initially provided the Guyana subsidiary with a US$2.7B credit facility and t this was increased to US$3.5B in July last year. According to the financial statement, the credit facility is perpetual-, the company essentially has infinite access to the cash, to collect when needed-i s non-interest bearing, unsecured and with payment on demand.

The documents illustrate that at the end of last year just over US$2.4B was received. At the end of the previous year that facility had reflected that US$2B had been taken, meaning the Guyana branch last year collected some US$400M.

The international SOC has provided its financial support to the operation of the company. CNOOC indicated that the capital structure comprises share capital and debt, and a US$3.5B credit facility provided by the parent company CNOOC International Limited.

CNOOC Guyana Branch manages its capital structure to ensure that it will be able to continue as a going concern and have the financial capacity, liquidity and flexibility to fund the exploration and development efforts in Guyana through the Branch.

” It has been notified by its parent company that it will sustain the business at its current level of activities.”

EEPGL—the Operator of the Stabroek Block, is registered in the Bahamas with ExxonMobil Global Holding Investment B.V. being the 100 percent owner .
EEPGL/ExxonMobil Guyana, is expected to make annual payments to its home office, outlined in the company’s most recent filings of its financial records.
An amount of G$847,407,889 was due to be paid at the end of last year, while the previous year’s operations saw G$1,326,315,642.

According to the accompanying notes to EEPGL accounts, “parties are considered related if (a) one party has the ability to control the other party or exercise significant influence over the other party in making financial or operation decisions or (b) the party is a member of key management personnel.”

Payments identified in the financial report represent amounts due to the Home Office and are considered related party balances.
The payment is one of the expenses being deducted from oil sold from the Stabroek Block that has been earmarked for repayments or to be recovered. Under the Production Sharing Agreement, up to 75 percent of the oil produced in the Stabroek Block can be earmarked for deductions.
Other costs being recovered and paid for using ‘cost oil’ includes, decommissioning fees, Exploration and Production costs, leases and loans, among others.

 

China Petrochemical Corporation

1 July 2022

Sinopec cheers giant shale gas discovery and claims new discovery could be China’s second largest shale gas find and plans more appraisal wells.  PRC is well supplied with energy reserves and can divest Guyana assets to focus on domestic resource. After backing the Russian invasion. PRC/PLA has blood n its hands.

 

Local content law-an ill wind

Guyana, the South American Caricom founder implented a local content law to ensure equity in its energy sector.  Denial to operate in Guyana of Trinidad-based Ramps Logistics because of cryptic specifications in its Local Content Act sparked a local and regional controversy on the balancing act governments must perform to ensure that resources and commodities are shared with international parties, while ensuring that their citizenns benefit most.

The act, proclaimed in December 2021, led to questions on whether Guyana’s protection of proceeds from its new-found oil and gas resources may be a cause for concern for Caricom.

Timothy Tucker, the Georgetown Chamber of Commerce and Industry president and advocate for local content policies in Guyana, defended the act and the specifics that were grounds to exclude Ramps Logistics, saying that these rules were intended to ensure that the bulk of profits from the energy sector stay at home where it belongs.

The Guyanese Local Content Act

The Local Content Act (LCA) was enacted to provide obligations on businesses involved in the energy sector to prioritise Guyanese nationals and companies in procurement for the enhancement for the oil and gas value chain; to develop local capacity and to promote competitiveness and encourage the creation of industries that would help the country’s development.

The LCA states that every person who enters into a petroleum agreement in accordance with the Guyanese Petroleum Act, every holder of a licence granted under the act is required to utilise “local content” as an essential part of its operations.

Timothy Tucker, president of the Georgetown Chamber of Commerce and Industry, says Guyana’s local content laws are meant to ensure the bulk of profits from the energy sectors remains within the country.

The act defined local content as: “the monetary value of inputs from the supply of goods or the provision of services by Guyanese nationals or Guyanese companies.”

For a company specified in the act to have a licence to operate, one of the requirements is that the business must have a percentage of local content. A total of 40 sectors were identified by the LCA as subject to the minimum local content requirements.

• Welding companies must have at least 25 per cent Guyanese participation.
• Onshore pipe sand blasting requires 30 per cent participation.
• Onshore construction work for buildings require 50 per cent participation.
• Food supply and administrative support requires at least 75 per cent.
• Transportation services in particular has a high participation requirement with trucking companies requiring 75 per cent participation and
• ground transportation in the form of movement of people must have a 100 per cent participation by Guyanese nationals.
• Customs brokerage businesses require a 100 per cent Guyanese participation as well.

The LCA requires that a Guyanese national must also be a beneficial owner for the company to be granted a licence to operate in the specified sub-sectors in the energy sector with 51 per cent beneficial ownership . The executive board of the company must also be 75 per cent Guyanese.

Trinidad & Tobago has considered similar policies since 2004, when the regime developed a local content and participation policy and framework. In the policy framework submission it was suggested that government maximise value for the country from its assets through fiscal measures such as taxation and royalty policies, maximising the amount of local ownership, control and financing and the level of local goods and services used in the TT energy sector.

This is a problem for Caricom. In March, Miguel Vasquez, senior associate in Hamel Smith and Co’s taxation and dispute and risk management groups, raised questions on whether the LCA, while protecting the interests of Guyanese people could hinder the country’s ability to meet its regional obligations and commitments.

“What is curious about the local content definition is that the scope of people covered extends only to Guyanese citizens with no nationals of Caricom member states.”

He compared the act to TT’s Foreign Investment Act which also subjects foreign investors to restrictions and requirements for the acquisition and holding of land shares, however Caricom member states’ nationals and companies are not included in those requirements. Guyana signed the Revised Treaty of Chaguaramas, which formed Caricom in 1973 with Barbados, Jamaica and TT. It provides for integration of efforts in economic matters, coordination of foreign policies and functional cooperation in labour administration, industrial relations, social security and other matters affecting the region.

The fact that establishment of the minimum number of Guyanese nationals and companies must be engaged under the LCA, did not facilitate access by nationals of all the collective resources of Caricom.

Tucker said these sub-sectors are only a fraction of sectors where Guyanese companies have any kind of advantage.

“Outside entities are allowed to participate in the sector in these areas up to 45 per cent. They also have the opportunity to participate in 80 per cent of the industry.”

He said the oil and gas industry has about 180 sub-sectors in Guyana.

 

Ramps: Lall perfect to do business in Guyana

Ramps Logistics CEO Shaun Rampersad said he felt that his company met all the requirements to do business in Guyana’s energy sector but was still denied. Ramps had met the requirements of having a staff that was 90 per cent and a board that was 75 per cent Guyanese, in keeping with Guyana’s laws.

He said the only requirement that the company had not met was to have a Guyanese national who had 51 per cent stake in the company and he felt that they had found a solution in Deepak Lall, managing director at Qualitech, a mechanical engineering company which supports the petrochemical, manufacturing, marine, food and beverage, quarrying, agriculture, oil exploration and construction industries.

“We thought that Deepak was a great candidate. He is a member of the diaspora, he is well educated and has done well for himself. He is just the kind of person who I think Guyana needs. His business, Qualitech is a major supplier to Point Lisas.”

Lall has dual citizenship for TT and Guyana. His father, a Guyanese had to leave the country in the 1960s because of political persecution, like mmany thousands of fellow citizens fleeing racial bigotry. When he came to TT he married a Trinidadian woman.

Rampersad said that they hired the most suitable people to advise them on how to treat with the new laws and requirements that came with the LCA, and followed that advice. When Ramps submitted a request for a local content licence it was denied.

“When we sent everything they gave us an automated response that we were denied access to the local content register. We sent them a letter asking why we were denied. We didn’t hear anything from them for two days. Then our lawyers wrote to them three days later asking why we were denied. If you make a law and ask people to follow it but when they follow it they are still denied, then it is okay to give a reason why, especially when we have hundreds of people working for us over there.”

Ramps, an integrated logistics company that services the energy industry, entered Guyana in 2013 to set up a company which would support commodity trading. In 2014 when Exxon came to Guyana, Ramps offered its services in energy industry logistics. It started its relationship with Exxon in 2015, and with partner company El Dorado Offshore, Ramps was able to grow the business in Guyana from a few people in an office to over 400 employees.

Rampersad said without the licence Ramps can still operate in Guyana but most of its business is in the oil and gas sector, which means it would be significantly affected if it is not able to do business in these sectors. Rampersad said two of the areas in its business that would be affected are customs brokerage and transportation.

Ramps Logistics team oversees a heavy lift operation for a client. The Trinidad-based company believes it has been unfairly denied a licence to operate in the energy sector in

Guyana. – Ramps Logistics
Tucker claimed that although the LCA requires a Guyanese to own the business in these areas, it is not just simple ownership but a beneficial ownership of the company that is required. The onus is on the company to prove that there is beneficial ownership by a Guyanese.

“Beneficial ownership means that money must be given to you as an owner and that the person in question must have controlling interest. It cannot be one Guyanese and 50 Europeans that own the company.”

Ramps is clearly a victim of double standards as it proved its commitment to Guyana to which President Ali invited regional companies to invest in the petroleum industry and signed an MOU with the TT Prime Minister.

As Caricom founders , both countries cooperate on trade and share historic cultural links as members of the Commonwealth of former British colonies with a majority of citizens of British Indian origin. Trinidad welcomed many Guyana migrants who took jobs in its petroleum industry, in UWI St Augustine where they worked and studied and in bauxite and other fields during the mass exodus of Indians.

Guyana accepted investment from a state-owned Comapny of the totalitarian People’s Republic of China, an existential risk to the free world after backing the invasion of Ukraine, now sanctioned by USA for spying and stealing technology and by Britain as a security threat, CNOOC is a foreign company registered in Barbados and its subsidiary is in the Exxon consortium developing Stabroek Block, although PRC owns adequate reserves of coal and petroleum and invests in Guyana infrastructure, mines and timber.

Instead of denouncing the Exxon PSA, Guyana can acquire the Stabroek share of CNOOC to protect its resources and end unfair practices. Then there is the contentious appointment as a director of NRF of the UK Labour MP David Lammy, being investigated by the UK Parliament for hiding income.

 

 

Gas to Energy

July 1, 2022

President Dr Irfaan Ali said the construction of the Gas to Energy project transcends the provision of energy and is linked to enormous benefits for all citizens.

The Head of State provided an outline of the project in the presence of representatives from the oil companies (ExxonMobil, HESS and CNOOC), the local private sector, and Cabinet members at State House.

“This is a project that is national and transformational in nature, one that cuts across varied sectors. It is directly linked to poverty reduction, opening up of opportunities, the creation of new growth poles and growth hubs. It is one of those projects that bring direct benefits to the pockets of people.”

The benefits are not only about electricity and the cost of electricity, but rather it is a transformational project that is directly linked to all the other sectors. The country could save billions of dollars per month from electricity costs and the cost of cooking gas.
Through the project, there will be the establishment of a gas-processing plant (GPP) and a natural gas liquids (NGL) facility, which will be capable of producing at least 4,000 barrels per day, including the fractionation (or separating out) of liquefied petroleum gas (LPG).

Approximately 220,000 households are currently on the Guyana Power and Light (GPL) grid; and with the power company earning almost $40bn in revenue, the establishment of the project would cut revenue in half, returning approximately $20bn into the pockets of Guyanese.

“That is $20bn of revenue that will be freed up and made available to be spent on the economy and expand the acquisition of goods and services.”

TRANSFORMATIONAL AGENDA

The project will fit nicely into the seven-pillar transformational agenda on which the Government embarked. These include; infrastructure, technology, services (health, education, economic), energy security, food security and mental transformation.

“We need to have a mental transformation in our society because the scale of what we’re doing is completely different from the way we think. From a business operational perspective, the scale is different from what we have imagined. The mental transformation talks about critical thinking.”

This “mindset change” requires all to understand the developmental agenda in order to achieve the best outcomes.

MANIFESTO   COMMITMENTS   DELIVERED

Through the project, the Government will fulfil several manifesto commitments under energy, including; the provision of affordable, stable, reliable energy, a mix of energy sources, an increase of electricity production to 400 MW and the reduction of the cost of energy to consumers.

“In terms of the manifesto, we have passed the test of soundness.”

 

 

Oil & Gas Governance Network

Jul 02, 2022

OGGN member Mike Persaud asserts that the money from the 2016 Production Sharing Agreement (PSA) should be of more concern to Guyana than the financial risks undertaken by oil companies operating in the Stabroek oil Block.Oil companies are gaining heavily from the PSA while Guyana’s leaders are preoccupied with the “financial risk assessment” of oil companies’ investment in Guyana.

Persaud said that “Guyanese are misguided to be concerned with “financial risk assessment.” Guyana is the “most politically unstable place in the Caribbean” with five of the biggest risks being; political, geological, price, and supply and demand as well as cost risk.

The concern of political risk, the government being overthrown and nationalization were highlighted. Guyana is a place of ethnic politics, but even so this situation “poses no risk to oil companies; in fact, it is obvious that oil companies manipulate the racial divide to their advantage.”

This is evident in none of the main political party leaders wanting to renegotiate the PSA. Vice President Bharrat Jagdeo is always defending the PSA.

With proven oil reserves of some 11 billion barrels and world demand for oil being strong despite plans for transition to clean energy, the PSA is written in such a way that oil companies recovering all their capital and operational expenses is guaranteed.

“Cost Recovery is capped at 75 percent of revenues, taken off at the top, before profit sharing is calculated. Cost Recovery is done on an expedited scale to the duplicitous advantage of oil companies. Moneys recovered as Cost Recovery are ploughed back to open new oil fields and wells; they perform the role of retained earnings. On one hand working capital steadily expands, but mostly with funds taken out as cost recovery. It is plainly double dipping, doubly benefitting.”

While the concept of ‘ring fencing’ has the potential to limit the duplicity – leaders seem unwilling to support the renegotiation.  Why then should Guyanese be concerned with Exxon and partners’ risk?

“What chance is there for oil companies not recouping their investment? Zero. Let’s say $2 billion is expended for exploration and no oil is found, what concern is that for the Government of Guyana or Guyanese or this army of pro-Jagdeo/Oil Companies bloggers?”

Oil companies are heavily capitalized, owned by millions of shareholders and their business model prepares them for those risks.

“Oil companies are multi-billion dollar agencies, why (is) Mr. Jagdeo pre-occupied with Exxon’s recouping its investment? Mr. Jagdeo is VP of Guyana; he should be pre-occupied with getting a fair contract for Guyanese citizens.”

In relation to another oil producing nation, Chad, Persaud related that information is available to show that the generous terms of their contract were required by oil companies to compensate for the exceptional risks they would endure in that country. It was suggested that the same could be said for Guyana with the benefits the companies are receiving from the PSA.

Exxon’s people drafted the contract and inserted the most favourable royalties for themselves.  They also inserted a Stability Clause that nullifies the powers of host country’s Parliament since no new taxes can be passed to impact the oil companies’ profits in Guyana as well as tax waived for the life of contract in Guyana.

“Compare Guyana’s with Suriname’s contract – and the scam of the Guyana contract .”

The conundrum is that average market price moved from US$65 to US$110 a barrel generating billions of windfall profits since the Ukraine war . The United Kingdom, Canada, USA have or are in the process of levying windfall tax amounting to billions,

“those folks – including VP Jagdeo – who want the Guyanese people to be more concerned with “risk assessment” of oil companies investment here in Guyana are deliberately trying to divert our attention away from renegotiation.”