Govt Inks Payara Production Licence With Landmark Clauses

─$7 trillion investment is single largest in Guyana

By Shaquille Bourne

DPI, Guyana, Wednesday, September 30, 2020

Minister of Natural Resources, Hon. Vickram Bharrat on Wednesday signed the Payara offshore development licence with ExxonMobil, effectively catapulting Guyana’s petroleum sector in a higher gear.

Production is set to start in 2024.

“[The licence] represents the single largest investment in the history of Guyana. The investment is billed at US$9 billion, and with the amount of oil estimated to be in the Payara development area, it is estimated that Guyana will benefit from GY$7.4 trillion in government revenue,” Minister Bharrat told the Department of Public Information (DPI).

The licence included several clauses that were not part of the Liza production licence.

Flaring

“In the Payara agreement, the Government of Guyana has negotiated for fines or penalties to be instituted for prolonged flaring,” the Minister announced.

Haphazard flaring, the Minister said, would not be condoned even as he acknowledged that some flaring may be necessary.

“The Environmental Protection Agency will institute fines for pollution and the Government of Guyana will also introduce penalties for the wastage gas because the flaring means that we are wasting the gas which can be utilised in a more meaningful way.”

Minister Bharrat stated this clause comes on the heels of the Government’s dissatisfaction with flaring aboard the Liza Destiny FPSO, an issue which is being resolved.

Audit

The Agreement includes US$400,000 for yearly audits of the Payara project.

“This is something that was not in the Liza development that we managed to put in Payara,” the Natural Resources Minister noted.

Dumping of produced water

Further, the agreement provides for testing of water extracted with the crude (produced water) prior to it being expelled into the ocean. This will be done according to international standards.

The EPA will play a major role in testing the water regularly.

Minister Bharrat said the operation is safe because of its distance from the shore and the depth of the ocean at the production site.

Oil spills

The Natural Resources Minister highlighted a clause that stipulates wells must be sealed within five days of an oil spill. Additionally, the clause compels Esso Exploration and Production Guyana Limited (EEPGL) to commit to a study to bring that timeframe down to three days.

“That is something significant for our country that is now new in the oil and gas sector,” Minister Bharrat said.

Local Content

To advance local content through the petroleum sector, the Minister said EEPGL will work with the Advisory Panel on Local Content convened by President Dr. Mohamed Irfaan Ali.

“We need a strong local content framework, legislation to ensure that from the farmer to fisherman benefits. It’s not only about the big companies benefiting, but for every single Guyanese to benefit from the oil and gas sector,” the Minister explained.

Unit Development Agreement

A significant section of the agreement dealt with the partial overlapping between the Liza and Payara wells.

Minister Bharrat clarified that while part of the Liza licence covers a section of the Payara well, a Unit Development Agreement was negotiated to grant that section over to the Payara project.

It was noted that the Liza FPSO is not within the intersection of the two projects and the Government saw it prudent to not leave the overlapping section underdeveloped.

“Had we not agreed to do a Unit Development Agreement, which allows Exxon or EEPGL to draw those reserves from the Liza well into the Payara development, then it means those resources would have been wasted,” the Minister explained.

He expressed his appreciation for the work done by the President, Vice-President, Attorney General, and all stakeholders who brought the agreement into fruition.

The Payara licence was held up for nearly a year after numerous delays by the previous Administration. The PPP/C Government prioritised a thorough review upon assuming office in August.