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ExxonMobil - Hess wants to extend hold on Stabroek Block due to COVID – 19

Hess

Map showing the discoveries made to date on the Stabroek Block.

By Kiana Wilburg / Kaieteur News

GEORGETOWN
Petroleumworld 11 19 2021

Given that the life of the Stabroek Block’s exploration licence comes to an end in 2026, ExxonMobil’s affiliate, Esso Exploration and Production Guyana Limited (EEPGL), has sent the PPP/C Government an application to extend its hold on the block for more than 10 years. This request for extended time is based on operational hindrances that resulted from the effects COVID-19 pandemic.

Making this revelation to the international market was Exxon’s partner on the Stabroek block, Hess Corporation. Specifically, Hess’ Chief Operating Officer (COO), Greg Hill made the disclosure during his participation at Bank of America’s recently held Global Energy Conference. There, Hill spoke of the company’s exploration plans for the block and whether he believes the four and a half years left on the licence is enough time to fully explore the prospective resources of the Stabroek Block.

Hill said he is of the view that the Stabroek Block partners will have enough time to figure out what they have in other parts of the deep water concession given the drilling programme the partners have in the pipeline. The COO said, “…we feel confident that with the active programme of 12 exploration wells planned for next year and 12 (done) this year and (if we) continue this pace, then we can definitely prosecute most of what we want to on the block.”

The Chief Operating Officer also alluded that the company is not worried about the activation of relinquishment provisions come 2026 since an application is before the Guyana government for an extension. He said, “Basically, how relinquishment works is you have to lock down all the acreage you expect to develop with a licence and when the time comes, that is 2026, you relinquish (or return to the State) what you don’t want out of that…The operator has applied for an extension due to the effects COVID-19 on that 2026 (timeline) and we will see if we actually get that but there could be an extension to the exploration licence.”

ABUSIVE

Industry stakeholders such as Chartered Accountant and Attorney-at-Law, Christopher Ram have been extremely critical over the years about the arrangements for relinquishment in the Stabroek Block Production Sharing Agreement (PSC).

Just recently, Ram told Kaieteur News that when it comes to relinquishment, both the Coalition and the PPP/C Governments have utilized a loophole in the nation’s Petroleum Act to the benefit of ExxonMobil and its partners, Hess Corporation and CNOOC.

Ram explained that the initial period of a prospecting licence is four years. Such licence is subject to two renewals of three years each. Expounding further, the lawyer said, “The standard provision in the Petroleum Act is that on an application for first renewal at the end of the four years, the company is required to give up 50 percent of the blocks granted and on an application for the second renewal, which is at the end of seven years, it is required to give up 25 percent of the remaining concession.”

He added, “At the end of the 10 years, which brings you to the end of the third renewal period, the company has to give up all portions of the block not subject to a production licence…”

He noted that under normal circumstances, ExxonMobil would have been expected to follow the foregoing process. Instead, through the reckless abuse of the loophole in the law which obliges that the subject Minister can vary the relinquishment arrangements, no relinquishment was required after four years and only 20 percent after the end of seven years, compared with 75 percent in normal situations.

But based on the recent revelations made by Hess’ COO, the relinquishment provision is more generous than Ram predicted. Instead of 20 percent being given up at seven years, none will be required. Instead, Exxon and its partners will only be required to return a small portion of the block at the end of 10 years.

Ram has also expressed the fear that with little oversight and undisclosed arrangements between ExxonMobil and the Government, the portion to be given up can be subject to any form of machination via production licenses. He said, “ExxonMobil and its friends are pushing for more and more explorations licenses so that by the time the first relinquishment is due…, the 20% would be of a considerably reduced portion of the Stabroek Block.” To date, ExxonMobil has made over 20 significant discoveries in the Stabroek Block. It is also rushing to find more oil discoveries before the end of the year and no doubt before 2026.

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