Guyana ramps up plans for selling crude oil

Last Updated on Wednesday, 6 November 2019, 22:10 by Writer

Guyana’s preparations for the start of commercial oil production and lifting is moving apace and these include having a third party aboard the floating production, storage and offloading (FPSO) vessel overseeing the movement of oil, Head of the Ministry of the Presidency’s Department of Energy, Dr. Mark Bynoe said Wednesday.

“It is the government’s desire to be pursuing a third-party verifier on the FPSO so even outside of what is stated within the crude oil lifting agreement, to be able to preserve the integrity of the system and also to reduce potential value-leakage is for us to have someone who could verify so in the event there is any issue when the fuel is shipped, whether quality or quantity-wise, we will be able to have our own evidence to push back against that,” he said.

The Energy Department boss said each batch is expected to be one million barrels accumulated from about 120,000 barrels per day every eight or 10 days. He added that each partner – the Guyana government, China National Oil Company, Hess and ExxxonMobil – is entitled to lifts to liquidate their costs.

Dr. Bynoe said Guyana would begin earning the two percent royalty from the first day of oil production and an additional 12.5 percent profit oil. He suggested that Guyana would be selling its crude on spot pricing (or current pricing) rather than hedging based on the highest available prices. “Guyana did have some experiences with hedging in the gold sector which didn’t work out so well for us so we would be cautious about going into hedging at this stage.”

He also announced that several arrangements are being put in place including an industry standard in the form of a crude oil lifting agreement which is expected to be completed next week and signed by the government as a crude-lifter along with the Stabroek co-venturers. He said the model, drawn from the Association of International Petroleum Negotiators, has been applied and customised to take the Guyanese context into consideration.

Dr. Bynoe said contracts have been signed already with a crude marketing specialist and a commercial specialist to prepare the energy department for First Oil. Additionally, he said steps were also being taken to have a cost recovery audit contract and measures for entitlement and reconciliation in collaboration with the co-venturers.

The Department of Energy is also working with the Guyana National Bureau of Standards to provide training and oversight for measurement, calibration, and testing through an American Petroleum Institute programme and Bureau Veritas.

Dr. Bynoe explained that the first entitlement, expected in February or March 2020, would go to ExxonMobil which is an operator, lifter, and refiner for the company to remove impurities that would impact on the price, quality, and integrity of crude.