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The Liza Unity, Floating Production Storage Offloading vessel.<\/p>\n\n\n\n
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Exxon
The Liza Unity, Floating Production Storage Offloading vessel.<\/p>\n\n\n\n
By Kaieteur News<\/p>\n\n\n\n
GEORGETOWN
Petroleumworld 11 22 2021<\/p>\n\n\n\n
The Oil and Gas Governance Network (OGGN), a diaspora group, is accusing the ExxonMobil-led consortium operating in the Stabroek Block of inflating its Field Development costs for the Liza 1 and 2 developments by some 25 percent or some US$2.4 billion.<\/p>\n\n\n\n
Additionally, the group charges that before the government approves anymore projects such as Yellowtail, the fourth project, it should ensure the auditing and verification of the first three oil projects in the Stabroek Block are completed.\u201d
To this end, the OGGN in alluding to the government\u2019s announced promise to audit the US$9.5 billion in capital costs\u2014outside the audit window that is now closed\u2014noted that \u201cit (Government) hasn\u2019t explained how it will enforce any discrepancies found given the timeframe to audit Liza 1 and Liza 2, the first 2 projects in the Stabroek Block, have expired.\u201d
According to OGGN, if \u201cwe consider the history of the US$460 million pre-contract costs audit, then the outlook for the audit of the US$9.5 billion in capital costs appears bleak. Chris Ram (local chartered accountant) in May 2018 raised serious concerns about the pre-contract costs for the Stabroek Block. He used the oil companies\u2019 own financial statements to show the pre-contract costs were overstated by at least 25 percent or US$92 million.\u201d
It was pointed out that it then took about 19 months for the government to hire a UK firm, IHS Markit, in December 2019 to start the audit.
As such, OGGN observed, \u201cit is now November 2021, and the results of the pre-contract costs audit have still not been released. It has been 3.5 years from when legitimate concerns were raised about pre-contracts cost and we still don\u2019t have any answers.\u201d
According to OGGN, the capital cost of Liza 1 is US$3.5 billion, and Liza 2 is US$6 billion for a total of US$9.5 billion.
Notably, it was observed that the Liza 1 capital cost was originally stated at US$4.4 billion and after concerns were raised in the media by Dr. Jan Mangal and others it dropped to US$3.7 billion before settling at US$3.5 billion. According to OGGN, that \u201cis an initial overstatement of about 26 percent.\u201d
Additionally, it was observed that the breakeven cost for the Liza 2 oilfield is US$25 per barrel but Liza 1 breakeven cost is US$35 barrel. To this end, it was noted that on a per barrel basis, Liza 2 capital cost is US$10 per barrel and Liza 1 per barrel capital cost is US$7.78.
OGGN has since noted that \u201cgiven these different breakeven costs, one would have expected Liza 2 capital cost to be lower than Liza 1\u2026Not to mention that on the second project, Liza 2, one would expect the oil companies to be more efficient given the lessons they would have learnt from the first project.\u201d
According to the local oil and gas stakeholder, \u201cif we apply the per barrel capital cost of Liza 1 to Liza 2, we see Liza 2 is about 29 percent more expensive.\u201d
The group noted therefore, that this is a red flag that should have triggered an urgent response to initiate an audit.
Additionally, OGGN iterated that from its outlined scenarios, it appears that the oil companies may be padding their costs by at least 25 percent. The grouping has since posited, \u201c\u2026if we apply a 25 percent padding to the US$6 billion capital cost of Liza 2, then was it padded by US$1.2 billion.\u201d
Similarly, \u201cif we also apply the 25 percent to US$9 billion capital cost for Payara, was it padded it by US$1.8 billion; that would be total padding of US$3 billion which is about 2 times the cost of Guyana\u2019s annual budget.\u201d
As such, OGGN is calling on the government to release the audit of the US$460 million pre-contract costs immediately. Additionally, OGGN said the government should state publicly when it plans to begin the audit of the US$9.5 billion in capital costs of Liza 1 and 2 and when this process is expected to be concluded.
The group has also requested of government to provide additional information, such as who will conduct the audit.<\/p>\n\n\n\n
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By Kaieteur News <\/strong><\/a><\/em><\/strong><\/a><\/em><\/a><\/em><\/p>\n\n\n\n Copyright \u00a91999-2021 Petroleumworld or respective author or news agency. All rights reserved.<\/p>\n\n\n\n Petroleumworld.com Copyright \u00a92021 Petroleumworld.<\/p>\n","protected":false},"excerpt":{"rendered":" ExxonThe Liza Unity, Floating Production Storage Offloading vessel. By Kaieteur News GEORGETOWNPetroleumworld 11 22 2021 The Oil and Gas Governance Network (OGGN), a diaspora group, is accusing the ExxonMobil-led consortium operating in the Stabroek Block of inflating its Field Development costs for the Liza 1 and 2 developments by some 25 percent or some US$2.4 billion. …<\/p>\n
kaieteurnewsonline.com<\/a> 11 19 2021<\/a><\/p>\n\n\n\n