Hess confident Govt. will maintain lopsided contract
News
…tells investors of State’s support for faster oil production
Kaieteur News – The Guyana Government is using a consultant—Michael Porter—that was foisted on it by Stabroek Block Operator and partner, Hess Corporation, to develop a country plan.
Additionally, the People’s Progressive Party/Civic Administration is in fact, encouraging the accelerated development of the oil resources offshore under the same provisions of the Production Sharing Agreement, since it is a country where “contract sanctity is honoured.”
These were among the views expressed by Hess Corporation Chief Executive Officer, John Hess, who during the 38th Strategic Decisions Conference 2022—organised by Bernstein Anonymous—sought to impress on stakeholders, the company’s decision to remain steadfast.
Hess Corporation CEO, John Hess (left) and the Moderator at the 38th Strategic Decisions Conference 2020 – organised by Bernstein Anonymous.
According to Hess, Guyana—a former British Colony—is a jurisdiction where contract sanctity is honoured and that the companies are in fact responding to the desires of the administration, forging ahead with the oil operations ahead of schedule.
He told stakeholders present at the confab, “…this government that is running the country is very pro-business.”
Hess elucidated saying the Guyana Government in fact, “wants us accelerate investing in their oil resource so they can monetize it so they can lift the country out of poverty.”
According to Hess, “the country two years ago had a GDP per capita of Jordan, in the next five years, it will have GDP per capita superior to Brazil or Mexico, so Hess and ExxonMobil as well are working hard with the country to help them help themselves to build a sustainable economic value proposition.”
Addressing the accelerated development by the oil companies in the Stabroek Block, Hess noted that as it relates to the first Floating Production Storage and Offloading (FPSO) ship—the Liza Phase I called the Destiny—it had come in with nameplate of 120,000 barrels of oil per day (BOD), but that vessel has since been debottlenecked to where it is now running 140,000 BOD “and you know the prospects are for that to continue, so that’s ahead of schedule.”
Debottlenecking is the process of identifying specific areas and/or equipment in oil and gas facilities that limit the flow of product (otherwise known as bottlenecks) and optimising them so that overall capacity in the plant can be increased.As it relates to the Liza Phase II—the Unity—Hess reminded that with a capacity of 220,000 BOD, that vessel is currently ramping up production and is also ahead of schedule.
According to Hess, the third ship Payara was supposed to come on-stream at 220,000 BOD, in 2024 but that has since been moved up to the fourth quarter of 2023.
The Liza Destiny currently producing more than 20,000 barrels of oil per day above what it was designed for
With regards increased production from those vessels beyond nameplate capacity, Hess said, “I would say both Liza Phase II, the second ship, and Payara, the third ship, both have the opportunity to debottleneck to go up maybe another 10 percent just like Liza Phase I.”
On the fourth project—Yellowtail—Hess told the confab that development which recently approved is currently having its Hull built to accommodate some 250,000 BOD nameplate capacity representing the largest of the vessels to be put in operations thus far.
That development too is also ahead of schedule and will cost some US$10B, according to Hess.
“The offset to that is that we are developing over 900M barrels of oil resources where the other developments we are developing a lower amount,” he said, and added that “the breakeven for these four ships is between US$25 and US$45 Brent, and the Yellowtail project of itself is the best return on the industry today.”
Meanwhile, as it relates to the relationship between the oil companies and the administration, Hess revealed that, “we worked and encouraged them (government) to work with Michael Porter, independently of ExxonMobil and Hess, to where they have a country development plan.”
Such a plan, he said, would be focused on human development “which is really education and health care, infrastructure development.”
Additionally, he said the plan should also speak to “how do you tie Brazil to the Caribbean with a deep water port, also have a regional tie and a corridor, economically with Suriname, really to make them a logistical power house if you will, as a regional centre in the northern part of South America so they have a plant to do that and now they are starting to execute that.”
With this in mind, he disclosed that ExxonMobil “on behalf of our joint venture is working with the government.”
This, since “right now the electric plant in the country is based on diesel; we are going to convert that plant and build a new plant where the government will own and operate it but our joint venture will have 60 Million Cubic Feet per Day of natural gas fuelling it, it will be lower cost electricity for the people of Guyana as well as a lower carbon footprint that should come on in 2024.”
He added further, that the Guyana Government as part of its relationship with the oil companies is also working with the Mount Sinai hospital “as a strategic partner to help them modernise their healthcare system.”
According to Hess, “I would be very bullish about this really being a role model for how to develop oil the right way, in a sustainable way that benefits their citizens and brings economic prosperity to their citizens but we are early in the journey.”
