Govt. Now Cementing Control Over Expenses For 14 New Oil Blocks

[Kaieteur News] According to the draft Production Sharing Agreement (PSA) released on Tuesday for deep water and shallow water blocks, the People’s Progressive Party Civic (PPPC) Government is proposing to implement a suite of international guidelines that oil companies must follow when preparing Field Development Plans.

These plans outline the steps a company will take to develop an oil or gas discovery.

In the draft documents, the government has set out clear terms on how much information it wants to see from prospective licence holders in these Field Development Plans. It also seeks to retain the right to make adjustments where necessary.

One of the proposed guidelines seeks to ensure oil companies provide a detailed account of their projected costs for oil projects, while including indicators such as project life cycle, internal rate of return, and breakeven cost at different rates of return.

Government is also proposing that future operators provide a detailed description of the development and production activities to be undertaken while giving an account of production facilities. It also wants to see a comprehensive outline of the socio -economic, technical, and environmental and safety related aspects of the development.

Oil companies are also likely to be required to provide the development objectives and development concept, including alternatives considered, tentative schedule, subsequent development stages, if any, and co-ordination of petroleum activities among other developments if relevant. Field Development Plans are also required to have a description of the surface outline of the area in which development and production operations will be carried out as well as location and water depth of the proposed wells and production facilities.

Government is also proposing to see a description of the offshore drilling unit and associated equipment that will be used to carry out the proposed development drilling activities. It also wants to review a description of the production platform(s), subsea wellheads and manifolds, pipelines, separation and storage facilities, measurement equipment and other production facilities that will be used to carry out the proposed development and production activities.

These development plans are also expected to feature a description of geological and reservoir engineering aspects including reserve estimates, production profiles, reservoir management practices to ensure maximum efficient recovery of the resources, resource conservation measures and production schedule.

There is also a proposed requirement for technical solutions aimed at preventing and minimizing environmentally harmful discharges and emissions, safety management systems, including estimates of maximum quantity of fuels and oil that will be stored in drilling units or production facilities.

Additionally, the Guyana Government wants to see a description of operational aspects including maintenance support vessels, onshore support facilities, plans for environmental monitoring and supervision of petroleum activities, as well as oil spill contingency plans and emergency response.

Along with an outline of the socio-economic impacts of proposed development including proposed local content plans, the administration is calling for the provision of preliminary estimates of abandonment and decommissioning cost and description of the disposal method.

Importantly, the State is demanding that oil companies provide detailed budget estimates and breakdown of tangible and intangible drilling costs, costs associated with facilities and infrastructure, and other operational expenses.

It also wants to see an anticipated production profile; and any other information required pursuant to the safety and environmental regulations in force at any time during the execution of the Agreement.

The draft document states that all technical models, particularly, static, and dynamic models, as well as economic models shall to the extent possible be submitted in a non-proprietary format.

Furthermore, the draft PSA states that the Development Plan shall be accompanied by an Environmental Impact Assessment Plan submitted under the Environmental Protection Act, 1996. The approval of the Development plan and issuance of the Production License is subject to the environmental authorizations to be issued by the Environmental Protection Agency.

Within 20 business days of receiving the application for Petroleum Production Licence and the accompanying Development Plan, the PSAs state that the Minister shall deem the application submitted if the submitted information meets the requirements previously outlined and is sufficiently accurate.

It goes on to state that the minister shall not deem the application for Petroleum Production Licence and the accompanying Development Plan submitted until the contractor has corrected all the deficiencies or issues he identified. The review process would commence following this.