Industry standards dictate that an oil company is expected to await the approval of the government on its Field Development Plans (FDP) before moving forward with any award of contracts related to that project. In the absence of doing so, the company risks losing billions of dollars if the project is not approved or if the authorities call for significant adjustments to the FDP.
In the case of ExxonMobil and its FDP for the Stabroek Block’s Payara project, one gets the impression that the company either had so much confidence that it would get the government’s approval or it was simply a case of putting the cart before the proverbial horse. Instead of awaiting government’s approval, ExxonMobil which submitted its Payara FDP since 2019, moved ahead with awarding contracts to SBM Offshore and other contractors for the construction of the Payara Floating Production Storage and Offloading (FPSO) vessel. Works began that year too. It should be noted that at the time this was done, the APNU+AFC regime was in power.
Now that considerable works have been completed on the FPSO, ExxonMobil recently disclosed that works have been suspended pending the requisite approval from the People’s Progressive Party / Civic (PPP/C) administration which made it clear that it intends to carefully peruse works that were previously done on reviewing Exxon’s Payara FDP. Once that process is completed to its satisfaction, only then will approval for Payara be awarded.
The approval process, however, has been anything but smooth. Currently, there are major environmental concerns that are dragging out discussions between the Energy Department and ExxonMobil. The issues pertain to the oil giant’s desire to have mechanisms in place which would allow it to flare gas as it deems necessary as well as the ability to dispose of water, the toxicity of which has not been determined by Exxon or local authorities.
Even though Minister of Natural Resources, Vickram Bharrat has indicated that approval is likely before month-end, Exxon is now playing it safe by pausing works on the FPSO.