ExxonMobil’s local headquarters also referred to as the new operating centre under construction at Ogle, East Coast Demerara (ECD), is budgeted at US$160 million and this cost will be recovered through the oil produced offshore.
This is according to President of ExxonMobil Guyana Alistair Routledge who spoke at a press engagement on Thursday at ExxonMobil’s current operating centre in Kingston, Georgetown.
“It’s there solely to support the operations so the cost will be recovered in the cost recovery mechanism.
“That’s been clear all the way along with the previous administration and the current administration as we set up the project,” Routledge explained.
What does that mean?
Oil companies can only recover their costs when they start producing oil. As such, even if a company spends millions of dollars searching for oil but they are unsuccessful, they stand the costs alone.
But if they are successful, they are able to recover the money they invested through a mechanism known as “cost recovery”.
As per Guyana’s 2016 oil contract, the ExxonMobil’s local affiliate Esso Exploration and Production Guyana Limited (EEPGL) is able to recover up to 75 per cent of their costs when oil revenues are accumulated.
The remaining 25 per cent of revenues is split equally between the companies and the government; the government also gets an additional two per cent in royalties from total revenues. Since EEPGL, Hess and CNOOC are co-venturers in the Stabroek prolific block, where production has begun, they share the costs and profits based on their varying stakes in the projects.
The forthcoming operating centre at Ogle is viewed as part of the project and as such, its cost is recoverable.
Oil companies can only recover their costs when they start producing oil. As such, even if a company spends millions of dollars searching for oil but they are unsuccessful, they stand the costs alone.
And Routledge emphasised that this facility is no simple headquarters, but a facility integrally supporting offshore operations.
“I see the word HQ attached to it (but) to me, it’s not a headquarters, it’s an office that will support the offshore operations like this one (at Kingston) does today,” he explained.
Earlier this week, Opposition Parliamentarian Ganesh Mahipaul submitted a Motion to Parliament requesting information on whether this project is indeed cost recoverable. He also sought the cost of the project.
These answers were sought from Minister of Natural Resources Vickram Bharrat but they were all answered by Routledge on Thursday.
The forthcoming operating centre at Ogle is viewed as part of the project and as such, its cost is recoverable.
The facility, once completed, will help the company conduct real time monitoring of operations in the Stabroek Block offshore Guyana- where there is ongoing production of about 380,000 barrels of oil daily.
And Routledge emphasised that this facility is no simple headquarters, but a facility integrally supporting offshore operations.
Because this facility is cost recoverable, Routledge also noted that Guyana’s Ministry of Natural Resources gets monthly updates on the project.
The project should be completed by April 2024.
