ExxonMobil Buys Two Oil Vessels Offshore Guyana to Cut Costs

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Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--Spending US$2.5 billion to purchase two floating production storage and offloading (FPSO) vessels at the end of their lease period is considered a cost-effective move for ExxonMobil Guyana Limited (EMGL), says the company's president, Alistair Routledge, on the Energy Perspectives Podcast. EMGL is a subsidiary of ExxonMobil Corporation (NYSE:XOM) (Spring, Texas).

EMGL's November 7 announcement that it had completed the purchase of the FPSO Prosperity followed a similar transaction in 2023 to purchase the FPSO Liza. Both were purchased from shipbuilder SBM Offshore (Schiphol, Netherlands) before the end of their maximum lease terms. The lease for Prosperity was scheduled to end in November 2025.

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Starting off by leasing helps to ensure efficient project completion, but in the long term, purchasing is more cost-effective because it limits the cash outflow, Routledge said. During the lease phase, both vessels proved themselves to be worth owning.

While Exxon will own the vessels, SBM will continue to be responsible at least for the operation of Prosperity through 2033. This agreement will allow the two companies to continue to pool their extensive knowledge of the field and of the operations.

SBM reports that the vessel began working for ExxonMobil in the Payara Field on November 14, 2023. In Exxon's oil-rich Stabroek Block offshore Guyana, Payara is the company's second oil project, discovered in 2017.

The first, Liza-1, was announced in May 2015. Exxon initiated exploration activities in Stabroek in 2008.

Earlier in 2024, Exxon announced its sixth Stabroek field, the Whiptail development, is expected to add 250,000 barrels per day of capacity by the end of 2027. The company says that Whiptail's FPSO, to be named Jaguar, is under construction.

Additionally, Exxon says, "Construction is underway on FPSOs for the Yellowtail and Uaru projects, with Yellowtail anticipated to start production in 2025 and Uaru targeted in 2026." Yellowtail is the company's 13th Stabroek discovery, and Uaru is its 16th.

With 18 total Stabroek discoveries (Yellowtail-2 the 17th and Redtail, announced in 2020, the 18th), Exxon announced in November its consortium, including Hess Corporation (NYSE:HES) (New York, New York) and CNOOC (Beijing), had reached 500 million barrels of production over the field's life. With Uaru and Yellowtail starting production in 2026 and 2027, respectively, the consortium expects 2027 daily production to reach 1.3 million barrels per day of oil by Q4 of that year.

A 2016 Production Sharing Agreement (PSA) stipulates that Exxon and partners Hess and CNOOC do not pay taxes to Guyana. Instead, after Exxon collects 75% of revenues to cover operating costs, the rest is divided up among Guyana and the partners. And from that, Exxon pays Guyana a 2% royalty fee.

Muddy Waters
As a side note, the future ownership of Hess is in dispute, specifically regarding its interest in Stabroek. Chevron Corporation's (NYSE:CVX) (San Ramon, California) proposed US$53 billion purchase of Hess, aimed at expanding that oil giant's options in the formation, is being challenged by Exxon. Exxon says it has first option on Hess's Stabroek share, and that the share can't be included in the sale to Chevron.

Chevron, for its part, says completion of the deal is contingent on the Guyana acreage being included. The companies are currently locked in an arbitration battle. A hearing on the dispute has been scheduled for May 2025.

Hess stockholders in May narrowly approved the sale, with 51% voting in favor. In September, the purchase passed muster with the Federal Trade Commission, as long as CEO John B. Hess is not named to the Chevron board of directors. He can, however, act in an advisory capacity.

The FTC's concerns with Hess are similar to those with Pioneer CEO Scott Sheffield, in that company's purchase by Exxon: Alleged price collusion with OPEC+.

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