ExxonMobil - Guyana Upstream Oil annd Gas Policy

ExxonMobil Comments
Esso Exploration & Production Guyana
January 2015
This presentation includes forward-looking statements. Actual future conditions (including economic conditions, energy demand, and energy supply) could differ materially due to changes in technology,
the development of new supply sources, political events, demographic changes, and other factors discussed herein (and in Item 1A of ExxonMobil’s latest report on Form 10-K or information set forth
under "factors affecting future results" on the "investors" page of our website at www.exxonmobil.com). This material is not to be reproduced without the permission of Exxon Mobil Corporation.
Stabroek History
• 1999 - Agreement signed with the Government of the Cooperative Republic of Guyana
• 2008 - Seismic planning and acquisition activities begin
• 2014 - Esso elected to enter into the next exploration period
• Projection
• Mobilization of drilling rig in February 2015
• Drilling to commence in March 2015
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Stabroek Block Area Background
• Challenging frontier,
unproven basin
• Area: 26,806 sq. km (~6.6M
acres )
• Water depth ranges from
200 – 3,000 meters
Liza
• Water Depth at Liza is~
1750 m.
• Total well depth is over
5500m
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Stabroek Block Drilling
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Attributes of an Effective and Sustainable
Hydrocarbon Investment Climate
1. Realizes the greatest value from the country’s hydrocarbon
resources
2. Provides structure and terms that are equitable to both
government and the investing companies
3. Ensures alignment between government and the investing
companies throughout the project life
4. Promotes a stable and sustainable business environment
5. Establishes a clear and practical framework to administer laws,
regulations, and agreements
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Attributes of an Effective and Sustainable
Hydrocarbon Investment Climate
1. Realizes the greatest value from the country’s hydrocarbon resources
• Create value through maximum economic recovery of hydrocarbon resources
– Structure and terms that promote effective resource development
– Duration of contract consistent with life of resource
– Incentives for incremental recovery projects and marginal field development
– Incentives for applying best technology including protection of proprietary rights
• Discover, develop, and produce resources in the most efficient, safe, and
environmentally sound manner
– Incentives for cost efficiency throughout all stages of the project life
– Access to capable workforce with practical local content requirements
– Open access to capital and currency markets
• Market-based, non-subsidized commodity pricing
• Limit number of forced investing company participants in individual projects
– Investing companies need material positions to justify allocation of best resources
and technology
• Generate growth in the local economies
– Development of local industries and communities
– Local jobs and training to increase skills of local workforce
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Attributes of an Effective and Sustainable
Hydrocarbon Investment Climate
2. Provides structure and terms that are equitable to both government
and the investing companies
• Government is the ultimate steward of the resource
• Recognition of the importance of equitable distribution of value across the
various regional government entities
• Investing companies’ share of value should reflect all their contributions to
create economic value from the resource, including:
– Capital investment
– Value chain integration
– Project management
– Technology
– Global operational expertise
• Investing companies’ profit potential should be commensurate with the risk that
they bear
– Should reflect the risk profile at the time of the investment decision
– Downside risk of the project should be balanced with participation in upside profit
potential
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Attributes of an Effective and Sustainable
Hydrocarbon Investment Climate
3. Ensures alignment between government and the investing companies
throughout the project life
• Equitable sharing of value through all stages of the project life-cycle, across a
range of outcomes and market conditions
– Extended periods of inequitable revenue sharing can result in misalignment
– Fiscal terms defined in advance that anticipate change and equitably rebalance
– Long-life projects may require adjustments to initial contractual terms – provided
those adjustments are reached through good faith negotiations and are mutually
agreed by all parties involved
• Maintain focus on value creation
• Structures that include investing equity participation by government promote
durable alignment over the project life
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Attributes of an Effective and Sustainable
Hydrocarbon Investment Climate
4. Promotes a stable and sustainable business environment
• Investing companies are equipped to manage inherent risks associated with
the hydrocarbon business
– Exploration risks
– Technical risks
– Project execution and operational risks
– Market risks (costs and prices)
• However, high degree of certainty regarding rights and terms required
– Rule of Law
– Contract Terms
– Legal Framework
– Fiscal Terms
• Use of international arbitration under neutral law to ensure equitable contract
dispute resolution for all parties
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Attributes of an Effective and Sustainable
Hydrocarbon Investment Climate
5. Establishes a clear and practical framework to administer laws,
regulations, and agreements
• Common understanding between government and the investing companies
with respect to:
– Fiscal terms
– Regulations
– Compliance
– Commodity prices
• Regulatory environments that are practical, efficiently managed, and effectively
coordinated between government agencies
– Balanced approach that supports responsible commercialization of hydrocarbon
resources
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Comments on the Draft Legislation
• ExxonMobil is pleased by the Government of Guyana’s overall supportive
position of the oil and gas industry and investment in the country.
• The draft Guyana National Oil and Gas Policy’s Core Principles are well
aligned with ExxonMobil’s Investment Climate Principles.
• We are also encouraged by the repeated commitment to transparency in the
document.
• ExxonMobil is supportive of the Government’s effort to ensure a stable and
comprehensive oil and gas policy is in place. We are ready to work with the
government in areas of the policy where we are well placed to contribute.
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