Exxon is by far the best bet on Guyana’s offshore oil boom

Global energy supermajor ExxonMobil is one of the few Western energy companies to invest in the development of Guyana’s burgeoning oil industry. Since the first discovery of high-quality oil in 2015 in the 6.6 million acre Stabroek block, where Exxon is the operator and owns a 45% stake, the oil supermajor has experienced incredible success. At the end of 2020, as global oil companies tightened their belts and learned to live in a world under $ 50 a barrel, Exxon announced that it was focusing its capital spending on Guyanese offshore. This decision is bearing fruit for the world’s energy supermajor. Guyana is shaping up to be South America’s offshore drilling site and potentially the hottest in the world. In October 2021, Exxon announced its 23rd discovery of crude oil in the Stabroek block with the Cataback-1 well following the September discovery at the Pinktail well. The latest discovery as well as the wave of previous discoveries of high quality oil off Guyana saw Exxon upgrade your estimate recoverable oil resources in the Stabroek block, from an earlier estimate of over eight billion barrels, to 10 billion barrels.

Apart from the considerable success of the drilling and the increase in exploration to be released in the Stabroek block, the operations are proving to be very profitable. Hess, which owns a 30% stake in Stabroek and the remaining 25% owned by Chinese company CNOOC, said in February 2020 that Liza Phase One, which in December 2020 reached full production capacity of 120,000 barrels per day , has a weak equilibrium price of $ 35 per barrel. This is expected to drop further to a low of $ 25 a barrel when Liza’s phase two development goes live. The Liza Unity FPSO, which set sail from Singapore for Guyana in August 2021, is expected to begin operations in early 2022. The FPSO has installed a production capacity of 220,000 barrels per day and will develop approximately 600 million barrels of crude oil. in the field Liza.

Exxon is also developing the Payara Oil Field in the Stabroek block, located north of Liza one at a water depth of approximately 2,000 meters. The Payara field is expected to break even at $ 32 per barrel, highlighting the considerable profitability of operations in an environment where Brent sells for over $ 85 a barrel. It is expected that Payara will begin production in 2024 and have the capacity to pump 220,000 barrels of crude oil per day. This means that by mid-2024, Exxon plans to pump approximately 560,000 barrels of crude oil from the Stabroek block.

Most importantly, the combination of a low break-even price for the Stabroek block oil fields and a very favorable production sharing agreement with the Guyanese government, with a low royalty rate and the means to recoup development costs. , makes Guyana a very profitable jurisdiction for Exxon. The energy supermajor plans to further expand its operations in the Stabroek block by targeting the Yellowtail field as the next and fourth development. This was Exxon’s 13th oil discovery in the block and the 5,622-meter Yellowtail-1 well that drilled into what the company has classified as a new reservoir. The Yellowtail-2 well completed in the first half of 2020, which was the 17th oil discovery in the Stabroek block, confirmed the presence of the oil-bearing sandstone reservoir identified by the Yellowtail-1 well. According to Exxon, this project will include the nearby Redtail oil field which was discovered with the drilling of the Redtail-1 well completed in September 2020. Exxon predicts that by 2026, the Stabroek block will pump more than 750,000 barrels of crude oil per day. the development track associated with the significant exploration potential of the Stabroek block indicates that recoverable oil resources will continue to grow well beyond 10 billion barrels.

Stabroek is shaping up to be a critical asset for Exxon, not only because of the large volume of quality oil discoveries, but also because of the characteristics of the crude oil discovered and produced. Liza from Exxon quality crude oil has an API density of 32 degrees and a sulfur content of 0.58%. This not only means that it is easier and cheaper to refine than the heavy and super-heavy crude oil blends, which are typically found in onshore South America, but has a much lower carbon footprint than many other blends. when they are checked out. These characteristics are important in a world where governments are working feverishly to reduce their carbon footprints and keep global warming well below 2 degrees Celsius. This has seen tremendous pressure on global energy companies to become carbon neutral. After some resistance, Exxon made a commitment to reduce the carbon footprint of its operations by developing, as part of its upstream operations, low-carbon sources of fossil fuels. The development of the Stabroek block and the light sweet crude oil contained in its reservoirs is an important part of this strategy. This is especially important to consider when it is recognized that oil and natural gas will remain important sources of energy even in a world where global warming is limited to less than 2 degrees Celsius.

Guyana’s National Government in Georgetown Focuses on Securing Deeply Impoverished South American Nation benefits from the vast oil wealth discovered by Exxon since 2015. This includes not only sharing the profits generated by the Exxon-led consortium developing the Stabroek block, but also building infrastructure to supply energy to the rapidly growing economy of the United States. Guyana. Investment in oil production coupled with oil export revenues was responsible for the 43.5% increase in gross domestic product in 2020, at a time when all other regional economies contracted due to the pandemic. . The IMF expects Guyana economy to grow by an impressive 20% in 2021 as oil investment and production increase. Georgetown is looking for partners to build a 220-kilometer submarine pipeline from the Liza oil field to an onshore natural gas processing facility and gas-fired power plant. Exxon has provided guarantees to Georgetown that the pipeline will be able to transport 50 million cubic feet of natural gas per day from its Liza oil field by 2024. This will reduce Exxon’s need to flare natural gas produced by its Liza operations, which cost the supermajor $ 400 million in flaring costs earlier this year, thereby reducing the carbon footprint of Liza’s field. As additional infrastructure is developed for the oil industry, breakeven prices for energy projects in Guyana will drop, making it a very profitable and therefore attractive destination for foreign energy companies.

By Matthew Smith for Oil Octobers

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