Guyana's Oil Boom To Gain Momentum In Second Half Of 2023

By Matthew Smith - May 21, 2023

• The ongoing development of the Stabroek Block by the Exxon-led consortium will deliver a tremendous economic and financial windfall for Georgetown.
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• The IMF forecasts a 37% y-o-y GDP growth for Guyana for 2023.
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• ExxonMobil’s Yellowtail project is expected to commence operations during 2025 and will boost Guyana’s oil production to nearly 900,000 barrels per day.

The impoverished South American micro-state Guyana is in the midst of an epic oil boom which has seen the former British colony emerge as the hottest frontier offshore drilling region. The ensuing economic boom created by surging oil production saw Guyana emerge as the world’s fastest growing economy reporting stunning double-digit GDP since 2020, which hit an incredible 62% for 2022. Guyana’s petroleum production has expanded at a stunning clip, growing from less than 100,000 barrels a day in early 2020 to nearly 400,000 barrels per day by the end of March 2023. Despite recent negative developments, Guyana’s epic oil boom will continue gaining momentum for at least another decade with the country on-track to be pumping 1.2 million barrels a day by 2027. Recent events point to further oil discoveries being made and that energy investment will continue growing both of which will boost Guyana’s reserves and oil production.

 It is U.S. energy supermajor ExxonMobil, and consortium partners Hess and CNOOC, which is at the heart of Guyana’s burgeoning oil boom. The integrated oil company has made over 35 oil discoveries in the 6.6-million-acre offshore Stabroek Block where it holds a 45% working interest and is the operator. Those have endowed Exxon and its partners with estimated oil resources of over 11 billion barrels. The supermajor continues to make discoveries in the Stabroek Block as it progresses its latest drilling campaign. 

The last discovery, which is the second for 2023 after the Fangtooth SE-1 well, was announced toward the end of April 2023. Exxon found oil with the Lancetfish-1 wildcat well which is located approximately four miles to the southeast of the January 2022 Fangtooth-1 discovery. Lancetfish-1 was drilled to a depth of 5,843 feet or 1,780 meters and found 92 feet, 28 meters of oil-bearing sandstone. According to Alistair Routledge, president of ExxonMobil Guyana, the discovery “demonstrate(s) the Stabroek block’s continued exploration potential”.  It points further oil discoveries being made despite the Kokwari-1 exploration also completed during April 2023 coming up dry.

The energy supermajor continues to prioritize development of the prolific Stabroek Block committing to investing $12.7 billion in the Uaru project, the fifth such operation to be developed by Exxon in the block. The Uaru project has been approved by Guyana’s government in Georgetown. The operation will have 10 drill centers with 44 production and injection wells targeting over 800 million barrels of oil resources. It is anticipated that Uaru will commence production during 2026 with the capacity to pump 250,000 barrels of oil per day.

Earlier in April 2023, the Prosperity Floating, Production, Storage, and Offloading vessel, known as an FPSO, arrived in Guyana’s waters. Prosperity will develop the Payara oilfield is located to the north of the Liza field, which analysts have described as the world’s most exciting frontier oil play. It is anticipated that Payara will start operations later this year to exploit a resource containing 600 million barrels of oil through 10 drill centers with 20 production and 21 injection wells. Payara has planned capacity to pump 220,000 barrels per day which will boost Guyana’s total production to over 600,000 barrels a day. 

Political Map of Guyana - Nations Online Project

Exxon also has the 250,000 barrel per day Yellowtail project planned, although a final investment decision, or FID, has yet to be made. If approved, Yellowtail is expected to commence operations during 2025 and will boost Guyana’s oil production to nearly 900,000 barrels per day. These developments indicate that the former British colony is on track to be pumping at least 1.2 million barrels of oil by 2027, securing Guyana’s position as the third largest oil producer in Latin America and the Caribbean. The prolific nature of the Stabroek Block with over 35 oil discoveries and 11 billion barrels of oil resources is why Exxon prioritized its development and has chosen to exit higher risk South American jurisdictions such as Colombia to concentrate on Guyana. 

While the Exxon led consortium operating the Stabroek Block is the key driver of Guyana’s massive oil boom it isn’t the only game in town. CGX Energy, a 78% owned subsidiary of Frontera Energy, announced in January 2022 the discovery of oil with the wildcat Kawa-1 well in the northern tip of the offshore Corentyne Block. Despite delays and drilling problems the Wei-1 well spudded during January 2023 has drilled to 19,142 feet compared to a planned depth of 20,500 feet with completion expected by the end of May 2023. The well to date has encountered multiple oil-bearing intervals in the Maastrichtian and Campanian formations with the presence of medium sweet 24.9 API oil. CGX has stated however that “It is not yet certain that the hydrocarbons encountered to date in the Well are yet sufficient to underpin commercial development on the Northern portion of the Corentyne Block.” The northern section of the block is believed to contain the same petroleum fairway that runs through the Stabroek Block and into neighboring Block 58 offshore Suriname where Apache and TotalEnergies have made five commercial discoveries.

The ongoing development of the Stabroek Block by the Exxon led consortium will deliver a tremendous economic and financial windfall for Georgetown. The IMF has forecast that Guyana’s economy will expand by a notable 37% for 2023 and then an incredible 45% next year securing the South American micro-state’s position as the world’s fastest growing economy. Oil from the Stabroek Block is delivering a tremendous financial windfall for Georgetown. According to Guyana’s central bank petroleum royalties and profits generated $201.5 million for April 2023 alone. The Ministry of Finance in January 2023 forecast that Guyana’s combined oil royalties and profits for the year will total $1.63 billion, which is a 31% increase over 2022. There is speculation that the former British colony’s revenue from oil could be even greater with the Lisa field now pumping around 400,000 barrels a day, well above nameplate capacity of 340,000 barrels daily.

By Matthew Smith for Oilprice.com

Guyana's Oil Boom Challenges OPEC+ Dominance

By Matthew Smith - Sep 08, 2023

• Guyana is expected to pump 1.2 million barrels of crude oil per day by 2027, surpassing many OPEC members, driven by Exxon's development of the Stabroek Block.
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• The high-quality light sweet crude oil, low breakeven prices, and successful exploration campaigns are attracting immense international interest in Guyana's oil sector.
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• Guyana's burgeoning oil production threatens to diminish OPEC Plus's influence, even as the cartel attempts to bring the country into its fold.

In a mere four years, Guyana went from first discovery to first oil, a rapid timeframe in an industry where it can take years to bring major energy projects online. The former British colony is now a major South American oil producer and global petroleum exporter. 

As a result, Guyana is benefiting from a tremendous economic windfall, with the country emerging as the world’s fastest-growing economy with 2022 gross domestic product (GDP) expanding by a stunning 62%. Industry consultancies and the government in Georgetown expect Guyana to be pumping 1.2 million barrels of crude oil per day by 2027, a figure greater than many OPEC members. Exxon’s commitment to developing the offshore 6.6-million-acre Stabroek Block indicates oil output could soar even higher. This has the potential to alter global energy market dynamics and challenge the price-making power of the OPEC Plus consortium.

Data from Guyana’s Ministry of Natural Resources shows the country of less than one million was lifting 351,600 barrels of oil per day at the end of July 2023. That production volume pumped by the Liza Destiny and Unity floating production storage and offloading vessels (FPSOs) is greater than their combined nameplate capacity of 340,000 barrels per day. Exxon, which holds a 45% stake in the Stabroek Block and is the operator, prioritized development of the block in late-2020 due to the Liza oilfield’s low breakeven price of $25 per barrel to $35 per barrel and high-quality light sweet crude oil. That saw the global energy supermajor ramp up activity with a large exploration drilling campaign that eventually yielded over 30 discoveries and more than 11 billion barrels of oil resources in the Stabroek Block.

Since the first oil discovery in the Stabroek Block was made in 2015, the Exxon-led consortium comprised of Hess, with a 30% interest, and CNOOC, holding a 25% stake, have approved six projects with the initial Liza phase-1 and 2 developments complete. There are four more operations being developed, which, on start-up, will significantly lift oil production to at least 1.2 million barrels per day, and perhaps more. These include the 220,000 barrel per day Payara operation, with the first oil slated for late 2023 and the 250,000 barrels per day Yellowtail project, which will commence operations in 2025. Earlier this year, the consortium approved the $12.7 billion 250,000 barrel-per-day Uaru project, which is expected to start production during 2026. In the latest news, Exxon and its partners in the prolific Stabroek Block announced they will proceed with the sixth development, the nearly $13 billion Whiptail project. This facility will consist of 72 wells with a nameplate production capacity of 250,000 barrels per day and commence operations in late 2027. 

Once all of those assets are operational, Exxon will have the capacity to lift just over 1.3 million barrels per day from the Stabroek Block. Each of those operations, like the functioning Liza Phase-1 and Phase-2 FPSOs, possesses the potential to pump more petroleum than the designated capacity. For this reason, oil output from the Stabroek Block could easily surpass the 1.3 million barrels expected. By 2027, Guyana’s petroleum output could very well surpass the forecast of 1.2 million barrels daily, which will see the country exceed the petroleum output of many OPEC members and become the world's 16th largest oil producer. 

The immense international interest in Guyana is being driven by a high exploration success rate and substantial offshore petroleum potential, which appears to exceed that estimated by the U.S. Geological Survey. The light sweet oil being discovered, with the Liza grade possessing an API gravity of 32 degrees and 0.58% sulfur content, is easier and cheaper for refineries to process into high-quality fuels further adding to offshore Guyana’s popularity. According to Rystad Energy, the carbon intensity of the oil being extracted is among some of the lowest globally. That is an extremely attractive attribute for foreign energy companies at a time when big oil is being pressured to sharply reduce emissions and become carbon neutral. Industry low breakeven prices, estimated by Rystad to average $28 per barrel, make operating in offshore Guyana highly profitable, especially with Brent selling for around $90 a barrel. 

For those reasons, Guyana’s rising petroleum output will not stop at 1.2 million or 1.3 million barrels per day, nor will discovered oil resources remain at around 11 billion barrels, both will expand at a solid clip. Earlier this year, Guyana’s Environmental Protection Agency greenlighted Exxon’s 35-well drilling campaign for the Stabroek Block, which will lead to further oil discoveries based on the supermajor’s success rate. Other foreign energy companies are investing in exploration assets and drilling activities in offshore Guyana. Georgetown’s pending first-time oil auction, which has been delayed multiple times since December 2022, captured considerable interest. Reportedly, Brazil’s national oil company Petrobras is eyeing investing in Guyana while French supermajor TotalEnergies, which made five commercial discoveries in nearby Block 58 offshore Suriname, has interests in Guyana’s Canje and Kanuku Blocks.

Guyana’s growing production and discovered oil resources will boost global supply at a crucial time, which will diminish the influence of the OPEC Plus cartel. In recognition of this and Guyana’s tremendous petroleum potential, OPEC is attempting to woo the former British colony to join its ranks. The cartel has invited representatives from Guyana to participate in its meetings in Europe but has yet to officially invite the country to join the cartel. Regardless, Georgetown appears reticent to join OPEC, especially with membership requiring Guyana to comply with various rules and regulations. Indeed, such a move would place limitations on Guyana’s oil industry by requiring compliance with OPEC Plus production quotas, a key reason regional neighbor Ecuador exited the cartel in 2020.

Guyana’s explosive arrival as a serious global oil producer, going from first discovery to first oil in a mere four years, will challenge OPEC’s dominance. When coupled with Brazil’s plans to become the world’s fourth largest producer, South America will reemerge as a major petroleum-producing region with the capability to challenge OPEC Plus’s role as a global price maker. These are all significant developments for the world’s largest oil consumer, the U.S., where Gulf Coast refineries, since 2019 when President Donald Trump ratcheted up sanctions against Venezuelan oil have been seeking alternate sources of supply. It will also blunt the Kingdom of Saudi Arabia’s at times antagonistic attitude toward the U.S., which is responsible for higher oil prices.

By Matthew Smith for Oilprice.com

THE NEW FRONTIER

More Oil Discoveries Boost Guyana’s Offshore Boom

By Matthew Smith - Jul 30, 2022

• Guyana has seen a string of oil discoveries, quickly positioning it as one of the world’s hottest offshore drilling locations.
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• ExxonMobil has led the charge, along with its partners Hess Corporation and CNOOC.
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• Guyana’s gross domestic product grew by just under 20% in 2021, and is on track to expand even further.

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The former British colony of Guyana, a nation whose economy was hit hard by the pandemic, has emerged as the world’s hottest offshore drilling location. Since 2015 global energy major ExxonMobil as well as its partners Hess Corporation and CNOOC have made a slew of quality oil discoveries in the offshore Stabroek Block which have delivered resources in excess of 11 billion barrels of oil. This is driving a massive economic boom for Guyana, which was among the poorest nations in Lain America and the Caribbean. According to the IMF, the micro-state’s gross domestic product grew by just under 20% during 2021 and is poised for further strong expansion. The substantial surge in oil prices which sees the international Brent benchmark up by 58% over the last year to be trading for $110 per barrel coupled with the push by big oil to decarbonize its operations are adding considerable momentum to the boom. Guyana’s government is expected to bank over $1 billion in oil revenues during 2022 which according to industry consultancy Rystad Energy will soar to $7.5 billion by the end of the decade. That will deliver a tremendous economic boom which will see Guyana’s economy grow fivefold over that period. Key to this tremendous economic opportunity is the rapid ramping up of crude oil production, with Exxon estimating that its operations will have the capacity to pump 1.2 million barrels per day by 2027, which is further oil discoveries. Exxon and its partners in the 6.6-million-acre Stabroek Block have made over 25 quality discoveries with the crude found being light and sweet with an API of 32 degrees and 0.58% sulfur content. The latest discoveries were at the Seabob and Kiru-Kiru wells in the Stabroek Block to the southeast of the Payara Project. Exxon also announced that production from the Liza oilfield in the Stabroek Block has exceeded the 340,000 barrels per day initially targeted. Earlier this month it was revealed that Exxon had lodged an application with Guyana’s Environmental Protection Agency to drill 35 exploration and appraisal wells in the Stabroek Block. When the energy supermajor’s exploration success in the block is considered along with the five discoveries made in the Stabroek Block earlier this year, the drilling campaign will make additional discoveries boosting the 11 billion barrels already discovered. That crude oil is also economic to extract. Breakeven prices range from $35 per barrel Brent for Liza Phase 1, $25 a barrel for Liza Phase 2, which recently came online, and $32 per barrel for the 220,000-barrel capacity Payara Project, which is scheduled to start production during 2024. 

 

While it is the Exxon-led consortium that is key to driving Guyana’s epic oil boom, which will see the Caribbean country become a leading oil producer, other international energy companies are also engaged in exploration drilling. British driller Tullow Oil, which is the operator of the world-class Jubilee field in offshore Guyana discovered in 2007, announced 37.5% partner Repsol, with TotalEnergies holding the remaining 25%, had spud the Beebei-Potaro well in the Kanuku Block. That wildcat well, which comes on the back of the 2020 Carapa medium oil discovery in the block where 13 feet of net oil pay was identified, is targeting a prospect that Repsol estimates contain around 200 million barrels of crude oil. The Kanuku Block lies below the southeastern tip of the Stabroek Block, where Exxon has made nearly all discoveries in offshore Guyana and is believed to lie on the same petroleum fairway. To the east of the Kanuku Block lies Block 58 offshore Suriname, where TotalEnergies and partner Apache have made five quality light oil discoveries with modelling estimating the block contains 6.5 billion barrels. Those factors, notably the slew of high-quality oil discoveries made by Exxon in the Southeastern tip of the Stabroek Block, bode well for further finds by Repsol and its partners in the Kanuku Block.

Related: U.S. Refiners Haven't Seen Fuel Demand Destruction

Most of the crude oil found so far, in offshore Guyana, has been medium to light and relatively sweet, meaning it is cheaper and easier to refine into high-quality low contaminant fuels such as gasoline and diesel. That means, particularly in comparison to neighboring Venezuela, Colombia, and Ecuador which all predominantly pump heavy sour crude oil grades, the petroleum being produced in Guyana has a low carbon footprint. Those characteristics are especially important in a world where there are significant global efforts to significantly reduce carbon emissions while ratcheting up pollution restrictions and regulations. Disappointingly for Tullow, its exploration wells in the Orinduik Block, Jethro-1 and Joe-1, found high-sulfur content heavy crude oil, which compared to the light sweet crude being pumped by Exxon from the Stabroek Block is less economically viable.

Guyana is a rapidly growing offshore drilling hotspot, accounting for nearly a fifth of discovered oil and natural gas resources globally and nearly a third of solely oil discoveries. The latest discoveries, made by Exxon and Repsol, coupled with growing light oil production will see Guyana become the third largest oil producer in Latin America after Brazil and then Mexico. That will deliver a tremendous economic windfall for the deeply impoverished South American nation which will grow with Georgetown focused on attracting greater energy investment and building urgently needed industry infrastructure.

By Matthew Smith for Oilprice.com

European And Indian Firms Show Interest In Guyana’s Oil Boom

By Tsvetana Paraskova - Jan 17, 2023,

European and Indian oil companies are reviewing the terms of Guyana’s first-ever licensing round as they consider bidding in the process that will award 14 shallow and deepwater offshore blocks in May 2023, Reuters reports, quoting sources with knowledge of the matter.

Last month, Guyana launched its first licensing round for offshore oil and gas exploration and production, which is expected to offer a different model of production sharing agreements than the ones in place with U.S. supermajor ExxonMobil, the first and biggest oil producer operating in Guyana. 

The government of Guyana says it is developing a new model to “reflect the indicative terms and guidelines for the licensing round as well as introduce comprehensive provisions reflective of the developments in the oil and gas industry and international best practices observed in other jurisdictions.”

Despite the still unfinished job with the new PSAs, companies from India and Europe are considering bidding in the round, hoping to obtain acreage in the world’s newest oil hotspot.

ONGC Videsh, the overseas investment arm of Indian state-run Oil and Natural Gas Corporation (ONGC), is considering a bid for some of the blocks up for grabs, while refiner Indian Oil Corporation evaluates working in Guyana in collaboration with ONGC Videsh, according to Reuters’ sources.

Guyana has become a hotspot for exploration and development in recent years after Exxon and its partners found more than 11 billion barrels of oil equivalent offshore the South American country.

Exxon helped make Guyana the latest oil-producing and oil-exporting nation in late 2019. Since 2015, when it first discovered oil offshore Guyana, Exxon has made more than 20 discoveries offshore Guyana.

By 2027, Exxon plans to produce more than 850,000 bpd of crude oil from Guyana’s offshore, the U.S. supermajor said in a presentation on its investor day in March 2022. Guyana is a strategically important development for Exxon this decade, together with the U.S. Permian Basin, Brazil, and LNG projects around the world, Exxon said last month.

 Oilprice.com

Exclusive-Exxon, Guyana in talks to return unexplored offshore oil areas


A replica of Exxon's Liza Unity production vessel is seen in the company's booth at Guyana Energy Conference and Expo in Georgetown

Wed, June 21, 2023 at 5:14 AM MDT·2 min read
By Sabrina Valle

HOUSTON (Reuters) -Exxon Mobil Corp and Guyana are in talks over which unexplored offshore areas will be returned to the government, people close to the discussions said, as the nascent oil nation seeks to attract new operators to the country.

The Exxon-led consortium that controls offshore production in Guyana this year was required to return 20% of unexplored acres, under the original 2016 production contract.

The acres will include parts of its crown jewel 6.6-million-acre (26,800 sq km) Stabroek block and two other blocks not yet in production.

Guyana wants to re-market the acreage to others to speed the country's economic development and reduce the Exxon group's dominance over its energy output. Officials aim to boost oil and gas production ahead of demands to cut carbon emissions to net zero by 2050.

Exxon is in compliance with the local legislation and in "ongoing discussions with the government regarding these requirements, in respect to both timing and area," a company spokesperson said.

Exxon and its partners Hess and CNOOC produce about 375,000 barrels of oil per day from two offshore vessels. The group has approved a total of $45 billion in outlays to triple its output by 2027 from five oil platforms.

CONTRACT FORCE MAJEURE

The relinquishment deadline for the 20% unexplored portion of the Stabroek block is due in October, one of the people close to the discussions said. The government agreed to an up to one year extension, citing difficulties during the COVID-19 pandemic that prevented some work.

Guyana's Energy Ministry did not immediately respond to requests for comment.

The consortium could return some of the areas as soon as the third quarter of this year, the people said.

The group separately aims to accelerate to as early as September the start up of the third oil production vessel, Prosperity, which will bring total production to 600,000 barrels of oil and gas per day in early 2024, the people said.

Guyana and the U.S.-Chinese group are also negotiating the return of about 20% of the unexplored areas of the group's other two blocks, Kaieteur and Canje, which have yet to start production.

The returned areas could be either included in a competitive auction or directly negotiated with other governments in bilateral agreements for oil exploration, one of the people said.

The Production and Sharing Agreement signed between Guyana and the Exxon-led group in 2016 allows for prospecting license extensions. But it requires at least 20% of unexplored or undeveloped areas be returned at the renewal.

Guyana plans to hold its first competitive oil blocks auction in August, which it expects to attract new operators to the country. It will offer 14 offshore blocks outside the Exxon group's domains.

(Reporting by Sabrina Valle; Editing by Lincoln Feast and Daniel Wallis)

UPDATE 3-Guyana, Exxon in talks to build gas pipeline to shore -minister

Tue, May 3, 2022,
By Sabrina Valle and Marianna Parraga




HOUSTON, May 3 (Reuters) - Guyana has started talks with U.S. Exxon Mobil Corp to build a more than 120-mile (190-km) natural gas pipeline from the company's offshore projects, Natural Resources Minister Vickram Bharrat said on Tuesday.

The tiny South American nation is trying to build infrastructure as part of an ambitious development plan that has followed over 30 oil and gas findings by an Exxon-led consortium, one of the world's largest reserve discoveries in the last decade with 11 billion barrels of recoverable resources.

Exxon is likely to participate in the project construction, Bharrat told Reuters on the sidelines of the Offshore Technology Conference in Houston. The pipeline would be used to bring to land up to 140 million cubic feet per day of the associated gas from Exxon's oil output in the Stabroek block, mostly for generating up to 300 megawatts of electricity.

Power demand in Guyana is forecast to triple in the next five years along with a fast-growing economy. The gas line is expected to have 120 miles offshore and another 10 to 15 miles onshore. A budget has not been set, but if enough gas is available, the line could also feed fertilizer plants, said Bharrat, who took part in a conference panel with Exxon's top executive in Guyana.

Investment in Guyana is also poised to grow exponentially in the coming years. The construction of the country's second onshore base is planned by 2023, Bharrat said.

The Exxon-led group currently pumps all the South American country's crude output - some 130,000 barrels per day (bpd) - since production started in 2019. Four projects at Stabroek have been sanctioned for a production potential of 1.2 million barrels per day of oil and gas by 2027.

In February, Guyana Vice President Bharrat Jagdeo told Reuters the country was considering creating a national oil company, while also engaged in talks with Middle Eastern firms to explore new offshore fields.

Guyana is leaning towards offering oil exploration areas outside of Exxon's blocks in a competitive bid, a process that could be done in parallel to the creation on a state oil company. If created, that national company would instead look for partners to explore and develop the new areas, Gopnauth Bobby Gossai, Guyana's senior petroleum coordinator, said in the same event.

A decision on how to award the unassigned blocks - one of which, located close to Suriname, has been identified as "Block C" - is still expected by September, Bharrat said.

Amid rising imported fuel prices, the country is also more eager to study over 20 proposals to build a modular refinery that could process some 20,000 bpd of crude in a first phase, the minister said. (Reporting by Sabrina Valle and Marianna Parraga in Houston; Writing by Arathy Somasekhar, Editing by Emelia Sithole-Matarise, Marguerita Choy and Richard Pullin)

Guyana's Oil Boom Is Changing The Global Energy Landscape

Editor OilPrice.com
Thu, August 31, 2023 

Since the discovery of 11 billion barrels of proven oil reserves offshore in 2015, Guyana’s oil industry has gone from strength to strength. The tiny Caribbean country has attracted billions in international investment in its energy sector, with billions more expected to follow thanks to several successes. And recent legislation passed by Guyana’s parliament is expected to encourage new production and ensure that the small country earns a significant share of its oil revenues in the coming decades.

Guyana, with a population of around 800,000 people is thought to be sitting on top of oil reserves with a value of more than half a trillion dollars. Following significant investment in exploration and production activities over the last decade, it can expect to produce around 1.2 million barrels of crude a day by 2028, according to current estimations. This is a significant increase from the current production rate of 400,000 bpd from two vessels. That’s equivalent to around 1.1 percent of the global supply, a contribution that was recently unthinkable in this previously untapped region. This figure means Guyana would be producing more oil per person than any country in the world.

So far, ExxonMobil Corp. has been the biggest investor in Guyana’s oil industry, dominating the exploration and drilling activities. In July, Guyana’s Environmental Protection Agency (EPA) approved an Exxon Mobil-led consortium to drill 35 new offshore exploration and appraisal wells. The consortium consists of Exxon, US oil company Hess, and China’s China National Offshore Oil Corporation. This allowed the consortium to drill wells within its 6.6-million-acre Stabroek offshore block. The EPA deemed that the drilling could be “conducted in accordance with good environmental practices, and in a manner that avoids, prevents and minimises any adverse effects which could result from the activity”.

In June, the consortium entered into discussions with Guyana about the return of 20 percent of unexplored or undeveloped areas in the blocks, as per the 2016 production agreement. This includes parts of the Stabroek block and the Kaieteur and Canje blocks. However, Exxon stated that it plans to continue oil and gas drilling even in a reduced area. It expects to begin this drilling in the third quarter of this year and continue through to 2028. This follows several successful drilling operations in recent years. Exxon stated, “The project is being developed to discover new and re-evaluate existing recoverable hydrocarbons from reservoirs in the Stabroek Block, thereby enabling potential future development projects.”

In August, the consortium announced plans to spend a further spend $12.93 billion to develop their sixth offshore oil project in the South American country, with the hope of starting production operations at the Whiptail project in 2027. To date, the consortium’s production activities have provided $2.8 billion in direct revenue to Guyana, as well as supported the creation of 4,400 jobs. The sixth project is much like the group’s $12.7-billion fifth project, Uaru, and is expected to provide an output of between 250,000 and 263,000 bpd. It expects to drill up to 72 wells commencing in 2024, continuing exploration through to 2030. The project could provide up to 540 jobs in the drilling and installation stages and between 100 and 180 during production activities, according to Exxon.

In terms of core markets, this year, Guyana has had success in capturing a larger share of the European market. Vessel monitoring data showed that Guyana’s crude exports to Europe in the first semester of the year increased to 215,000 bpd, equivalent to around 63 percent of the country’s total exports. Last year, Europe accounted for around 50 percent of Guyana’s crude exports. This rise in exports reflects the changing geopolitical structure of the global oil industry, with many European refiners looking for new crude suppliers following the sanctions introduced on Russian oil in 2022.


The ongoing war between Russia and Ukraine has meant that many refiners have had to establish new partnerships in alternative oil markets, with Guyana’s strong oil potential over the coming decades looking highly attractive for companies looking to change suppliers in the longer term. Much of Guyana’s crude has been traded in Rotterdam, according to the data. Apart from Europe, Guyana is also exporting to Asia, around 90,000 bpd and Brazil, 22,000 bpd. Meanwhile, there have been no exports to U.S. Gulf Coast's refiners so far in 2023.

Guyana is seeing a major influx of money into its economy following the development of its oil and gas sector, with reported earnings from royalties and profits of $439 million in the second quarter of this year. By the end of June, the country’s national oil fund reached a reported $1.72 billion. And Guyana hopes to raise this figure even further thanks to the passing of new oil legislation aimed at encouraging new production and increasing the country’s share of oil revenues.

By Felicity Bradstock for Oilprice.com

Guyana gas-to-power project to shave weeks off oil output, hit revenue

Fruit vendor organizes produce at a stand in Georgetown

Mon, Apr 8, 2024
By Sabrina Valle

GEORGETOWN (Reuters) - Guyana’s efforts to use its natural gas resources to fuel a power plant that would slash the South American nation's energy costs have snagged on construction delays and threaten to curtail the rising oil hotspot's revenue this year by about $1 billion.

The $1.9 billion gas-to-power project, Guyana's biggest effort to capitalize on its energy bounty, is embroiled in legal fights and risks cost overruns. The first phase of a 300-megawatt (MW) power plant is running six months behind schedule and full operation is not expected until the fourth quarter of 2025, officials have said.


Exxon Mobil, which operates all the oil and gas production in Guyana, is building a 140-mile (225-km) gas pipeline from its offshore Stabroek block to supply the government's project onshore: a power plant, a related natural gas processing facility and transmission lines.

The U.S. oil major's part of the project, the about $1 billion pipeline, will be ready by year-end as promised to Guyana, said Exxon Guyana country manager Alistair Routledge. That is despite having nothing to connect it to onshore because of delays on the works managed by the government.

The Stabroek block, site of the country's first commercial oil and gas discovery in 2015, currently produces crude - about 645,000 barrels per day (bpd). The new power plant will be the first to use the associated gas produced from the oil field that to date has been re-injected underground.

The gas pipeline completion will require Exxon to pause production in the third quarter at two oil production vessels to connect them to the undersea pipeline, Routledge said.

If the tie-in lasts four weeks, Exxon and its consortium partners Hess and China's CNOOC would have to halt up to 12 million barrels of oil output from two platforms that produce 400,000 bpd at peak levels.

Based on Guyana's recent sale at $85 per barrel, that could mean over $1 billion in deferred oil revenue.

An Exxon spokesperson last week declined to specify how long the production halt will last. Routledge had said the pipeline connection and maintenance works would take "weeks, not months."

The executive said Exxon is not worried about having to shut production this year for a project that will not be ready to accept the gas at least until sometime in 2025.

When the gas-fired power plant is ready is "a question of timing," said Routledge.

"It's hard to have all the facilities ready at the same time." As soon as the onshore facilities are ready, "the whole thing will start up and all those benefits will flow to the country," he said.

Guyana will miss the chance to slash its power costs this year because of the project delay. It imports expensive fuel oil for an aged and often faulty power facility. When fully running on natural gas, the new plant will reduce the nation's power costs by 50%, officials have said.

"Of course we are doing the best we can, but we have to be realistic," Winston Brassington, who coordinates the power project as a consultant for Guyana's Ministry of Natural Resources, said in an interview in February.

While it is not uncommon for major projects to run behind schedule, Guyana's government faces a presidential and parliamentary election next year and is keen to deliver tangible benefits to the nation's 750,000 residents.

"There is more pavement in the city," says fruit vendor Michael Bharrat, 23, when asked about the most visible signs of development brought by the nation's oil boom. "The government could be doing more to help poor people," he said.

Government officials are anxious to fulfill a 2020 election promise to cut residents' energy costs and want to use the gas for industries that can create jobs or for exports as liquefied natural gas.

The government has been pressing Exxon and its partners, which prior to this project have focused on oil, to develop the country's gas resources.

"There is a window of opportunity between now and the end of the decade to monetize and maximize the value of Guyana's natural gas resources," President Mohamed Irfaan Ali told oil executives during a conference in Georgetown in February. "We need to develop our gas now."

UNANSWERED QUESTIONS

Critics of the project say there are a lot of decisions yet to be made and little clarity over the next steps, including who will operate the power plant and market the gas-liquids such as propane produced by the related gas-processing facility.

Meanwhile, two contractors hired by the government for the project have filed for arbitration over costs overruns of $90 million and residents have filed lawsuits claiming unfair compensation for land taken to build the project.

“What rate will Guyana be paying for the unusable or unused gas? Is the gas sales agreement completed?" asked Elizabeth Hughes, a land owner whose family land was expropriated for the project. "There are so many questions unanswered, there is no transparency at all.”

Bharrat Jagdeo, Guyana's vice president, told Reuters in February the project is following its new schedule and will stay within its original budget.

"We believe this is nothing to worry about," Jagdeo said. "It is a two-year project, will take a few more months, but not a year" to complete.

Wally David, 66, a retired trolling boat mechanic, smiles when asked if the government he voted for in 2020 will deliver on its promise to build the gas-to-power project as promised.

"I think it will get done someday," he says from his home in Georgetown, where he complains a road construction project outside his house run by the government is behind schedule.

"Maybe in three, four years, just not now."

(Reporting by Sabrina Valle; Editing by Marguerita Choy)