by Following high-quality oil discoveries by the ExxonMobil-led offshore consortium Guyana, which have found at least 11 billion barrels of recoverable oil reserves, have put the impoverished South American country firmly on the global oil map. The basin between Guyana and Suriname is called the world’s most exciting oil frontier because it attracts considerable attention global energy companies. Despite the lack of industrial infrastructure and other constraints, there are clear signs that the oil boom that has given Guyana a huge economic windfall is poised to explode. Just about a week ago, Exxon announced two additional oil discoveries in the world-class 6.6 million hectare Stabroek Block offshore Guyana, which now has more than 30 discoveries in that block alone. Other energy companies are investing heavily in offshore Guyana, which has the lowest operating costs in South America. Guyana is poised to emerge before the end of this decade a a leading global oil producer and exporter.
Exxon’s the latest oil discoveries Offshore Guyana were with the Sailfin-1 and Yarrow-1 wells in the Stabroek block. Sailfin-1 encountered 312 feet of hydrocarbon-bearing sandstone, while Yarrow-1 found only 75 feet. This brings the number of discoveries made by the Exxon-led consortium in the Stabroek Block to 35 since 2015, where the energy supermajor is the operator with a 45 percent stake held by Hess and a 30 percent stake held by CNOOC.
Source: Hess Investor Relations Presentation May 2022.
A consortium led by Exxon ensured very favorable terms Georgetown to develop the Stabroek Block, with some analysts describing it as one of the cheapest production sharing deals ever. That’s why those operations will be very profitable for Exxon and partners Hess and CNOOC, given Brent’s projected low industry prices of $25-$35 a barrel. This is why Exxon is investing heavily in increasing operations in the Stabroek Block, with many projects ahead of schedule. The block is expected to become a major driver of growth for the global energy supermajor.
Exxon has increased its operations in the Stabroek Block with the Liza Phase 1 and Liza Phase 2 operations, which are now producing above nameplate capacity and pumping a total of about 360,000 barrels of oil per day. The integrated energy supermajor is working on other projects in Stabroek Block. These include the 220,000 barrels per day Payara project which accepted Government of Guyana in Georgetown during September 2020. It will add a third production, storage and offloading vessel named Prosperity to the two FPSOs working in the Liza oil field. Payara will have 41 wells, 20 production and 21 injection wells, which are expected to start up during 2023. Then there’s the Yellowtail development, with 51 wells planned, 26 production and 25 injection wells. Yellowtail, with a nameplate capacity of 250,000 barrels per day, will add a fourth FPSO to Exxon’s operations in the Stabroek Block. The project is expected to begin production in 2025. Exxon expects to pump one million barrels per day from the Stabroek block by 2030. Related: Saudi Arabia cuts oil prices in Asia
Guyana is getting the attention of international energy companies. Canadian intermediate oil producer Frontera Energy, which announced in May 2022 The discovery of light oil and condensate in the Corentyne Block with the Kawa-1 well has committed to spending $186 million in Guyana in 2022. That represents a $46 million increase from the driller’s original budget of $140 million. The northern part of the Corentyne block is adjacent to the prolific Stabroek block and is believed to share the oil channel of this block, which bodes well for further discoveries. Frontera owns 68 percent of the block, and the operator is subsidiary CGX Energy, which controls the remaining 32 percent.
Source: Frontera Energy August 2022 corporate presentation.
Of its 2022 Guyana budget of $186 million, the driller has allocated $51 million to the Kawa well, $100-130 million to the drilling of the Wei well and $5 million to the Guyana port project. Kawa-1 well encountered 228 feet of net pay, the geological structure of which has been identified as having similarities to oil discoveries in the adjacent Stabroek block. The Wei-1 well, approximately 9 kilometers northwest of Kawa-1, will be spudded during the fourth quarter of 2022, after CGX announced in July 2022 that drilling was to resume. Frontera confirmed its plans to drill the Wei-1 well in an August 2022 corporate presentation. The intermediate oil producer announced that drilling will begin in October 2022, subject to a third party releasing the drilling. CGX’s 3D seismic survey of the northern Corentyne block combined with the successful Kawa-1 well and nearby oil discoveries in the neighboring Stabroek Block in the northeast and Block 58 in Suriname to the west highlight the block’s considerable potential.
These latest developments indicate that with Guyana’s oil boom, the country will become a major oil producer in Latin America, one day a competitor close to Brazil, the region’s leading oil producer. To ensure that the former British colony’s oil industry continues to grow at an impressive pace, Georgetown is focusing on building the necessary infrastructure to support the oil industry. CGX began construction of Guyana’s first deepwater port on the country’s east coast on the Berbice River in 2021. a multi-million dollar facility, which has already cost the company $21.8 million and will be completed by 2023. When operational, the port will be a key piece of infrastructure supporting Guyana’s emerging oil boom and supporting two existing oil and gas ports as the country’s only deepwater facility. In October 2022, Georgetown announced a tender for Guyana’s first oil refinery. The Government of Guyana is seeking proposals to finance, design and build a 30,000 barrel per day facility on government land near the Berbice River, further cementing the importance of CGX’s port.
It is easy to understand Georgetown’s eagerness to ensure that the critical infrastructure needed by Guyana’s oil industry is built, given the considerable economic windfall already achieved. During the 2020 pandemic, when nearly every other country saw a collapse in economic growth, Guyana’s GDP skyrocketed 43.5%, which then grew by a further 23.8% in 2021. The IMF has predicted that Guyana’s GDP will grow by an impressive 57.8% in 2022, by far the fastest growth rate in the world, and Guyana’s economy has held this title since 2020. These impressive economic results will continue as Guyana’s oil production and exports continue to grow with the country pumping up to one million barrels of crude oil by 2027.
Matthew Smith, Oilprice.com
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