Global supermajor foresees further discoveries in Guyana’s prolific Stabroek Block
As Guyana’s offshore oil boom continues to gain momentum, energy website OilPrice.com is reporting that the ExxonMobil-led consortium operating the 6.6-million-acre Stabroek Block offshore stands to benefit the most.
According to the online publication, the global energy supermajor has made over 32 world-class discoveries in the Stabroek Block and is now pumping 360,000 barrels per day from the consortium’s operations in the Liza oilfield. This is a spectacular development considering that Exxon only made the first discovery in the Stabroek Block in May 2015.
The two latest discoveries were announced in October 2022, further underscoring the tremendous oil potential held by the Stabroek Block and offshore Guyana. While other drillers, like CGX Energy, have found oil in Guyana’s waters, it is Exxon that is best positioned to fully benefit from the former South American/Caribbean colony’s tremendous hydrocarbon potential.
OilPrice.com reports that, since 2015, 11 per cent of the crude oil discovered globally has been found in Guyana with the vast majority occurring in the Stabroek Block, where Exxon has estimated that it has found more than 11 billion barrels of oil resources. The publication anticipates that this number will keep growing, as the global energy supermajor makes further discoveries in the prolific Stabroek Block.
Guyana prioritised in Exxon’s capital plans
The tremendous success experienced by Exxon in Guyana is unmatched and saw the integrated energy company prioritising Guyana in its capital plans with its CEO, Darren Woods quoted as saying in February 2022 that offshore Guyana will form a key part of Exxon’s production growth with the current discoveries. Liam Mallon, president of ExxonMobil Upstream, advised that the supermajor is focused on acting as an essential partner for the government of Guyana to develop the country’s vast offshore hydrocarbon resources.
It has been reported that Exxon plans to invest US$20 billion to US$25 billion annually, up to 2027, with 70 per cent of that spending allocated to upstream operations with the Permian, Brazil, Guyana and LNG being the top priorities. Such a significant exploration plan will deliver dividends when the considerable petroleum potential of the Guyana-Suriname Basin is considered.
According to OilPrice.com, Exxon’s swathe of world-class oil discoveries in the Stabroek Block indicates that the US Geological Survey grossly under-estimated the basin’s petroleum potential. Exxon, while focused on the prolific Stabroek Block, has also acquired a 35 per cent interest in the Canje and Kaieteur Blocks in offshore Guyana, where it is the operator.
The oil company plans to drill more than 60 wells in offshore Guyana over a six-year period, as it seeks to exploit what is fast becoming a key driver of production growth. This includes a 35-well drilling campaign in the Stabroek Block starting during the third quarter of 2023, when the current 25 wells being targeted are completed with the plan expected to conclude by the end of 2028.
OilPrice.com says Exxon also plans to drill 12 wells on the Canje Block and another 12 on the Kaieteur Block over the same period. Both blocks are believed to possess considerable petroleum potential despite recent non-commercial discoveries and dry holes.
It has been estimated that Canje contains up to 10 billion barrels of undiscovered oil resources while Kaieteur could hold anywhere up to two billion barrels.
Guyana’s favourable break-even price
Guyana’s industry-low breakeven prices make it a highly profitable jurisdiction for Exxon, which was able to secure a very favourable production-sharing agreement with the national government in Georgetown. Liza Phase 1, which produced first oil on December 20, 2019 less than five years after the first exploration well was drilled, one of the fastest ramp-up periods witnessed, breaks even at US$35 per barrel Brent. That fell to US$25 per barrel Brent for Liza Phase 2, which pumped first oil in February 2022.
OilPrice.com says the Payara project, which will come online during 2023, is forecast to have a breakeven price of US$32 per barrel Brent, while the Yellowtail development is expected to break even at US$29 per barrel Brent. Those numbers highlight just how profitable oil production in the Stabroek Block is for Exxon, underscoring the crucial role Guyana will play in reducing the company-wide breakeven from US$41 per barrel in 2021 to US$35 a barrel by 2027.
As drilling techniques improve and additional infrastructure is developed in offshore Guyana, those breakeven prices will likely fall lower. Another compelling reason cited by the online publication for Exxon to prioritize developing its assets in offshore Guyana, is the high-quality oil being discovered in the Stabroek Block and pumped from the Liza oilfield.
Liza grade crude oil is light and sweet with an API gravity of 32 degrees and 0.58 per cent sulfur, meaning it is cheaper and easier to refine into high-grade fuels. The oil being produced has a low greenhouse gas intensity to extract, especially in comparison to heavier sourer varieties being produced in other South American countries, like Venezuela and Colombia.
Exxon, as part of its 2023 to 2027 Corporate Plan, intends to reduce the carbon intensity of upstream operations by 40 per cent to 50 per cent with growing production in Guyana slated to play a key role with those operations to have a greenhouse gas intensity that is 30 per cent less than the upstream average by 2027. Not only was Exxon able to secure a very favorable production sharing agreement with Georgetown which contributed to industry-low breakeven prices but production will keep expanding at a rapid clip making Guyana an important profit center.
After a substantial outcry, such an extremely beneficial production-sharing agreement will likely never be secured by any other energy company in Guyana.