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Matthew Smith

Matthew Smith

Matthew Smith is Oilprice.com's Latin-America correspondent. Matthew is a veteran investor and investment management professional. He obtained a Master of Law degree and is currently located…

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Exxon May Emerge As The Biggest Winner In Guyana’s Oil Boom

  • Guyana is quickly becoming one of the hottest new oil frontiers on the planet.
  • It is estimated that over 11 billion barrels of recoverable oil resources have been discovered in the Stabroek Block.
  • Exxon is emerging as one of the biggest winners in this new oil hotspot.
Guyana Oil Boom

The impoverished tiny South American country of Guyana has emerged as one of the continent’s top oil producers and is poised to become a leading global energy exporter. Since 2015 an Exxon Mobil-led consortium has made a swathe of high-quality oil discoveries in offshore Guyana in the 6.6-million-acre Stabroek Block, with the latest announced in July 2022. It is estimated those finds have uncovered nearly 11 billion barrels of recoverable oil resources in the Stabroek Block with further oil discoveries to come. 

Exxon, the operator who owns 45% of the block with Hess holding 30% and CNOOC the remaining 25%, is developing the Stabroek Block at a lightning pace. The Liza oilfield, located in the southeast of the block, is currently pumping around 360,000 barrels of crude oil per day from two floating production storage and offloading (FPSO) vessels; Liza Destiny and Liza Unity. The petroleum pumped from the Liza field is light and sweet, with an API gravity of 32 degrees and 0.58% sulfur content. That makes it easier and cheaper to extract as well as refine. This means Liza-grade crude oil is cheaper and easier to produce as well as refine into high-quality fuels, giving it a lower carbon footprint compared to heavier sourer grades, particularly those produced in neighboring Venezuela. 

As a result, the oil discovered and produced in offshore Guyana is particularly attractive to global energy companies, which are under considerable pressure to significantly reduce emissions and decarbonize their operations. Industry low costs, as reflected by offshore Guyana’s forecast average breakeven price of $35 per barrel, make the deeply impoverished country one of the lowest cost and hence most profitable jurisdictions in Latin America. These factors have seen offshore Guyana emerge as what industry insiders are calling the world’s most exciting oil frontier. That is driving even greater investment inflows into Guyana’s hydrocarbon sector from foreign energy companies.

In November 2020, at a time when Brent was selling for around $45 per barrel, Exxon announced it was prioritizing Guyana, along with the Permian Basin and Brazil, for capital spending because of the jurisdiction’s considerable potential. Exxon’s ongoing exploitation of the Stabroek Block will play a vital role in the company’s plans to aggressively decarbonize its operations after being heavily criticized for ignoring the perils of climate change. In 2021, Exxon announced that it intended to reduce greenhouse gas emissions from its upstream operations by between 40% and 50% by 2030, which will in part occur because of the energy supermajor’s commitment to end flaring.

These reasons see Exxon pressing ahead with developing the Stabroek Block and exploration activities in other blocks where it holds a stake in offshore Guyana. During 2021 the energy supermajor announced it intends to spend $20 billion to $25 billion on capital expenditures between 2022 and 2027, with 60% of that investment directed to Guyana, Brazil, the Permian and its LNG as well as chemical businesses. The 220,000 barrel per day Payara project is currently under development with it approximately five months ahead of schedule and slated to commence production before the end of 2023. Exxon is also advancing the Yellowtail project, which is forecast to come online during 2025 with a capacity of 250,000 barrels per day. The completion of Payara and Yellowtail will see Stabroek Block producing at least 810,000 barrels per day by the end of 2025, potentially even more. 

Industry analysts estimate that Guyana will be pumping at least one million barrels of crude oil daily by 2027, while some believe that figure could be higher, reaching 1.2 million barrels. When that occurs, Guyana will overtake Colombia to become the third largest oil producer in Latin America and the Caribbean. Recent discoveries in the basin, along with estimates of their hydrocarbon potential, point to the combined recoverable oil resources of offshore Guyana and Suriname being more than 18 billion barrels of oil equivalent. That number is significantly higher than the mean 13.6 billion barrels of undiscovered oil resources estimated by the U.S. Geological Survey in 2012.

Guyana’s recoverable oil resources will keep growing as further discoveries occur. In June 2022, Exxon spudded the Banjo-1 wildcat well in the Stabroek Block and as of early September 2022 drilling activity was continuing. The energy supermajor also started drilling the Sailfin-1 well in the Stabroek Block during September 2022, making it the ninth wildcat well so far this year. Further wells are planned with Exxon holding a large inventory of prospective drilling targets in offshore Guyana. That latest exploration activity comes on the back of the integrated energy company announcing two oil discoveries in the Stabroek Block during July 2022, at the Seabob and Kiru-Kiru wells.

These developments point to Guyana becoming not only a major oil producer and exporter but that it has the potential to amass significant oil reserves. There is even speculation, based on the current rate of drilling success, that eventually Guyana’s oil reserves could overtake Brazil’s, seeing it possess the second largest oil reserves in Latin America and the Caribbean behind Venezuela. Exxon and its partners in the Stabroek Block are ideally placed to profit from Guyana’s rapidly expanding offshore oil boom.

By Matthew Smith for Oilprice.com

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  • Mamdouh Salameh on October 02 2022 said:
    There is no doubt that Guyana could become the most lucrative investment for ExxonMobil enabling the oil supermajor not only to improve its financial balance but also lift the size of reserves at its disposal and thus enhance its market valuation.

    This is of great significance to ExxonMobil at a time when the balance of power in the global oil market has been shifting overwhelmingly in favour of the National Oil Companies (NOCs) at the expense of the International Oil companies (IOCs). This is partly due to a resurgent resource nationalism.

    Whilst top IOCs such as Total, BP, Shell, Chevron, ENI, ConocoPhillips, ExxonMobil, Equinore and Repsol have reserve estimated to last from 8.0-10.5 years, the NOCs of countries like Saudi Arabia, Iraq, UAE, Venezuela, Russia and Kuwait to name but a few have access to proven reserves which could last from 66-91 years.

    Between 1998 and 2002, top IOCs replaced 99.7% of oil produced. This declined to 51.7% between 2003 and 2007. Overall average IOCs’ reserves in place have fallen by 25% since 2015 with less than 10 years of total annual production available. For instance, oil supermajor Shell expects to have produced 75% of its current proven oil and gas reserves by 2030, and only around 3% after 2040.

    Moreover, the fact that the crude produced is light and sweet with an API of 32 degrees and 0.58% sulfur content will enable ExxonMobil to meet its target of reducing greenhouse gas emissions from its upstream operations by between 40% and 50% by 2030.

    However, we shouldn’t exaggerate the oil potential of Guyana. In the scheme of things recoverable reserves of 11.0 billion barrels while highly beneficial for a poor country like Guyana don’t suddenly make it one of the hottest new oil frontiers on the planet and a leading global oil exporter.

    Based on an estimated production of 1.0 million barrels a day (mbd), Guyana’s entire recoverable reserves could be depleted totally in less than 24 years allowing for the average annual depletion rate of 6%.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • George Doolittle on October 02 2022 said:
    Hi there I'm an environmentalist from Venezuela and we care!

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