The small Caribbean nation of Guyana is experiencing a colossal oil boom which keeps getting bigger and bigger. In January 2023, ExxonMobil, which is the operator, made yet another world-class oil discovery in the prolific 6.6-million-acre Stabroek Block offshore Guyana. The energy supermajor has made over 30 high-grade discoveries in the block since 2015. These endowed Exxon, which holds a 45% working interest in the Stabroek Block, and its partners, Hess owning 35% and CNOOC 25%, over 11 billion barrels of recoverable oil resources. The quality and volume of discoveries saw Exxon fast-track development of the Stabroek Block, which in as little as five years went from discovery to first oil. Guyana, which is enjoying explosive economic growth because of the oil boom, is on track to become a major global oil producer and exporter. There are many indicators that the former British colony’s petroleum potential is far greater than originally anticipated.
Ministry of Natural Resources data shows by the end of February 2023, Guyana was pumping 383,000 barrels per day from two Floating Production Storage and Offloading (FPSOs) vessels operating in the Liza oilfield in the Stabroek Block. That makes the former British colony the seventh-largest oil producer in Latin America and the Caribbean. It is believed that Exxon can, through optimizing operations, increase production from the two FPSOs operating in the Stabroek Block to 400,000 barrels per day. A third vessel FPSO Prosperity is en route to Guyana, having left its Singapore shipyard in February 2023. That vessel is destined for the Payara development, which on start-up in 2023, is targeting production of 220,000 barrels per day.
Guyana, according to Hess Chief Executive John Hess, is on track to be pumping 1.2 million barrels per day from six FPSOs in the Stabroek Block by 2027. That represents a substantial increase over previous estimates, which put expected petroleum output at 850,000 barrels per day by the end of 2027. This significant increase in estimated production is due to Exxon fast-tracking the development of the Stabroek Block, which the supermajor outlined as a priority in early December 2021. By mid-2022, Exxon was planning to drill 35 wells in the Stabroek Block during 2023, which will likely lead to further quality oil discoveries and potentially drive production to levels higher than anticipated. The January 2023 Fangtooth SE-1 discovery, according to Hess, is so significant it will underpin another development in the Stabroek Block to support an additional FPSO. That will not only bolster the volume of oil resources but support production growth to at least 1.2 million barrels per day and likely even more. Related: OPEC: The Oil Market Is Less Tight Than A Year Ago
While the prolific Stabroek Block is catching the global oil industry’s attention, it isn’t the only operation in offshore Guyana. Canadian junior explorer CGX Energy, operator of the Corentyne Block, during May 2022 announced a light oil and gas condensate discovery in the northern part of that block with the Kawa-1 wildcat well. The well was drilled to a total depth of 21,578 feet finding hydrocarbons in multiple zones with 228 feet of net pay in the Maastrichtian, 66 feet in the Campanian, 23 feet in the Santonian and 15 feet in the Coniacian intervals. CGX stated the results of further analysis of the well was consistent with other discoveries made in blocks neighboring the northern segment of the Corentyne Block, notably those in Block 58 offshore Suriname.
The Kawa-1 discovery supported CGX’s seismic and lithological studies paving the way for a second exploration well Wei-1, which was spudded in January 2023. Wei-1 is located roughly nine miles to the northwest of Kawa-1 in the northern segment of the Corentyne Block.
Source: CGX Energy.
It is anticipated that Wei-1, which is targeting the Maastrichtian, Campanian and Santonian intervals, will be drilled to a total depth of 20,500 feet over a period of five months at an estimated cost of $120 million to $140 million. Frontera, which holds a 68% working interest in the Corentyne Block and owns 77% of CGX, believes the petroleum fairway in the Stabroek Block extends through the northern tip of Corentyne into Block 58 offshore Suriname.
CGX, because of budget constraints, is currently in the process of relinquishing its interests in the Berbice and Demerara Blocks offshore Guyana, a procedure that commenced in September 2022. This forms parts of CGX and Frontera’s strategy of focusing on the Corentyne Block, which is believed to hold the most potential. It is, however, extremely likely that if the Wei-1 well proves successful that the companies will need to find a partner with deep pockets to farm into the Corentyne Block to fund appraisal and development activities.
Guyana’s 2022 licensing round has been underway since December 9, 2022, with bids closing on April 14, 2023. There are 14 offshore blocks for tender comprised of three deepwater blocks located to the northeast of the Exxon-operated Kaieteur Block and 11 shallow water blocks situated west of the Repsol-operated Kanuku Block. The shallow water blocks have a two-year exploration period which is extended to three years for deepwater blocks with an initial 10-year production period for both. The auction has attracted the interest of at least 10 energy companies including supermajors Shell, Petrobras and Chevron, all of which possess considerable capital to invest in what has become the world’s hottest frontier oil play.
Georgetown will introduce a new production-sharing agreement when awarding successful bids. The new PSA, while not as favorable as the previous contract secured by the Exxon-led consortium for the prolific Stabroek Block it still offers beneficial fiscal terms. The conditions of the new PSA include the application of a 10% royalty which, despite being five times greater than the 2% royalty applicable for the Stabroek Block, is still at the lower end of the scale for South America. Cost recovery oil is capped at 65% of gross production after the royalty is allocated, compared to 75% for the Stabroek contract. The new PSA retains the existing 50% profit-sharing arrangement after allowing for cost recovery and royalty payments. A 10% corporate income tax, which will go along to boosting government coffers if the oil auction is successful, has also been implemented.
By Matthew Smith for Oilprice.com
More Top Reads From Oilprice.com:
- Why Americans Aren’t Buying EVs
- Russia's Gasoline Exports Jump As African Buyers Replace Europe
- Canada’s Biggest Bank Becomes The World’s Top Financier Of Fossil Fuels