Despite the dire predictions of peak oil demand, which will is expected to arrive during the next decade as the world transitions to a low-carbon economy, international energy companies are investing heavily in fossil fuel exploration and production. One region which has caught the world by surprise and is attracting significant attention is the Guyana-Suriname Basin. A swathe of world-class discoveries by ExxonMobil in offshore Guyana sparked considerable interest in the Guyana-Suriname Basin, which after poor drilling results during the 1960s and 1970s saw it largely ignored by energy companies. Recent discoveries with estimated recoverable oil resources of more than 11 billion barrels in the Stabroek Block offshore Guyana alone indicates the U.S. Geological Survey grossly underestimated the basin’s undiscovered oil resources. There are signs that the sedimentary basin could indeed be the world’s last great offshore oil boom.
In a May 2001 report, the USGS estimated that the Guyana-Suriname Basin held somewhere between 2.8 billion and 32.6 billion barrels of undiscovered oil resources with mean resources of 15.2 billion barrels. The latest oil discoveries, since 2020, point to that number being far lower than the actual petroleum potential that exists in the sedimentary basin. Exxon has found at least 11 billion barrels of technically recoverable oil resources in the Stabroek Block offshore Guyana while nearby Block 58 offshore Suriname is believed to contain as much as 6.5 billion barrels. Oil discoveries in those two blocks alone, out of more than 30 blocks across the Guyana-Suriname Basin, are estimated to total more than 18.5 billion barrels which is substantially higher than the USGS mean of 15.2 billion barrels. The latest discoveries made since the start of 2022 in the Stabroek and Corentyne Blocks offshore Guyana as well as Blocks 58 and 53 in offshore Suriname point to the volume of recoverable oil resources being considerably higher.
Drilling activity is continuing at a feverish pace in Guyana, where the national government in Georgetown implemented very favorable terms for the Exxon-led consortium operating in the offshore Stabroek Block. Exxon, which is the operator holding a 45% working interest with partners Hess owning 30% and CNOOC 25% respectively, has made over 30 world-class discoveries in the block and is fast-tracking its development. Aside from the Stabroek Block containing over an estimated 11 billion barrels of recoverable oil resources Exxon’s Liza oilfield, which analysts describe as the last major frontier oil play, is pumping 360,000 barrels per day, well above the nameplate capacity of 340,000 barrels.
Exxon is developing additional assets in the Stabroek Block, notably the Payara and Yellowtail discoveries which on commencing operations, during 2023 and 2025 respectively, will add 470,000 barrels of capacity to the Stabroek Block. That will see Exxon pumping at least 800,000 barrels per day from offshore Guyana by 2025. There is every likelihood that production from the Stabroek Block will keep growing past 2030. In October 2022, Exxon announced the Sailfin-1 and Yarrow-1 discoveries in the block and continues to advance its drilling campaign. Exxon continues to drill in offshore Guyana, with a focus on the prolific Stabroek Block, where the supermajor is targeting the completion of 25 wells by the close of June 2023 to be followed by a 35-well campaign that will be launched when the current plan is completed. There have been discoveries outside of the Stabroek Block. Among the most recent is at the Kawa-1 exploration well by CGX Energy and partner Frontera Energy in the northern section of the Corentyne Block located adjacent to Stabroek. That segment of Corentyne is believed to lie above the same petroleum fairway running through the Stabroek Block into Block 58 offshore Suriname.
For these reasons, analysts are forecasting Guyana’s production will reach 1.2 million barrels daily by 2027, seeing the impoverished former British colony overtake Colombia to become the third largest oil producer in Latin America and the Caribbean. Guyana’s oil output is forecast by industry consultancy Rystad Energy to reach 1.7 million barrels per day by 2035, seeing the tiny South American country surpass U.S. offshore production and become the world’s fourth-largest offshore oil producer. It will be an ongoing investment by energy supermajors in the South American country of around 800,000 people which will drive this rapid growth. Among the latest to enter the fray in Guyana is British global energy supermajor BP, which in November 2022 won the contract to market Guyana’s share of the petroleum produced from the Stabroek Block, which comes from the Liza Destiny and Unity platforms operating the Liza oilfield.
It hasn’t been all plain sailing in offshore Guyana despite the Exxon-led consortium’s tremendous success. CGX, which is 77% owned by Frontera and the operator of the Corentyne Block, was forced to delay the drilling of the Wei-1 well targeted for 2.5 miles northwest of Kawa-1. This occurred because a third party did not release the drilling unit. CGX and Frontera are committed to drilling the well which, according to the companies, is to be spudded before the end of January 2023. The partners have confirmed with Guyana’s government that the block’s license is unaffected and remains in force. In August Tullow Oil, which holds a non-operating 37.5% interest in the Kanuku Block, announced it was abandoning operations at the Beebei-Potaro well in the block after it hit water-bearing targets. Repsol, operator and owner of a 37.5% share in the Kanuku Block with the remaining 25% held by a joint venture between TotalEnergies and Qatar Petroleum, has plugged and abandoned the well.
A tremendously positive development for Guyana’s burgeoning offshore oil boom is Georgetown’s 9 December 2022 announcement it had launched the first licensing round for offshore oil exploration and production. The bid round has a mixture of 14 shallow and deep-water blocks for tender, with submissions closing on 14 April 2023 and contracts expected to be awarded on 31 May 2023. There is a minimum signature requirement of $10 million for shallow-water blocks and $20 million for deep-water blocks. While the terms of the contracts to be awarded to successful bidders will not be as favorable as the agreement secured by the Exxon-led consortium for the Stabroek Block, they will still be on advantageous terms.
Guyana is one of the lowest-cost jurisdictions in Latin America for energy companies to operate in, and even globally for that matter. The Exxon-led consortium claims that the 120,000 barrel per day capacity Liza Destiny Floating Production Storage and Offloading (FPSO) vessel is pumping petroleum with a breakeven price of $35 per barrel. That has fallen to $25 a barrel for the second FPSO, the 220,000 barrel-per-day Liza Unity, which came online in February 2022. Exxon recently announced that both FPSOs are operating above capacity, see the Liza oilfield pumping 360,000 barrels per day. The energy supermajor continues to develop the Stabroek Block at a rapid clip, expecting production to reach one million barrels per day by 2030. Overall, offshore Guyana is estimated to have an average breakeven price of $30 to $35 per barrel Brent, which will fall further as additional industry infrastructure comes online.
The sweet light and medium oil grades found in Guyana have a relatively low carbon cost to extract and refine, especially when compared to the heavier sourer grades typically found in South America, which magnifies the country’s competitiveness. Those characteristics further enhance the attractiveness of investing in offshore Guyana and is the reason the former British colony is attracting considerable investment from international oil companies. For these reasons, Georgetown’s inaugural oil auction will garner considerable attention, particularly with Guyana at the top of the leaderboard for yielding the most oil discovered globally since 2015. In fact, aside from the prolific Stabroek Block where Exxon’s swath of world-class finds has yielded 11 billion barrels of recoverable oil resources, it is believed that another 25 billion barrels is waiting to be discovered. With Rystad predicting Guyana will be pumping 1.7 million barrels daily by 2035 the deeply impoverished South American country will emerge as an elite top-five global producer.