- Guyana is undergoing a major economic transformation driven by a massive oil boom.
- The IMF expects the tiny South American country’s GDP to expand by a remarkable 49% during 2022.
- Exxon is making significant investments in offshore Guyana and expanding its drilling efforts in a big way.
The former British colony of Guyana, one of South America’s poorest nations, is undergoing a major economic transformation driven by a massive oil boom. ExxonMobil’s 2015 discovery of crude oil has been a game-changer for a deeply impoverished Guyana that was severely impacted by the COVID-19 pandemic. The U.S. energy supermajor, after making a slew of quality oil discoveries, is investing heavily in offshore Guyana commencing petroleum production during 2019 from the Stabroek Block. That has been a boon for the former British colony’s economy. International Monetary Fund data shows Guyana’s 2020 gross domestic product expanded by a notable 43.5%, despite the pandemic, and grew by 20% during 2021 as oil reserves and production surged. The rapid growth being experienced by Guyana’s economy is gaining momentum. The IMF expects the tiny South American country’s GDP to expand by a remarkable 49% during 2022 as oil reserves and production soar. Guyana is expected to be pumping over one million barrels of crude oil daily by 2028, making it the 11th country globally to reach that number, which will generate a further significant windfall for the economy. Guyana’s national government in Georgetown has recognized that to maintain the boom’s momentum and achieve such an impressive production goal it needs to build out critical infrastructure while boosting foreign energy investment. Georgetown is also seeking to increase Guyana’s cut of the massive oil profits that will be generated as production expands. Since entering office in August 2020 President Irfaan Ali has launched a series of initiatives aimed at improving regulation, increasing the government’s share of oil revenues, and attracting further energy investment. A key plan currently being explored is cooperating with neighboring Suriname, which shares the prolific Guyana-Suriname Basin, and Brazil, Latin America’s largest oil producer. The presidents of all three countries were supposed to meet last week to discuss the possibility of joint infrastructure and energy projects. Unfortunately, Brazil’s President Bolsonaro had to cut short his visit for personal reasons after meeting Suriname’s President Chandrikapersad Santokhi in the capital Paramaribo, meaning he was unable to meet his counterpart in Guyana. The considerable petroleum potential of all three countries, as well as the growing scale of industry operations, coupled with the significant financial income they can generate, means such close cooperation has the potential to reshape South America’s economy.
Key to progressing Guyana’s oil boom and making the country a regional transport hub is the construction of a deep-water port. Not only would such an asset benefit Guyana but it would also make it a crucial transportation hub for Suriname as well as northern Brazil because of their proximity to the former British colony which can offer quick and easy access to the Atlantic Ocean. Guyana’s foreign secretary, Robert Persaud stated in a recent Reuters article; “The deepwater harbour is a major part of our transformation agenda, and we want Brazil to be part of it,”. The construction of a deep-water port will be a game-changer for the region because it would further facilitate crude oil and petroleum product exports as well as the importation of heavy machinery utilized for oil exploration and production.
In November 2020 Exxon announced that it was making Guyana a priority for investment. The energy supermajor is allocating considerable capital to exploration and development activities in offshore operations in the deeply impoverished South American nation. Exxon, earlier this year, reported two more oil discoveries in the prolific Stabroek Block where it had already made 23 discoveries and identified 10 billion barrels of recoverable crude oil resources. The integrated energy supermajor is the operator of the Stabroek Block and owns a 45% interest with partners Hess holding 30% and CNOOC 25% ownership. Exxon discovered crude oil at the Fangtooth-1 well and the Lau Lau-1 well which are 11 miles northwest and 42 miles southeast, respectively, of the Liza oilfield. Those discoveries will further boost the Stabroek Block’s already announced recoverable resource estimate of 10 billion barrels.
Exxon is investing significantly to develop the block. The Liza Phase 2 project will come online during the first quarter of 2022 with the Liza Unity floating production, storage, and offloading vessel or FPSO having arrived from Singapore during late October 2021. When Liza Phase 2 is operational it will add capacity of up to 2220,000 barrels of crude oil daily to production from the Stabroek Block where the Liza Destiny FPSO reached operational capacity during December 2020 to be pumping 120,000 barrels per day. Upon Liza Unity reaching operational capacity, total production from the Stabroek Block will rise to 340,000 barrels per day. Exxon is developing the Payara project which is expected to commence operations in 2024 and add a production capacity of another 220,000 barrels per day. The supermajor is also progressing the Yellowtail development where it is targeting the development of up to 67 wells. At the end of 2021, Exxon awarded contracts to companies that will provide the infrastructure and machinery required to develop the project. Yellowtail is expected to pump the first oil in 2025 adding 250,000 barrels per day capacity to the Stabroek Block.
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Offshore Guyana’s appeal for foreign energy companies is underscored by low breakeven prices, due in part to low royalties and favorable contractual terms established with Georgetown, compared to other deep-water operations. This makes operating in Guyana highly profitable, especially with the international Brent benchmark trading at around $87 per barrel. Exxon’s Liza Phase 1 operation is pumping crude oil with a breakeven price of $35 a barrel, while for Liza Phase 2 the breakeven price will fall to $25 per barrel. The Payara project has a forecast breakeven price of $32 per barrel whereas for Yellowtail it is estimated to be $29 a barrel. Offshore Guyana’s appeal is further enhanced by the characteristics of the petroleum found which has a low sulfur content and is light meaning it has reduced carbon intensity, making it highly appealing in a world pushing to decarbonize the economy and reduce emissions. Exxon’s Liza grade has an API gravity of 32 degrees and 0.58% sulfur content, making it lighter and sweeter than many other more carbon-intensive crude oil blends being produced in Latin America.
For these reasons Exxon is making significant investments in offshore Guyana and expanding its drilling efforts in the Stabroek, Canje and Kaieteur Blocks which it operates.
Exxon Operated Offshore Blocks In Guyana
In late 2021, the company submitted a proposal to Guyana’s Environmental Protection Agency for a proposed 12 well drilling campaign in the Canje Block. Exxon currently has six drilling vessels currently conducting exploration and development drilling across the three blocks it operates in offshore Guyana.
Guyana is fast becoming one of the hottest offshore oil booms globally which are a game-changer for the deeply impoverished tiny South American country of nearly 800,000. In a March 2020 report, petroleum industry consultancy Wood Mackenzie predicted that Exxon and its partners will be pumping over one million barrels of crude oil per day from the Stabroek Block by 2028. That will further boost the impoverished country’s economy and make it a major oil exporter. Georgetown’s efforts to build out urgently required supporting infrastructure will attract further foreign energy investment, especially when the country’s low offshore breakeven prices and low-carbon-intensity crude oil are considered. Those measures will be bolstered by Georgetown’s efforts to secure an alliance with Brazil, Latin America’s largest oil producer, and Suriname. Guyana’s government will be able to tap the considerable expertise that has accrued in Brazil since that country’s offshore oil boom started in 2006.