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Exxon Is The Biggest Winner In Guyana’s Epic Oil Boom

South American microstate Guyana recently emerged as what is being described as the world's hottest offshore frontier oil play. A consortium led by ExxonMobil controls Guyana's prolific offshore 6.6-million-acre Stabroek Block, where more than 30 world-class oil discoveries have been made and lies at the heart of the former British colony's burgeoning oil boom. Exxon, the operator of Stabroek, holding a 45% interest with 30% held by partner Hess and the remaining 25% by Beijing-owned CNOOC, is ideally positioned to be the greatest beneficiary of Guyana's oil boom. The consortium secured especially favorable terms for the Stabroek Block, making it an especially profitable venture, notably for Exxon, with it becoming a key driver of production and profit growth.

Exxon made its first discovery in offshore Guyana in the Stabroek Block in 2015. In a stunning turn of events, the supermajor brought the discovery of Liza-1 to the first oil by the end of 2019, an incredibly short four-year period. Since then, Exxon has made over 30 discoveries in the block, which contains more than an estimated 11 billion barrels of oil resources, endowing Guyana with greater petroleum reserves than many of its regional neighbors. It was in late 2020, during the global COVID-19 pandemic, when Brent had plunged to multidecade lows, that Exxon elected to prioritize the development of the Stabroek Block. There are a range of reasons for this, including low breakeven costs, high-quality low carbon intensity light sweet crude oil and most importantly, the Exxon-led consortium's ability to secure an extremely favorable production sharing agreement.

That PSA was so lopsided that it drew considerable criticism globally, with claims that Exxon was exploiting the nativity and lack of experience in Georgetown, seeing Guyana lose billions of dollars in oil profits. The agreement signed by the Stabroek consortium secured Georgetown an industry-low royalty rate of 2%, which is significantly lower than any other oil-producing jurisdiction in South America. The PSA caps cost recovery oil at an advantageous 75% of all petroleum produced and sold. Cost recovery oil is not ringfenced to any single development within the Stabroek Block, allowing the Exxon-led consortium to frontload exploration and development costs for other projects. There is also a 50:50 profit split with Georgetown for all petroleum sold after the cost recovery oil is deducted. Based on those conditions, Guyana effectively receives 12.5% of the revenue generated by the oil produced and sold, along with a 2% royalty.

For those reasons, the administration of Irfaan Ali set about reviewing the existing PSA after taking office. Georgetown recently introduced a new production agreement, although the president pledged to leave the Stabroek agreement with Exxon untouched despite converting many existing blocks to the new contract. The new PSA will be used for successful bids in Guyana's first-ever oil auction, where the country has received eight bids, including from supermajors Exxon and France's TotalEnergies. This leaves Exxon, as well as its partners, Hess and CNOOC, in the unique position of holding what appears to be a low-risk, highly profitable agreement to exploit the Stabroek Block.

The good news for Exxon doesn't stop there. The Liza phase one and two facilities are producing well in excess of their nameplate capacity of 120,000 barrels per day and 220,000 barrels per day, respectively. According to data from Guyana's Ministry of Natural Resources, combined output from both floating, production, storage and offloading (FPSO) vessels operating in the Liza field was 410,000 barrels per day at the end of July 2023. Production from the Stabroek Block is expected to soar over the coming years, with Exxon committed to developing four additional operations in the Stabroek Block.

The first of these is the 220,000-barrel-per-day Payara project, which is expected to produce its first oil later this year from 41 wells, comprised of 20 production wells and 21 injection wells. Payara will be followed by the Yellowtail development, which will have 51 wells, comprised of 26 production wells and 25 water wells with the capacity to lift 250,000 barrels per day. Exxon anticipates that Yellowtail will start up during 2025, giving the supermajor total capacity of 810,000 barrels per day in the Stabroek Block. The fifth operation Exxon and its partners will develop in offshore Guyana is the 250,000 barrel-per-day Uaru project, which was approved earlier this year. Uaru will have the capacity to pump 250,000 barrels per day from 44 wells on start-up, which is scheduled for 2026. The final project to be approved is the nearly $13 billion Whiptail operation, which will have the capacity to lift 250,000 barrels per day from up to 72 wells and is expected to start up during 2027. 

This means the Exxon-led consortium will have the capacity to lift 1.3 million barrels per day from the Stabroek Block, potentially even more with all assets capable of producing more oil than their stated capacity. That will put Guyana firmly on the map s a global oil producer, seeing the former British colony of less than one million take Algeria's place to be ranked as the world's 16th largest oil producer. It will be a significant driver of production growth for Exxon, Hess and CNOOC while significantly boosting those companies' profitability.

The oil discovered and produced in the Stabroek Block is light and sweet, with the Liza grade having an API gravity of 32 degrees and 0.58% sulfur content. Those characteristics make Liza grade oil cheaper and easier to refine into high-quality, low-emission fuels. Petroleum with those characteristics is surging in popularity among refiners around the world because of ever-stricter fuel emission regulations. The carbon intensity of extracting Liza-grade crude oil is some of the lowest in the world. According to industry consultancy Rystad Energy, the oil extracted in Guyana emits 9 kilograms of carbon per barrel compared to the global average of 18 kilograms per barrel. This enhances the attractiveness of operating in offshore Guyana, particularly with Western energy majors, including Exxon, committed to becoming carbon neutral and achieving net zero emissions by 2050.

Offshore Guyana is also a profitable jurisdiction in which to operate because of its industry low breakeven prices. According to Hess Liza Phase-1 has a breakeven price of $35 per barrel Brent while for Liza Phase-2 that has fallen to $25 pr barrel. Exxon's other projects in the Stabroek Block will have similar breakeven prices. It is estimated that the 250,000 barrel-per-day Payara operation will breakeven at $32 per barrel, while Yellowtail is pegged at $29 per barrel. In an operating environment where Brent is selling for around $93 per barrel, the Stabroek Block is a cash-generating machine for Exxon, Hess and CNOOC. 

As this low-cost production expands, with four new operations adding a capacity of 970,000 barrels per day, coming online between now and 2029, Exxon's total oil output, revenue, cash flow and bottom line will all experience a healthy boost. Further significant oil resource and production growth are ahead, with the Stabroek Block containing far greater oil potential than originally believed. Exxon is set to embark on an ambitious 35-well drilling campaign once the current 25 well program ends.

By Matthew Smith for

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Matthew Smith

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