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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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Guyana Could Overtake Brazil As South America’s Top Oil Producer

  • Guyana’s oil industry is booming thanks to a number of massive discoveries.
  • Exxon is leading the charge on this new oil frontier.
  • The former British colony will materialize as a leading global oil exporter with its petroleum output far exceeding domestic demand.

Global energy supermajor ExxonMobil and its partners Hess and CNOOC have made an astonishing number of high-quality oil discoveries in offshore Guyana. In April 2022 Exxon announced that it made three more discoveries in the 6.6-million-acre Stabroek Block, where it is the operator holding a 45% interest with 30% owned by Hess and the remaining 25% held by CNOOC. The discoveries were made at the Barreleye-1, Patwa-1 and Lukanani-1 well all of which lie to the east of the Liza oilfield and Payara development. That brings the number of oil discoveries thus far this year in offshore Guyana to five and a total of at least 31 discoveries in the Stabroek Block since 2015. Exxon estimates that those latest discoveries give it around 11 billion barrels of recoverable oil resources in the Stabroek block. This is the world’s largest oil discovery in two decades.

The swath of oil discoveries in offshore Guyana are not limited to the Exxon-led consortium’s operations in the Stabroek Block, other energy companies are reporting similar quality finds. In January 2022 Canadian driller Frontera Energy, Colombia’s third largest oil producer, along with partner CGX Energy, of which Frontera is the controlling shareholder, announced the discovery of oil in the Corentyne Block. The wildcat Kawa-1 well was drilled in the northern tip of the block to a depth of 21,578 feet or 6,577 meters with 177 feet or 54 meters of hydrocarbon-bearing reservoirs found. Then in a May 2022 media release Frontera stated additional drilling at Kawa-1 had identified an additional 51 feet or 15 meters of net pay with multiple hydrocarbon bearing zones running for 69 meters. The Canadian intermediate upstream oil producer plans to spud the Wei-1 wildcat well, 14 kilometers northwest of Kawa-1, in the Corentyne Block during the third quarter 2022.

Industry insiders claim that the northern tip of the Corentyne Block encompasses the same petroleum fairway which runs through the Stabroek Block into Block 58 offshore Suriname. According to Frontera the geology found in the Corentyne Block is comparable to offshore Suriname Block 58 where TotalEnergies, which is the operator, and 50% partner Apache have made five quality oil discoveries. Those numbers combined with clear signs that the Guyana Suriname Basin’s oil potential significantly exceeds the United States Geological Survey’s (USGS) May 2001 mean estimated undiscovered oil resources of around 15.25 billion barrels. Hess Chief Executive Officer John Hess, in early June 2022, stated he believes further large hydrocarbon discoveries will be made in the Stabroek Block when drilling deeper. Most of the 31 discoveries made in the block, thus far, occurred at a depth of around 15,000 feet or 4,572 meters, but the Fangtooth-1 well, completed early this year, identified 164 feet or 50 meters of high-quality oil-bearing reservoirs after drilling 18,000 feet or 5,486 meters. This indicates that the 11 billion barrels of recoverable oil resources found by the Exxon-led consortium in the block could very well be the beginning, with further large-scale finds to be made when drilling at greater depths proceeds. 

For these reasons, energy industry insiders believe the USGS, during its 2000 assessment, grossly underestimated the discoverable oil resources in the Guyana-Suriname Basin. The U.S. government body had stated that the basin held undiscovered oil resources of 2.8 billion to 32.6 billion barrels which at the bottom-end is significantly less than the volume of oil discovered in the Stabroek Block by Exxon. These developments indicate a reappraisal of the basin’s oil potential is urgently required. The USGS was planning to reassess the Guyana-Suriname Basin in 2020, but this was delayed by the pandemic. The vast petroleum potential emerging in offshore Guyana indicates that the impoverished former British colony could eventually possess greater oil reserves than neighboring Brazil where the regulator, the National Hydrocarbon Agency, announced proven reserves of 13.24 billion barrels at the end of 2021.

The development of the Stabroek Block is continuing at a brisk pace, and according to Hess is ahead of schedule. While industry analysts predicted in 2020 that Guyana will be pumping 1.2 million barrels of crude oil daily by 2017, there is every indication, based on the latest developments, that output will be far higher by then. Government officials in Georgetown believe crude oil production could reach 1.5 million barrels per day, or more, from as many as 12 Floating Production Storage and Offloading facilities (FPSOs) in five years. If that is achieved it will see the tiny South American nation, based on 2021 production volumes, emerge as the third largest oil-producing nation in Latin America and the Caribbean with only Brazil and Mexico pumping more crude oil. Such an event will deliver a tremendous economic boom for Guyana. The former British colony will materialize as a leading global oil exporter with its petroleum output far exceeding domestic demand, while government coffers will swell with annual income expected to over $10 billion annually in less than a decade. The latest oil discoveries, Exxon’s plans to drill at greater depths and Georgetown’s focus on building out urgently needed industry infrastructure and attracting additional investment mean Guyana possesses the potential to become South America’s leading oil producer.

By Matthew Smith for Oilprice.com

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