Since the discovery of 11 billion barrels of proven oil reserves offshore in 2015, Guyana’s oil industry has gone from strength to strength. The tiny Caribbean country has attracted billions in international investment in its energy sector, with billions more expected to follow thanks to several successes. And recent legislation passed by Guyana’s parliament is expected to encourage new production and ensure that the small country earns a significant share of its oil revenues in the coming decades.
Guyana, with a population of around 800,000 people is thought to be sitting on top of oil reserves with a value of more than half a trillion dollars. Following significant investment in exploration and production activities over the last decade, it can expect to produce around 1.2 million barrels of crude a day by 2028, according to current estimations. This is a significant increase from the current production rate of 400,000 bpd from two vessels. That’s equivalent to around 1.1 percent of the global supply, a contribution that was recently unthinkable in this previously untapped region. This figure means Guyana would be producing more oil per person than any country in the world.
So far, ExxonMobil Corp. has been the biggest investor in Guyana’s oil industry, dominating the exploration and drilling activities. In July, Guyana’s Environmental Protection Agency (EPA) approved an Exxon Mobil-led consortium to drill 35 new offshore exploration and appraisal wells. The consortium consists of Exxon, US oil company Hess, and China’s China National Offshore Oil Corporation. This allowed the consortium to drill wells within its 6.6-million-acre Stabroek offshore block. The EPA deemed that the drilling could be “conducted in accordance with good environmental practices, and in a manner that avoids, prevents and minimises any adverse effects which could result from the activity”.
In June, the consortium entered into discussions with Guyana about the return of 20 percent of unexplored or undeveloped areas in the blocks, as per the 2016 production agreement. This includes parts of the Stabroek block and the Kaieteur and Canje blocks. However, Exxon stated that it plans to continue oil and gas drilling even in a reduced area. It expects to begin this drilling in the third quarter of this year and continue through to 2028. This follows several successful drilling operations in recent years. Exxon stated, “The project is being developed to discover new and re-evaluate existing recoverable hydrocarbons from reservoirs in the Stabroek Block, thereby enabling potential future development projects.”
In August, the consortium announced plans to spend a further spend $12.93 billion to develop their sixth offshore oil project in the South American country, with the hope of starting production operations at the Whiptail project in 2027. To date, the consortium’s production activities have provided $2.8 billion in direct revenue to Guyana, as well as supported the creation of 4,400 jobs. The sixth project is much like the group’s $12.7-billion fifth project, Uaru, and is expected to provide an output of between 250,000 and 263,000 bpd. It expects to drill up to 72 wells commencing in 2024, continuing exploration through to 2030. The project could provide up to 540 jobs in the drilling and installation stages and between 100 and 180 during production activities, according to Exxon.
In terms of core markets, this year, Guyana has had success in capturing a larger share of the European market. Vessel monitoring data showed that Guyana’s crude exports to Europe in the first semester of the year increased to 215,000 bpd, equivalent to around 63 percent of the country’s total exports. Last year, Europe accounted for around 50 percent of Guyana’s crude exports. This rise in exports reflects the changing geopolitical structure of the global oil industry, with many European refiners looking for new crude suppliers following the sanctions introduced on Russian oil in 2022.
The ongoing war between Russia and Ukraine has meant that many refiners have had to establish new partnerships in alternative oil markets, with Guyana’s strong oil potential over the coming decades looking highly attractive for companies looking to change suppliers in the longer term. Much of Guyana’s crude has been traded in Rotterdam, according to the data. Apart from Europe, Guyana is also exporting to Asia, around 90,000 bpd and Brazil, 22,000 bpd. Meanwhile, there have been no exports to U.S. Gulf Coast's refiners so far in 2023.
Guyana is seeing a major influx of money into its economy following the development of its oil and gas sector, with reported earnings from royalties and profits of $439 million in the second quarter of this year. By the end of June, the country’s national oil fund reached a reported $1.72 billion. And Guyana hopes to raise this figure even further thanks to the passing of new oil legislation aimed at encouraging new production and increasing the country’s share of oil revenues.
By Felicity Bradstock for Oilprice.com
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