Will Guyana fulfill its potential and become a major hotspot for oil over the next decade? As several oil majors invest in the tiny state, it looks set to become a vital bridge in the transition to cleaner energy, offering low-carbon oil opportunities while demand is still high. Several new discoveries and the development of a national oil sector could see Guyana become one of the biggest energy players in Latin America and the Caribbean.
This little-known country in the Caribbean has quickly transformed into an energy hub, offering low-cost, low-carbon oil prospects for oil majors looking to develop promising oil regions while global demand for fossil fuels remains high. Over the last 7 years, energy firms have made offshore discoveries of over 10 billion barrels of recoverable oil and gas, around a tenth of the world's conventional discoveries. An Exxon Mobil Corp, Hess Corp, and CNOOC Ltd consortium hopes to be producing as much as 1 million bpd from the Stabroek, Corentyne, and Demerara blocks by 2030.
Exxon has already begun its second offshore development with hopes to produce huge amounts of oil in the Stabroek Block. The block covers an offshore area of 26,800km2 controlled by Exxon, Hess, and CNOOC. Since 2015, the companies have made 20 oil discoveries. Having begun crude output from Stabroek with its Liza 1 (Destiny) floating production, storage, and offloading (FPSO) vessel in 2019, producing around 120,000 bpd, Exxon is now launching its second project in the region.
Lisa 2 (Unity) started producing crude in February and is expected to have an output of 220,000 bpd by the end of the year, as operations gradually come online. Exxon hopes to boost production by bringing two additional FPSOs into operation by 2025, the Payara and the Prosperity – which is currently under construction. This should bring the capacity to over 800,000 bpd if Exxon gains regulatory approval.
Liam Mallon, president of ExxonMobil Upstream Oil and Gas, explained “We are collaborating closely with the government and people of Guyana to develop this world-class resource responsibly, helping to meet the world’s energy needs and delivering enhanced value for all stakeholders at a record pace and well ahead of the industry average.” Further, “With unparalleled project execution, we now have two production facilities operating offshore Guyana,” he said.
Oil projects have boosted Guyana’s employment and economy significantly in recent years, with around 3,500 Guyanese workers supporting Exxon’s operations. With a population of just 800,000, a substantial percentage of the workforce could eventually work in the energy sector. Based on the development of its energy sector, Guyana could see economic growth of 500 percent by 2030, according to government officials.
But Guyana is not simply handing away its assets to international players, as it plans to form a new national oil and gas company to develop its domestic oil and gas economy. In place of carrying out an oil auction in 2022, the Guyanese government may establish a national energy company, according to officials. This would see Guyana getting a piece of the action rather than relying purely on foreign oil firms to develop its waters.
Vice President Bharrat Jagdeo stated, "We have some proposals from some people in this room, from large operators, to work with the government and utilize the remaining blocks." He explained, "We will either go to an auction, sometime in the third quarter this year, with or without seismic (surveys) from our part or alternatively use those blocks to form a national oil company."
Other state leaders are encouraging Guyana to introduce protections to ensure it sees the profits from its newfound oil wealth. In a bid to enhance Guyana’s involvement in its oil industry Ghana’s President Akufo-Addo stated, “To ensure energy sustainability, it is critical that we manage socio-economic and environmental benefits in a continuously changing world. No energy project, therefore, no matter how high its return in value, is worth it if the interests of some or the majority of the stakeholders are not properly represented and they are left impoverished and dissatisfied.”
So, could this tiny nation become the next UAE in terms of oil? Guyana has already established a sovereign wealth fund (SWF), following in the footsteps of Norway and the UAE, and is planning on using the funds for its $2.6 billion 2022 national budget. It will pump $975 million in oil revenues back into the SWF this year. While Guyana expects to produce about one-quarter of the oil the UAE currently produces, it has a much smaller population, around ten times fewer people, meaning its per capita output may become the largest in the world. With a combination of international and local investment and a focus on economic diversification, Guyana could quickly become a major world economy, considering its size.
By Felicity Bradstock for Oilprice.com
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