PETROANALYSIS || ARTICLE

Guyana: Top country for discovered oil in 2018 – will avoid “oil curse” Part Two

Published on

August 26, 2018

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Article by

Stuart Wilkinson

(This article continues from Part One)

Guyana on the road to becoming a top producer

A final investment decision on the first phase of development for the Liza field was made, and also results were reported from the Liza-4 well, which the ExxonMobil said encountered more than 197 feet of high-quality, oil-bearing sandstone reservoirs and will underpin a potential Liza Phase 2 development.



Gross recoverable resources for the 6-million-acre Stabroek block are now estimated at 2-2.5 billion oil-equivalent barrels, including Liza and the Liza Deep, Payara, and Snoek exploration wells.

Production is expected to begin by 2020, less than 5 years after discovery of the field. Phase 1 is expected to cost just more than $4.4 billion, which includes a lease capitalization cost of $1.2 billion for the FPSO facility, and will develop 450 million barrels of oil.

Drilling of the Payara-2 well on Stabroek is expected to commence in late June of 2017 and will also test a deeper prospect underlying the Payara oil discovery. (17)

Guyana Resources Minister Raphael Trotman announced mid-year that ExxonMobil and its partners could now drill an area believed to contain at least two billion barrels of oil.

He said that oil extraction is expected to start in 2020 at an initial rate of 100,000 barrels per day. ExxonMobil will receive a royalty of 2 percent on gross earnings and 50 percent of profits. (18)

In July ExxonMobil announced that it had discovered additional oil in the Payara reservoir offshore Guyana, increasing the total Payara discovery to approximately 500 million oil-equivalent barrels.

These positive well results again increased the estimated gross recoverable resource for the Stabroek Block to between 2.25 billion oil-equivalent barrels and 2.75 billion oil-equivalent barrels.

“Payara-2 confirms the second giant field discovered in Guyana,” said Steve Greenlee, president of ExxonMobil Exploration Company. “Payara, Liza and the adjacent satellite discoveries at Snoek and Liza Deep will provide the foundation for world class oil developments and deliver substantial benefits to Guyana. We are committed to continue to evaluate the full potential of the Stabroek Block.”

The well encountered 59 feet (18 meters) of high-quality, oil-bearing sandstone in the Payara field. It was drilled to 19,068 feet (5,812 meters) in approximately 7,000 feet (2,135 meters) of water. The well is 12 miles (20 kilometres) northwest of the recently funded Liza phase 1 project. (19)

Later in the year, Turbot became ExxonMobil’s latest discovery to date in the country. Following completion of the Turbot-1 well, the “Stena Carron” drillship will move to the Ranger prospect. An additional well on the Turbot discovery is being planned for 2018.

Drilling was started the Turbot-1 well on August 14, 2017 and encountered a reservoir of 75 feet (23 meters) of high-quality, oil-bearing sandstone in the primary objective. The well was safely drilled to 18,445 feet (5,622 meters) in 5,912 feet (1,802 meters) of water on September 29, 2017. The Turbot-1 well is located in the south-eastern portion of the Stabroek Block, approximately 30 miles (50 kilometres) to the southeast of the Liza phase one project. (20)

“The results from this latest well further illustrate the tremendous potential we see from our exploration activities offshore Guyana…” president of ExxonMobil Exploration Co (21)

Following ExxonMobil’s announcement of its fifth new oil discovery after drilling the Turbot-1 well offshore Guyana, Pablo Medina, Wood Mackenzie’s senior analyst, Latin America upstream, said that the discovery proves “that deepwater can still be attractive”… “After today’s announcement, ExxonMobil’s Liza and Payara complex might approach the 2 billion barrel mark in commercial reserves.”

This discovery also puts Guyana on the map because the country currently does not produce any oil. “We expect around 350,000-400,000 barrels a day of oil production by 2026, making Guyana one of top oil producers in Latin America,” he added. (22)

Further interest in Guyana came from Africa Oil Corp, as reported towards the end of the year: the company announced that it had entered into a strategic partnership with Eco (Atlantic) Oil and Gas Ltd. for exploration in Guyana, and West Africa. In Guyana, ECO holds a block directly updip from the Stabroek block on which ExxonMobil estimates resources of 2.5 to 2.8 oil-equivalent barrels, including the super-giant Liza field. (23)

Now entering 2018, the Ranger-1 exploration well, marked ExxonMobil’s sixth oil discovery offshore Guyana since 2015. The well was drilled to 21,161 feet (6,450 meters) depth in 8,973 feet (2,735 meters) of water. (24)

In addition, it was reported in February that Total SA was to acquire two exploration licenses covering more than 12,000 sq. km offshore Guyana.

The company agreed to acquire a 35% working interest in the Canje Block from an affiliate of JHI Associates Inc, Toronto, and Mid-Atlantic Oil & Gas Inc. of Guyana. The block, operated by ExxonMobil with a 35% interest, is in 1,700-3,000 m of water. JHI and Mid-Atlantic will retain a shared 30% interest.

Total also agreed to acquire a 25% working interest in the Kanuku Block from operator Repsol, which will retain a 37.5% interest. Tullow Oil Ltd holds a 37.5% interest in the block, which has water depths of 70-100 m.

Total in September 2017 acquired an option to purchase a 25% working interest in the Orinduik Block from an affiliate of Eco (Atlantic) Oil & Gas Ltd., Toronto, which would retain a 15% interest. Tullow, with 60%, operates the block, which is in 70-100 m of water. (25)

For its part, ExxonMobil saw a seventh oil discovery following drilling at the Pacora-1 exploration well. The company encountered approximately 65 ft. (20 m) of high-quality, oil-bearing sandstone reservoir. The well was safely drilled to 18,363 ft. (5,597 m) depth in 6,781 ft. (2,067 m) of water. (26) Guyana Resources Minister Raphael Trotman said that Pacora was in line with “an aggressive program of exploration and as we proceed towards production in 2020”. (27)

Remarkable work done and economic benefits for Guyana

Development drilling began in May for the first of 17 wells planned for Phase 1, laying the foundation for production startup in 2020. The company and its co-venturers have so far discovered estimated recoverable resources of more than 3.2 billion oil-equivalent barrels on the Stabroek Block.

“The work our teams have done in Guyana is remarkable,” said Liam Mallon, president of ExxonMobil Development Company. “We are well on our way to producing oil less than five years after our first discovery, which is well ahead of the industry average for similar projects. The Liza development and future projects will provide significant economic benefits to Guyana.”

Liza Phase 1 is expected to generate over $7 billion in royalty and profit oil revenues for Guyana over the life of the project. Additional benefits will accrue from other development projects now being planned. Liza Phase 1 involves the conversion of an oil tanker into a floating, production, storage and offloading (FPSO) vessel named “Liza Destiny” along with four undersea drill centres with 17 production wells. Construction of the FPSO and subsea equipment is under way in more than a dozen countries.

“Liza Destiny” will have a production capacity of 120,000 barrels of oil per day. A second FPSO with a capacity of 220,000 barrels per day is being planned as part of the Liza Phase 2 development, and a third is under consideration for the Payara development. Together, these three developments will produce more than 500,000 barrels of oil per day. (28)

The eighth discovery came mid-2018 with Longtail, which is in close proximity to the Turbot discovery. The combined estimated recoverable resources of Turbot and Longtail will exceed 500 million barrels of oil equivalent, and will contribute to the evaluation of development options in this eastern portion of the block. The well was safely drilled to 18,057 feet (5,504 meters) depth in 6,365 feet (1,940 meters) of water. (29)

ExxonMobil let contracts to SBM Offshore of Amsterdam for the front-end engineering and design of a second floating production, storage, and offloading vessel for the Liza development. The second Liza FPSO design involves a newbuild, multipurpose hull combined with several standardized topsides modules. The FPSO will be designed to produce 220,000 barrels per day of oil, will have associated gas treatment capacity of 400 million cubic feet per day, and water injection capacity of 250,000 barrels per day.
The FPSO will be spread moored in 1,600 m of water and able to store 2 million barrels of oil. (30)

Starbroek reserves re-estimated in 4 billion barrels

ExxonMobil said today it has increased its estimate of the discovered recoverable resources for the Stabroek Block to more than 4 billion oil-equivalent barrels and has advanced its evaluation to support a third phase of development and consideration of two additional phases.

The increase follows completion of testing at the Liza-5 appraisal well, a discovery at Ranger, incorporation of the eighth discovery, Longtail, into the Turbot area evaluation and completion of the Pacora discovery evaluation.

The collective discoveries on the Stabroek Block to date have established the potential for up to five FPSOs producing over 750,000 barrels per day by 2025. There is potential for additional production from significant undrilled targets and plans for rapid exploration and appraisal drilling, including at the Ranger discovery. (31)

Sovereign wealth fund for Guyana

By way of concluding remarks, an indication of the importance of all this petroleum development for Guyana can be appreciated from the Green Paper published by the Guyana government on the 6th August 2018 entitled “Managing future petroleum revenues and establishment of a fiscal rule and a sovereign wealth fund” prepared at the request of the president of the country David Granger.

The paper is intended to capture key issues for consideration, including the mechanisms to ensure sustainable use of petroleum revenues to achieve a diversified and green economy, with a specific predisposition to avoid mismanagement of the national patrimony. (32)

This is a clear statement that Guyana’s petroleum policy is to avoid the “natural resource curse”.

 

References
17) OGJ, 16th June 2017 “ExxonMobil makes FID on Liza development offshore Guyana”
18) AP, 16th June 2017 “Guyana allows ExxonMobil, partners to start drilling for oil”
19) ExxonMobil, 25thJuly 2017 “ExxonMobil Announces Successful Payara-2 Well Offshore Guyana”
20) Exxon Mobil, 5th October 2017 “ExxonMobil Announces Fifth Discovery Offshore Guyana”
21) Mercopress, 8th October 2017 “Guyana en route to become a top oil producer in Latin America”
22) World Oil, 6th October 2017 “ExxonMobil’s Guyana deepwater discovery could total 2 Bbbl, WoodMac says”
23) World Oil, 13th November 2017 “Africa Oil, Eco announce strategic partnership for exploration in West Africa, Guyana”
24) ExxonMobil, 5th January 2018“ExxonMobil Announces Sixth Oil Discovery Offshore Guyana”
25) OGJ, 5th February 2018 “Total acquires interests offshore Guyana”
26) World Oil, 28th February 2018 “ExxonMobil reports seventh discovery offshore Guyana”
27) World Oil, 7th March 2018 “Exxon-Mobil hits oil jackpot offshore Guyana: future production of 500.000 bpd”
28) ExxonMobil, 12th June 2018 “ExxonMobil Advances Liza Phase 1 Development”
29) ExxonMobil, 20th June 2018”ExxonMobil announces 8th discovery offshore Guyana”
30) OGJ, 3rd July 2018 “ExxonMobil lets second Liza FPSO contract”
31) ExxonMobil 23rd July 2018 “Exxon Mobil reestimates Starbroek reserves in 4 billion barrels”
32) Government of the Co-operative Republic of Guyana, 8th August 2018 Green Paper “Managing future petroleum revenues and establishment of a fiscal rule and a sovereign wealth fund”

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