(+) Promise of oil is a promise for development

Before 2019 roughly zero barrels of crude was produced, suddenly it’s up to 400 000 bpd. The estimates are that by 2027 production output is up to 1,2 Mbpd. It’s an explosion into the oil scene. In recent years Guyana has really taken off as prolific oil-producing country. Only a decade ago most people wouldn’t even imagine this small country on the north Atlantic coast of South America becoming a major producer of crude oil. Now we see all the tell-tale signs and the characteristics for a future oil boom. The English speaking , former British colony has a population of only 800 000 people. The small country is located at northern mainland of South America and is boarded by the Atlantic Ocean to the north, Venezuela to the west, Suriname to the east and Brazil to the south and southwest. Guyana is a democracy, and its legal system is based on English common law. The government is proud of their large oil basin and eager to monetize the resources and develop the country further, making Guyana attractive for foreign investors.

Major players

After years of collecting and evaluating substantial 3-D seismic data, ExxonMobil announced the Liza-1 discovery in May 2015. The Liza-1 well, located in the large Stabroek Block, was the first significant oil discovery offshore Guyana. The well was drilled to 5433 meters, in 1743 meters of water, and encountered more than 90 meters of high-quality oil-bearing sandstone reservoirs. A notable milestone, the development was put on stream in 2019, only five years after discovery.

Since then, ExxonMobil and their partners has made multiple new discoveries in the Stabroek Block. The gross recoverable resource for Stabroek is now estimated to be more than eight billion oil equivalent barrels, including Liza and other successful exploration wells on Payara, Liza deep, Snoek, Turbot, Ranger, Pacora, Longtail, Hammerhead, Pluma, Tilapia, Haimara, Yellowtail, Tripletail and Mako.

The 24-year-old floating production, storage, and offloading (FPSO) Liza Destiny is currently located 200 kilometres offshore Guyana in the Stabroek block for the Liza Phase 1 project. The FPSO is designed to produce up to 120 000 barrels of oil per day, and the converted VLCC can store up to 1.6 million barrels of crude oil. The Liza Phase 2 development involves a second FPSO, Liza Unity , and will produce 220 000 bpd, with storage capacity of 2 million barrels.

A third phase of development, at the Payara Field was sanctioned in September 2020 and is targeted for startup early in the fourth quarter of 2023. Payara will utilize the Prosperity FPSO, which will have the capacity to produce up to 220 000 barrels of oil per day.

The fourth and largest development on the Stabroek Block at Yellowtail was sanctioned in April 2022 with first oil expected in 2025. Yellowtail will utilize the One Guyana FPSO with a production capacity of approximately 250 000 barrels of oil per day.

Uaru, the fifth development on the Stabroek Block, was sanctioned in April 2023. Uaru will utilize the Errea Wittu FPSO with a production capacity of approximately 250 000 barrels of oil per day. Production is targeted to startup in 2026.

Based on the discoveries on the block to date, six floating production, storage, and offloading (FPSO) vessels with gross production capacity of more than 1.2 million barrels of oil per day are expected to be online by the end of 2027 with potential for up to 10 FPSOs to develop the discovered resources on the block.

China`s CNOOC International holds a 25 percent working interest in the large Stabroek Block, with ExxonMobil as operator. The US-based Hess Corp has a 30 percent interest in the Stabroek Block and in 2018 Hess acquired an interest in the Kaietuer Block, 250 kilometres offshore and adjacent to the Stabroek Block.

ExxonMobil and partners, Hess Corp and CNOOC are the only active producers in Guyana. Their projects are expected to reach 1.2 million bpd of output by 2027, turning Guyana into one of Latin America's most prominent producers, only surpassed by Brazil and Mexico.

Other players

The publicly traded Canadian oil and gas exploration company CGX holds an interest in the Corentyne Block in the Guyana basin under a Joint Operating Agreement (JOA) with Frontera Energy Corporation. In 2021-22, CGX successfully drilled its operated exploration well, Kawa-1, in the eastern channel sand complex identified in the northern segment of the Corentyne Block.

Eco Atlantic has a strategic portfolio of offshore projects in Guyana (South America) and Namibia and South Africa (Africa) in partnership with major energy companies and large independents. Eco aims to deliver material value for its stakeholders through its role in the energy transition for low carbon intensive oil and gas in stable emerging markets close to infrastructure.

Eco’s history in Guyana began in 2014 before the first ever Stabroek Liza oil discovery, Eco were awarded 40 percent of the Orinduik licence after bringing in the Operator Tullow Oil for 60 percent in early 2016. In 2018, Eco brought in TotalEnergies as farm-in partners to the block for 25 percent WI (working interest). Eco now holds, a direct, 15 percent working interest in the Orinduik Block and an indirect, ~1.3 percent WI in the Canje Block.

Resources and logistics

Resource estimates for the basin is 11 billion BOE not included some recent discovery that has been made. Many people think that is a very lowball estimate. Compared to Guyana’s neighbour, Venezuela who has the biggest oil reserves in the world with proven reserves of over 300 billion BOE. It’s easy to imagine Guyana`s reserves to be larger than the 11 billion estimates.

Logistically Guyana is at the very top of South America, close to Panama, and through the Panama Canal the crude has easy access to the US Westcoast. As of late the bulk of the Guyana crude were hitting the US Westcoast, but now falling behind on a close second to Europe. Panama is also a waystation for export to Asia. We expect significant number of Guyanese barrels to be exported to Asia. It is also logistically closer to Europe than Brazil, it takes an estimated a third of the time to ship from Guyana than Port of Açu in Brazil.

Grades

Different grades, different prices, and different buyers. Liza crude (API 32.0 and sulphur 0.58 percent) and Unity Gold crude (API 34.5 and sulphur 0.41 percent) are both medium-sweet crudes, with Unity Gold expected to be a bit sweeter than Liza. What is said is that Unity Gold is trading at a premium at about 30 cents per barrel above Liza, all at the refinery’s preferences. Payara is expected to be a bit heavier than the two and should be at a discount to both of those crudes.

The US West coast has been the primary destination for Liza crude and Unity Gold, but In recent months, especially after the Russian sanction, Europe has past the US West coast as the biggest buyer of the two Guyanese crude grades. Guyana don’t have their own refinery, and they are exporting 100 percent of their crude.