Guyana offshore oil project is ExxonMobil\'s best investment

[ Time:2021-11-01 | Hits:443 ]

Facts have proved that Exxon's offshore business in Guyana is very profitable. It is expected that the breakeven cost of the project will be reduced from US $35 to US $25 per barrel, which is the lowest level in the industry. You know, ExxonMobil has very favorable production sharing agreements and low royalties.

According to Oil Price Today's report on October 28, ExxonMobil, a global energy giant, is one of the few Western energy giants investing in Guyana. In 2015, ExxonMobil obtained the first high-quality oil discovery on 6.6 million acres of Stabroek block. ExxonMobil is the operator of the block and owns 45% of the block. By the end of 2020, when global oil companies are tightening their belts and learning to live in a world below $50 a barrel, Exxon announced that it will focus its capital expenditure on the offshore waters of Guyana. Judging from the current situation, for this global energy giant, this decision has undoubtedly brought rewards. Guyana is gradually becoming the hottest offshore drilling site in South America and even the world. By October 2021, ExxonMobil announced the discovery of the 23rd crude oil in Stabroek block, including cataback-1 oil well, which followed the discovery of pinktail oil well in September. This latest discovery, together with a large amount of high-quality oil previously found off the coast of Guyana, has enabled ExxonMobil to increase the exploitable oil resources in the Stabroek block from more than 8 billion barrels previously estimated to 10 billion barrels.

In addition to the considerable drilling success and exploration potential of Stabroek block, it has proved to be very profitable in terms of operation. Hess holds 30% of the shares of Stabroek. In February 2020, the company said that in the first phase of Liza, the production capacity of 120000 barrels / day was realized in December 2020, and the profit margin was very low, only US $35 / barrel. It is expected that after the second phase of Liza is developed and put into operation, the oil price will further fall to the industry low of US $25 / barrel. Liza unity FPSO set sail from Singapore to Guyana in August 2021 and is scheduled to start operation in early 2022. The production capacity of FPSO is 220000 barrels / day, and about 600 million barrels of crude oil will be developed in Liza oilfield.

Exxon is also developing payara oilfield in Stabroek block, which is located in the north of Liza oilfield with a water depth of about 2000 meters. It is expected that payara oilfield will break even at the level of $32 / barrel. When the price of Brent crude oil exceeds $85 / barrel, the profitability of the oilfield is considerable. Payara is expected to start production in 2024, with a daily crude oil output of 220000 barrels. This means that by mid-2024, ExxonMobil is expected to extract about 560000 barrels of crude oil from the Stabroek block.

More importantly, the low breakeven price of the Stabroek block oil field, the very favorable production sharing agreement reached with the Guyana government, as well as the means of lower mining royalties and recovery of development costs, make Guyana a high-profit jurisdiction of ExxonMobil. The energy giant plans to further expand its business in Stabroek block and take yellowtail oilfield as the next and fourth development project. This is ExxonMobil's 13th oil discovery in the block, and a 5622m long yellowtail-1 well is drilled into the area classified as a new reservoir by the company. Well yellowtail-2 completed in the first half of 2020 is the 17th oil discovery in Stabroek block, which confirms the existence of oil-bearing sandstone reservoir identified by well yellowtail-1. According to ExxonMobil, the project will include the nearby redtail oil field, which was discovered when the drilling of well redtail-1 was completed in September 2020. ExxonMobil predicts that by 2026, the daily output of crude oil in Stabroek block will exceed 750000 barrels.

Stabroek is gradually becoming an important asset of ExxonMobil, not only because it has found a large amount of high-quality oil, but also because of the characteristics of the crude oil it has found and is producing. The API gravity of ExxonMobil Liza grade crude oil is 32 degrees and the sulfur content is 0.58%. This not only means that it is easier and cheaper to extract than the heavy and super heavy oil mixtures usually found on the land of South America, but also has a much lower carbon footprint than other mixtures. These characteristics are very important in a world where governments are trying to reduce their carbon footprint and control global warming below 2 degrees Celsius. This puts considerable pressure on global energy companies because they are required to achieve carbon neutrality. After experiencing some resistance, ExxonMobil promised to reduce its business carbon footprint by developing low-carbon fossil fuels as part of its upstream business. The development of Stabroek block and its light and low sulfur crude oil in the reservoir are an important part of this strategy. It is particularly important that oil and natural gas will remain important energy when global warming is limited to 2 degrees Celsius.

The national government of Guyana is focused on ensuring that this extremely poor South American country benefits from the huge oil wealth discovered by ExxonMobil in 2015. This includes not only sharing the profits from the development of Stabroek block by a consortium led by Exxon, but also building infrastructure to provide energy for Guyana's fast-growing economy. In 2020, oil production investment and oil export revenue increased gross domestic product by 43.5%, while all other regional economies contracted due to the epidemic. The International Monetary Fund predicts that with the expansion of oil investment and production, Guyana's economy will grow at an alarming rate of 20% in 2021. Georgetown University is looking for partners to build a 220 km submarine gas pipeline to connect the Liza oilfield with onshore gas processing facilities and gas-fired power plants. ExxonMobil assured Georgetown University that the pipeline would be able to deliver 50 million cubic feet of natural gas a day from the Liza field by 2024. This will reduce ExxonMobil's demand for natural gas combustion from its Liza field, thereby reducing the Liza field's carbon footprint. At the beginning of this year, the super large oil company spent $400 million on fuel removal. With the development of more oil industry infrastructure, the breakeven price of Guyana's energy projects will decline, making Guyana a high profit destination. Therefore, the region is attractive to foreign energy companies.