TORONTO – Guyana’s world-class oil and gas industry, which, for months, has been chocked by the unprecedented political stalemate and non-declaration of the March 2, 2020 elections results, is now breathing again after operating like a rudderless ship without a captain, unable to get approvals for offshore development projects, unnerving investors and shareholders.
The main contention has been that Guyana has not received the best deal for its vast oil resources offshore. Many industry experts and observers feel that Guyana is no longer a frontier basin and any further approvals of its oil fields must reflect much higher royalties and revenues to the English-speaking South American nation of about 780,000 people.
While there was a government in power for the past five months, the administration’s hands were pretty much tied because of its perceived illegitimacy by the international community and the then Opposition, which ran the risk of a new government reversing or failing to recognize any major decisions taken by the A Partnership for National Unity+Alliance for Change (APNU+AFC) coalition after March, 2,2020.
The ExxonMobil-Hess-CNOOC consortium has discovered more than 8 billion barrels of oil on the Stabroek Block offshore Guyana since 2015 and commenced production in the 120,000 bpd Liza 1 Field utilizing the Liza Destiny Floating Production Storage and Offloading (FPSO) vessel, in December 2019.
While the Liza Phase 2 development is on track to come on stream in 2022, utilizing the Liza Unity FPSO producing 220,000 bpd, ExxonMobil has said that the third field, the Payara Field, originally scheduled to start production in 2023, is at risk of falling behind as much as a year because it has failed to get government approval, coupled with the COVID-19 pandemic.
The just ousted APNU+AFC coalition government had reportedly, since 2019, put Payara approval on hold although ExxonMobil had submitted its Field Development Plan and an Environmental Impact Assessment (EIA). Reports said that the documents were still being studied by the Department of Energy (DoE) and the Environmental Protection Agency (EPA).
ExxonMobil has already awarded the contract to SBM Offshore for the construction of the third FPSO, the Liza Prosperity, which will be used in the Payara Field producing 220,000 bpd. However, the company is hoping that it can work with the newly installed People’s Progress Party/Civic (PPP/C) government to get approval for the Payara project.
Observers are speculating about what will be the posture of the new PPP/C Administration towards Guyana’s oil industry in the coming months with regard to royalties and profit sharing.
A recent report by industry analysts Rystad Energy, had said the past government’s failure to approve the Payara-Pacora oil field in 2019, will result in the country producing more than 50 million barrels of oil less by 2030, costing the country, the #ExxonMobil-Hess-CNOOC Joint Venture, and investors, millions of US dollars.
The Payara discovery was announced in January 2017. The discovery well was drilled in a new reservoir, encountering more than 29 metres of high-quality oil-bearing sandstone reservoirs. It was safely drilled to 5,512 metres in 2,030 metres of water. Payara will support up to 45 wells, including production, water injection and gas injection wells.
“In our base case, the Guyanese government could generate around US$4.4 billion in oil revenues by 2028, meaning within five years of production start. However, revenues diminish quite substantially if the project faces delays. With a six-month delay, the project would generate around US$800 million less than what it would in our base case, and around US$1.6 billion less with a 12-month delay,” Rystad noted.
Rystad looked at four potential scenarios with delays ranging from three to 24 months and its analysis shows that Guyana may lose around 10 million barrels of oil that could be produced from the project by 2030 presuming just a three-month delay, a number which climbs to around 75 million barrels assuming a 24-month delay.