By Stuart Wilkinson, OEF.
Discovered resources globally of conventional oil and natural gas surpassed 4.5 billion barrels of oil equivalent in the first half of 2018, and Guyana was the top country in terms of total discovered resources. In this South American country bordering on Venezuela, US major ExxonMobil made three major discoveries in the Stabroek block: Ranger, Pacora and Longtail, which together can hold almost one billion barrels of oil or more. (1)
It was as far back as 1916 when the first significant effort to locate petroleum was undertaken in Guyana. Later, in 1966/67 Shell drilled six wells on the Atlantic coast. The offshore quest began in 1958 and Guyana Offshore #1 and #2 were drilled in 1967.
This Guyana-Suriname Basin remains one of the last unexplored areas in the world with significant petroleum potential, the United States Geological Survey estimating that 13.6 billion barrels of oil and 32 trillion cubic feet of natural gas could lie there. (2)
With the Liza 1 discovery in 2015 in the Stabroek Block by ExxonMobil and its partners – Hess and the CNOOC-subsidiary Nexen Petroleum, Guyana would be able to take its place as one of the world’s oil producing nations. CGX Energy and Repsol had been active there for more than a decade, as well as Eco Atlantic and its partner Tullow Oil. (3)
However, this is occurring within the context of the border dispute that Venezuela has had with Guyana for over a hundred years.
The dispute over the region known as the Essequibo resurfaced in 2011 when Guyana asked the United Nations to extend its continental shelf – the area where countries control ocean resources – toward a region where Venezuela had granted natural gas concessions. (4)
Venezuela claims the territory out into the Atlantic Ocean, calling the area an “operational zone for maritime defence”. (5) Mid-2015 the Caribbean Community, CARICOM, stated its total support for the integrity of Guyana’s territory and maritime space. (6)
ExxonMobil’s Liza-1 well encounters oil
In 2015 Esso Exploration & Production Guyana Ltd., a unit of ExxonMobil, reported an oil discovery on Stabroek block 120 miles offshore Guyana. The Liza-1 well was the first well drilled by the company on the 6.6-million acre Stabroek block. Esso E&P holds 45% interest in the prospect. Partners include Hess Guyana Exploration Ltd. 30% and CNOOC Nexen Petroleum Guyana Ltd. 25%. (7)
As was expressed at the time this could put the Guyana-Suriname Basin on the map. “The Liza project will also be well-placed to benefit from any uplift in oil prices post-development. Its commercial success could redefine the basin as a global deepwater production player,” said an official from the research and consulting firm Global Data. (8)
For their part, the Guyana authorities estimated in 2016 that oil reserves at the well were around 700 million barrels, and according to Bob Fryklund, chief upstream strategist at consulting firm IHS Energy, the development of Liza oil resources appeared an attractive proposition. IHS Energy estimated that the 700 million barrel oil project could generate an internal rate of return of 20 percent. Capital expenditure for the project was around $2.80 a barrel, while the finding and development cost as well as operating expenditure were pegged at $11.57 a barrel and $11.62 a barrel, respectively. Fryklund added that the breakeven price for the Guyana project was around $32 a barrel. (9)
Activities rising
Mid-2016 the Guyana government signed a Petroleum Prospecting License and Production Sharing Agreement with the joint venture team of Tullow Oil and Eco Atlantic for a small concession of 1801sq. km, called the Orinduik Block, located close to the Liza discovery. Tullow is already involved in an offshore project in Guyana as it is a part of a joint venture with Repsol Exploración Guyana Inc. in the adjacent Kanuku Block. (10)
Also at that time, drilling results from the Liza-2 well, the second exploration well in the Stabroek block offshore Guyana, confirmed a world-class discovery with a recoverable resource of between 800 million and 1.4 billion oil-equivalent barrels. The well was drilled by ExxonMobil affiliate Esso Exploration and Production Guyana Ltd., approximately 2 miles (3.3 km) from the Liza-1 well. The Liza-2 well encountered more than 190 feet (58 meters) of oil-bearing sandstone reservoirs in Upper Cretaceous formations. The well was drilled to 17,963 feet (5,475 meters) in 5,551 feet (1,692 meters) of water. (11) The affiliate also announced that it had awarded contracts to SBM Offshore for a floating production, storage and offloading (FPSO) vessel, a key step in moving the Liza field toward first production.
(12)
Coming to the beginning of 2017 ExxonMobil announced positive results from its Payara-1 well. Payara is the company’s second oil discovery on the Stabroek Block and was drilled in a new reservoir. The Payara-1 well targeted similar aged reservoirs that were proven successful at the company’s Liza discovery. More than 95 feet (29 meters) of high-quality, oil-bearing sandstone reservoirs were encountered. It was safely drilled to 18,080 feet (5,512 meters) in 6,660 feet (2,030 meters) of water. The Payara field discovery is about 10 miles (16 km) northwest of the 2015 Liza discovery.
In addition to Payara, appraisal drilling at Liza-3 has identified an additional high quality, deeper reservoir directly below the Liza field, which is estimated to contain between 100-150 million oil equivalent barrels. This additional resource is currently being evaluated for development in conjunction with Liza. (13)
Guyana’s seafloor one of the richest oil discoveries in decades
By this time, Exxon Mobil was moving full steam ahead with plans to transform Guyana into a major oil producer. In what industry experts call a rare occurrence in the industry, Exxon Mobil asked the David Granger administration for a production license to start pumping oil from the country’s seabed, less than five years after it discovered major oil finds. (14)
In March ExxonMobil announced positive results on the Snoek well: “The latest discovery at Snoek demonstrates the continued success we have achieved in this technically complex play, which is just part of the significant exploration province offshore Guyana,” said Steve Greenlee, president of ExxonMobil Exploration Company.
Affiliate Esso Exploration and Production Guyana Ltd. commenced drilling of the Snoek well on February 22, 2017 and encountered 82 feet (25 meters) of high-quality, oil-bearing sandstone reservoirs. The well was safely drilled to 16,978 feet (5,175 meters) in 5,128 feet (1,563 meters) of water on March 18. It is located in the southern portion of the Stabroek Block, approximately 5 miles (9 km) to the southeast of the 2015 Liza-1 discovery. (15)
National development and national defence inseparable
One should note at this point that it was reported in April of that year that a donation of equipment from the Chinese People’s Liberation Army was made to the Guyana Defence Force, whose mandate is to support the infrastructural development of the country.
The donation consisted of 31 pieces of equipment including patrol boats, bulldozers, one excavator, water tankers, fuel tankers, tipper trucks, off-road ambulances and several other vehicles.
“National defence is inseparable from national development. Public infrastructure enables and ensures public security by guaranteeing safety for our citizens, by providing assurance to investors and visitors and contributing to an enabling environment for investment,” said the Guyana President. (16)
(This article continues in Part Two)
References:
1) Mercopress, July 31st 2018. “Guyana top country in discovered oil resources during 2018”
2) OilNOW, September 24, 2017 “Guyana history with oil dates back centuries”
3) Drilling Info, May 21, 2017 “Guyana Oil: From Rags To Riches”
4) Reuters, JUNE 6, 2012 “Guyana oil exploration stirs up Venezuela border dispute”
5) Washington Post, June 9, 2015 “What’s a little oil between neighbours? Venezuela-Guyana tensions flare.”
6) Mercopress, 12th August 2015 “CARICOM tells Venezuela it supports Guyana’s integrity in territorial dispute”
7) Oil and Gas Journal, 20th May 2015 “ExxonMobil’s Liza-1 well encounters oil offshore Guyana”
8) World Oil, 22nd October 2015 “Exxon Mobil’s deepwater Liza find could put Guyana-Suriname basin on the map”
9) Rigzone, 5th May 2016 “OTC 2016: Guyana’s Investment Appeal Gets a Boost from Liza Oil Discovery”
10) Offshore Energy Today, 30th June 2016 “Tullow, Eco Atlantic to search for oil offshore Guyana”
11) ExxonMobil, Jun 30, 2016 “ExxonMobil Says Second Well Offshore Guyana Confirms Significant Oil Discovery”
12) ExxonMobil, 20th December 2016 “ExxonMobil Awards Key Contracts for Liza Oil Development and Production in Guyana”
13) ExxonMobil, 12th January 2017 “ExxonMobil Announces New Oil Discoveries Offshore Guyana”
14) Mercopress, 22nd March 2017 “Guyana beats exploration/production record: oil extraction expected to begin 2019”
15) ExxonMobil, 30th March 2017 “ExxonMobil Announces New Oil Discovery Offshore Guyana”
16) chinamil.com.cn, 6th April 2017 “Chinese Army Donates Military Equipment to Guyana Defence Force”