A small, largely overlooked country in South America has become the center of the world’s oil future, offering low-carbon and low-cost oil production with the potential for an output of 1 million bpd. Guyana, which borders Brazil, Venezuela, and Suriname could be the world’s next big oil power, as international oil majors invest heavily in the country’s promising offshore oil fields.
Since 2015, oil firms operating in Guyanese waters have discovered over 11.2 billion barrels of oil equivalent, accounting for 32% of discovered oil globally. This has put the poor, South American country of just 800,000 inhabitants at the global oil and gas radar center. As several oil majors move away from existing operations that have begun to dry out over time, many are looking for promising, low-carbon alternatives in the Caribbean and Africa. A consortium, consisting of ExxonMobil, Hess Corp, and CNOOC Ltd, is expecting to produce 1 million bpd of Guyanese oil by 2030.
Guyana’s oil and gas blocks include the Stabroek block, a 626,800 km3 offshore area controlled by Exxon, Hess and CNOOC; and the Corentyne and Demerara blocks, which are under exploration by Canada’s CGX Energy and Frontera Energy. Projects include the Liza 1 development; which has produced up to 120,000 bpd since 2019; Liza 2, which began production in February and has a capacity of 220,000 bpd; Payara, with production expected to start in 2023; Yellowtail, with an anticipated capacity of 250,000 bpd; and Uaru, which ExxonMobil expects to explore further pending licensing approval.
Some oil and gas experts speculate that Guyana’s oil reserves may be larger than Brazil’s, putting it in second place for crude, after Venezuela, in the Latin American and Caribbean region. Exxon, Hess, and CNOOC stand to profit significantly from Guyana’s oil boom over the next decade and beyond.
In July, Rystad Energy stated that Guyana’s revenue from oil and gas production is expected to reach $1 billion this year, and $7.5 billion a year by the end of the decade. The profit outlook was increased in September to $1.25 billion, based on high oil prices and strong production levels. For example, Guyana saw its crude go for $106 a barrel in one April cargo, compared to $76 per barrel in mid-2021.
Guyana is seen as a competitive and policy-friendly player for offshore production. However, Guyana is also expected to profit from its oil and gas resources, with the Georgetown government taking 59% of the total value. The country’s oil recovery prices are highly competitive, at an average of $28 a barrel across all projects and under $20 a barrel at producing projects, making it cheaper than oil from the Permian Basin and Russia, and similar to that of projects in the Middle East and offshore Norway.
And U.S. oil major ExxonMobil could emerge the biggest winner from its Guyanese oil operations, following several high-quality oil discoveries over the last seven years, the latest of which it announced in July. Exxon holds 45% of the Stabroek block, with Hess holding 30% and CNOOC 25%. The consortium has developed the offshore field rapidly, helped by the light and sweet crude in the region, which it can extract and refine more easily and cheaply than other grades of crude, such as those produced in Venezuela. This also means that operations are less carbon-intensive than other projects, making them more future-proof.
Exxon had prioritized its Guyana operations since 2020 when the Covid pandemic led to a dramatic fall in oil prices. Its offshore projects in the region support the company’s decarbonization targets, with aims to cut greenhouse gas emissions in its upstream operations by between 40% and 50% by 2030. It will achieve this aim by shifting to lower carbon oil operations and dramatically reducing its gas flaring practices. Exxon expected to invest between $20 billion to $25 billion in capital expenditures between 2022 and 2027, with 60% going to its Guyana, Brazil, and Permian Basin operations, and its LNG and chemical businesses.
However, other oil and gas companies may be able to get a piece of the action as ExxonMobil has suggested it is unsure of whether it will bid on new offshore exploration areas in Guyana. The Exxon consortium currently controls all of Guyana’s oil and gas production, but this may not be the case in the future. The Government of Guyana has postponed a planned auction of new offshore blocks due to uncertainties about how to distribute oil properties outside of Exxon’s blocks. In response, Exxon has said it will wait to see the economic terms to decide whether it will bid on the new regions.
Vice President Bharrat Jagdeo suggested that Guyana is still deciding whether to hold an auction for new exploration areas or to recruit a national oil company for a partnership that could produce oil from the new properties. The government is currently establishing terms for its Production Sharing Agreement (PSA) to ensure “more economic benefits for the nation” from its resources.
Guyana, a little-talked-about Latin American nation, is set to become a major international oil player that will support the development of low-carbon oil operations. U.S. major ExxonMobil stands to profit substantially from its stake in the region, while Guyana expects to see dramatic economic development over the next decade and beyond thanks to its vast reserves.
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Felicity Bradstock is a freelance writer specializing in Energy and Industry. She has a Master’s in International Development from the University of Birmingham, UK, and is now based in Mexico City.
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