The deeply impoverished South American microstate of Guyana, which was rocked by the COVID-19 pandemic, finds itself at the epicenter of the continent’s latest mega-oil boom. Since 2015, ExxonMobil, which has a 45% stake and is the operator, along with its partners Hess and CNOOC which own 30% and 25% respectively, has made a swathe of high-quality oil discoveries in Guyana’s offshore 6.6-million-acre Stabroek Block.

Exxon, which is the operator of the Stabroek Block, has made over 20 discoveries, 6 of those in 2021 alone, which the global energy supermajor estimates to hold at least 10 billion barrels of recoverable oil resources. The most recent crude oil discoveries, announced in January 2022, were at the Fangtooth-1 and Lau Lau-1 exploration wells. Those finds will boost the Stabroek Block’s oil potential adding to the 10 billion barrels of recoverable oil resources already estimated by Exxon.

The integrated energy supermajor is investing heavily in the Stabroek Block, which will be a game-changer for the company. Exxon’s first operational field in the Stabroek Block Liza Phase-1 achieved a nameplate capacity of 120,000 barrels per day during December 2020.

The next notable development for the Exxon-led consortium and a deeply impoverished Guyana is that the Liza Phase-2 development pumped first oil in February 2022. That operation is expected to reach a nameplate capacity of 220,000 barrels daily before the end of 20220, lifting the Stabroek Block’s output to around 340,000 barrels per day. In September 2020 Exxon gave the green light for the Payara oilfield project.

This $9 billion development is the supermajor’s third project in the Stabroek Block, and it is anticipated that Payara will start production during 2024, with the asset expected to reach a capacity of 220,000 barrels per day before the end of that year.

Earlier this month, Exxon made the final investment decision on the Yellow Tail offshore development choosing to proceed and invest $10 billion in the project. This was announced on the back of Guyana’s national government, in Georgetown, approving the project and signing a petroleum production license for Yellow Tail with the Exxon-led consortium.

This will be the integrated energy supermajor’s largest project to be developed to date in offshore Guyana. It is anticipated that Yellow Tail will commence production in 2025 reaching a nameplate production capacity of 250,000 barrels per day before the end of that year. That will lift overall petroleum output from the Stabroek Block to at least 810,000 barrels per day.

Exxon envisages that the Stabroek Block will be pumping over 1 million barrels per day by 2026 when the Uaru project, which has yet to be approved, comes online.

As a result of Exxon’s investment, Guyana will become a major player in global energy markets and a top 20 producer with the former British colony pumping an estimated 1.2 million barrels daily by 2026, two years earlier than originally predicted.

It isn’t only the Exxon-led consortium in the Stabroek Block which is enjoying drilling success in offshore Guyana. In late-January 2022 Canadian driller CGX Energy and its partner, the company’s majority shareholder, Frontera Energy discovered oil with the Kawa-1 exploration well in the 3-million-acre Corentyne Block in offshore Guyana.

The block, where CGX is the operator and its parent company Frontera owns a 33.33% working interest, is contiguous to the prolific Stabroek Block lying to its south-southwest. The Kawa-1 well is in the northern tip of the Corentyne Block, close to the discoveries made by Exxon in the Stabroek Block.

CGX and Frontera intend to invest $130 million in exploring the Corentyne Block. That includes spudding the Wei-1 exploration well in the northwestern part of Corentyne during the second half of 2022. According to CGX, the geology of the Kawa-1 well is similar to discoveries made in the Stabroek Block as well as the 5 significant finds made by TotalEnergies and Apache in neighboring Block 58 offshore Suriname.

It is believed that the northern segment of the Corentyne Block lies on the same petroleum fairway that runs through the Stabroek Block into Suriname’s Block 58.

These events point to offshore Guyana’s considerable hydrocarbon potential, supporting industry claims that the United States Geological Survey grossly miscalculated the undiscovered oil potential of the Guyana Suriname Basin. The USGS, which committed to revisiting its two-decade-old appraisal during 2020, only for that to be prevented by the COVID-19 pandemic, estimated 2 decades ago that the Guyana Suriname basin had to mean undiscovered oil resources of 15 billion barrels.

To date, Exxon has disclosed that it estimates to have found at least 10 billion barrels of crude oil in the Stabroek Block. This number can increase because of the latest discoveries in the block and ongoing development activities. Then there are TotalEnergies and Apache’s crude oil discoveries in Block 58 offshore Suriname where the flow-tested Sapakara South appraisal well has tapped a reservoir estimated to hold oil resources of over 400 million barrels.

In 2020 U.S. investment bank Morgan Stanley estimated that Block 58 could possess oil resources of up to 6.5 billion barrels.

The low costs associated with operating in Guyana, reflected by projected industry-low breakeven prices of $25 to $35 per barrel, and a favorable regulatory environment make it an extremely attractive jurisdiction for foreign energy companies. That appeal is enhanced by the crude oil discovered being relatively light and low in sulfur, making it particularly attractive in a global energy market where demand for low-carbon intensity and reduced emission fuels is rapidly growing. For those reasons investment from foreign energy companies and hence exploration as well as development activities in offshore Guyana are accelerating.

Aside from Frontera allocating up to $130 million to be invested in exploration activity in the Corentyne Block, Spanish energy major, Repsol, plans to ramp up activity in the nearby Kanuku Block in offshore Guyana. The company has contracted Noble to spud the Beebei-Potaro well in the block during May 2022. The Kanuku Block, where Repsol is the operator and holds a 37.5% interest with partners Tullow and TotalEnergies owning 37.5% and 25% respectively, is located south of, and contiguous to, the prolific Stabroek Block.

That places it close to Exxon’s Stabroek discoveries, notably the Hammerhead, Pluma, Turbot, and Longtail wells, indicating that the northern part of the Kanuku Block potentially contains the petroleum fairway that runs through the Stabroek and northern part of the Corentyne Block into offshore Suriname Block 58.

Recent oil discoveries combined with rising interest as well as investment from foreign energy investment coupled with the speed with which Exxon is developing the Stabroek Block could see Guyana pumping well over 1 million barrels per day earlier than expected. Some industry analysts speculate that volume could be reached by 2025 which is supported by statements from the CEO of Hess, Exxon’s 30% partner in the Stabroek Block, John Hess. These latest developments in offshore Guyana couldn’t come at a more crucial time with the U.S. looking to bolster crude oil supplies in the wake of Washington banning Russian energy imports.

If Guyana can rapidly grow low-carbon intensity offshore oil production as predicted, the deeply impoverished South American microstate will become an important supplier of crude oil, especially for the U.S. This will also deliver a significant economic windfall for Guyana, which has already seen its gross domestic product expanded by a stunning 20.4% during 2021 when crude oil production was only averaging 120,000 to 130,000 barrels per day.

OILPRICE by Matthew Smith, April 12, 2022