Exxon makes potentially huge new oil find off Guyana

ExxonMobil and the Guyana government have announced a further major oil discovery on its Ranger-1 well in the Stabroek Block. The find, the largest since Exxon began exploration offshore Guyana, is the sixth discovery made by the company since 2015.

It follows ‘world-class discoveries’ on its Liza, Payara, Snoek, Liza Deep and Turbot wells, which are estimated to total more than 3.2 bn recoverable oil-equivalent barrels. The latest find suggests that Guyana is moving towards being a major producer in the Western Hemisphere.

“This latest discovery represents the largest single find to date and adds to the quantities which have been confirmed in the five previous finds …. Managed prudently, these resources will allow for an enormous transformational effect on the lives of every Guyanese”, the country’s Department of Public Information said in a statement.

Steve Greenlee, the President of ExxonMobil Exploration Company (EEPGL) said: “This discovery proves a new play concept for the 6.6 m acre Stabroek Block, and adds further value to our growing Guyana portfolio.”

 

EEPGL said the well was drilled to a depth of 21,161 feet (6,450 meters) in 8,973 feet (2,735 meters) of water and had found approximately 230 feet (70 meters) of high-quality, oil-bearing carbonate reservoir. Stabroek News cited a source as saying that the well has ‘greater porosity for oil and gas’, suggesting it will be more commercially productive than previous successful wells. The find is expected to spur other companies who are well advanced in their seismic data collection to invest in drilling in 2018.

In an indication of the potential magnitude of the developmental implications for Guyana and its 0.8m citizens, the Guyana government used the occasion to call on all stakeholders to act responsibly and patriotically, while stressing its commitment to the safe and efficient development of the offshore reserves.

Esso Exploration and Production Guyana Limited has a 45% interest in the 6.6m acres (26,800 sq km) Stabroek Block, while Hess Guyana Exploration Ltd holds 30% and China’s CNOOC Nexen Petroleum Guyana Limited holds 25%.

Growing criticism of first petroleum agreement with Exxon

Meanwhile, in related developments, Guyana’s Private Sector Commission (PSC) has said much more needs to be done to incorporate local content and greater benefits for businesses into future oil agreements.

Commenting on a much-delayed but recently-released statement on the first petroleum agreement between the government and ExxonMobil’s subsidiary, the PSC called for world-class negotiators for future contracts. It suggested that unless this happens, owning large oil reserves would not translate into the much-needed reduction of the costs of energy to Guyanese.

In its statement, the PSC also criticised the failure of government negotiators to address ring-fencing provisions. The agreement, which they said was legally not renegotiable, meant that Guyana will be left to bear the costs of any unsuccessful exploration. This, they said, was because it allowed the contractor to offset costs in any field within the entire Stabroek Block against government revenue streams based on each field being separate. It also observed that all future agreements with operators/contractors should contain provisions that ensure that the country received more in the way of royalties, rents, training and opportunities for all Guyanese.

Separately, the Guyana government has said that except for necessary testing, there will be no flaring of natural gas found offshore. According to its Natural Resources Minister, Raphael Trotman, in keeping with governments desire to build a green economy, Exxon will not be allowed to flare the natural gas that would accompany the find.

ExxonMobil has said that it is not commercially feasible to bring the natural gas from the Liza field onshore when extraction commences in 2020, and that it will use the gas for reinjection during production. However, Guyana’s government continues to indicate that it has plans to pipe excess natural gas onshore to meet a part of the country’s energy needs.

To this end it is expected that government will shortly select a site for the proposed pipelines to land the gas for conversion to electricity to supplement the national grid. An IDB supported study on natural gas development is expected to be produced by the end of the first quarter of 2018. A further Japanese study is also underway.

Late last year, the Guyana Power and Light Company said that it was seeking a 50-megawatt (MW) natural gas generating plant.

This is an extract from the Caribbean Council’s leading fortnightly editorially independent publication, Caribbean Insight, which provides in depth information on current economic, political and commercial developments in the Caribbean and news on events in Europe and the US that affect the region. Business people, academics, and those with a general interest in the Caribbean find it an invaluable tool for developing and maintaining knowledge and providing an insight into political, economic and commercial events in the region.

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