Just Another Incredible Story -- Guyana -- Exxon -- September 8, 2023

Locator: 45576GUYANA.
Locator: 45576SURINAME.

Guyana: link here. See this post for map. Think about this: this is really, really huge. XOM "owns it" and this only play challenges OPEC!

In a mere four years, Guyana went from first discovery to first oil, a rapid timeframe in an industry where it can take years to bring major energy projects online. The former British colony is now a major South American oil producer and global petroleum exporter.

As a result, Guyana is benefiting from a tremendous economic windfall, with the country emerging as the world’s fastest-growing economy with 2022 gross domestic product (GDP) expanding by a stunning 62%. Industry consultancies and the government in Georgetown expect Guyana to be pumping 1.2 million barrels of crude oil per day by 2027, a figure greater than many OPEC members.

Exxon’s commitment to developing the offshore 6.6-million-acre Stabroek Block indicates oil output could soar even higher. This has the potential to alter global energy market dynamics and challenge the price-making power of the OPEC Plus consortium.

Data from Guyana’s Ministry of Natural Resources shows the country of less than one million was lifting 351,600 barrels of oil per day at the end of July 2023. That production volume pumped by the Liza Destiny and Unity floating production storage and offloading vessels (FPSOs) is greater than their combined nameplate capacity of 340,000 barrels per day.

Exxon, which holds a 45% stake in the Stabroek Block and is the operator, prioritized development of the block in late-2020 due to the Liza oilfield’s low breakeven price of $25 per barrel to $35 per barrel and high-quality light sweet crude oil. That saw the global energy supermajor ramp up activity with a large exploration drilling campaign that eventually yielded over 30 discoveries and more than 11 billion barrels of oil resources in the Stabroek Block.

Consortium:

• XOM: 45%, and operator
• Hess: 30%
• CNOOC: 25%

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But Is It The "Right" Kind Of Oil?

It sure is.

Light.

Sweet.

Link here.

Following ExxonMobil’s commercial discovery at the giant Liza field in the Stabroek Block offshore Guyana in 2015, it was confirmed that the oil found is of ‘high quality’. The term “High Quality” is commonly used to refer to crude oil which is sweet (low sulphur content) and light (high API gravity). This means oil which has been determined to rank higher on the American Petroleum Institute (API) Gravity Scale and determined to be of a low sulphur content.

This bodes well for Guyana as sweet light crude is the preferred type from which the highest value petroleum products are derived. However, it is important to note that the price of Guyana’s crude will be dependent on more than just its quality. More on this later.

Why is high-quality oil more in demand?

The market value of any given type of crude is in large part determined by the two main measured characteristics determining oil quality, which are density and sulphur content.

Crude oils are classified from light to heavy based on the API gravity scale and are classified as sweet if they contain less than 0.42%sulphur (NYMEX).

Crude Oil density is measured in API Gravity. This scale has become the recognized standard in the oil industry worldwide for the classification of crude oil. The calculation for API gravity of an oil is complicated but on the API Gravity scale which ranges from 0 to 50, crude oils with an API gravity greater than 10 are lighter than water and will float, while those with an API of less than 10 are heavier than water and will sink.

API gravity and sulphur content are important determinants of oil quality because heavy oils are harder and more expensive to produce or extract from reservoirs while high sulphur or sour crude is corrosive and requires more refinery processing to remove the sulphur and therefore produces more expensive gasoline and diesel.

The two best known Sweet Light Crudes are Brent (UK North Sea) and West Texas Intermediate (WTI). Venezuela has vast reserves of extra heavy crude while crude from Mexico with sulphur content greater than 3% is considered as sour crude.

The ExxonMobil reference to oil in the giant Liza Field as “high-quality oil bearing sands” means that the crude oil found in Guyana has been measured to have both a high API gravity (> 30) and a low sulphur content(< 0.5%). This is significant as it means that Guyana’s crude will flow easily from the reservoir rock to the producing well while the low sulphur means that the crude will be less corrosive on producing well and the cost of refining the oil will be lower.

More at the link.

Reserves? Eleven billion bbls.

Back of the envelope:

Saudi Arabia: seven million bopd, export.

11 billion bbls / seven million bopd = 1,600 days at Saudi's rate of export.

11 billion bbls / 1.5 million bopd lifting in Guyana: 7,500 days = 20 years.