Smart City Clearing Company issued a market report to help people understand the dynamics and implications of ExxonMobil's Phase 1 and 2 programs at the Starbroek block.
Guyana’s Economic Outlook: A Rising Tide Lifting All Ships
A primary driver of our positive investment thesis on Guyana is the simple fact that Guyana is currently forecast to be the single fastest growing economy in the world, pre-covid Guyana had a an astounding 85.6% estimated Real GDP growth rate. Post-Covid with the rest of the world facing negative growth of approximately -4%, Guyana’s growth was revised downward to the mid 50%’s maintaining it’s lead as the fastest growing economy in the world. Guyana’s rapid economic growth is directly attributable to the recent discovery of a world class offshore oil reservoir in the Stabroek block by Exxon Mobile and several other major oil producers in the last few years. Development plans for the oil project have been fast-tracked and it is estimated that total production is likely to exceed 120Mboe/d by 2021.
The country achieved first oil on December 21st 2019 when the Liza Destiny started producing oil. As of June 2020 production is currently averaging 85–90,0000 barrels per day and the country of Guyana has successfully lifted 2MM Barrels of their oil which has been sold to Shell Western Supply and Trading Ltd (SWSTL) — the Caribbean Subsidiary of Shell. In total between royalty payments and the sale of the two lifts the country has already received $94,921,803.00 which is sitting in the Natural Resource Fund at the Federal Reserve Bank in New York.
The history of Oil & Gas exploration in Guyana: An Overview
Back in 2000, the U.S. Geological Survey identified the Guyana-Suriname Basin as the second highest resource potential among unexplored oil basins in the world. ExxonMobil, Esso, Hess, Repsol, Anadarko, Total, Tullow Oil, and CGX Energy, Ratio, JHI, Mid Atlantic O&G, and Ecco Atlantic have been a part of exploration and drilling activities over the years. ExxonMobil Guyana has made 13 discoveries since 2015 and plans to begin production of ~120Mboepd from the Liza Phase 1 development in early 2020. Guyana is projected to be among the world’s largest per-capita oil producers by 2025.
Development by Exxonmobil on the Stabroek block will consist of two initial development phases which we describe below.
Liza Phase 1 project — Development description
The Liza Phase 1 development is approximately 190 kilometers offshore in water depths of 1,500–1,900 meters. The development plan includes completion of a floating production, storage and offloading (FPSO) vessel which has already arrived in Guyana and is designed to produce up to 120,000 barrels of oil per day. Four drill centers are envisioned with 17 wells in total; eight production wells, six water injection wells, and three gas injection wells.
Liza Phase 2 project — Development description
The development plan involves a second floating, production, storage and offloading vessel (FPSO) and related subsea equipment, umbilical, risers and flowlines. The development concept is similar to that of Liza phase 1. A total of six drill centers with approximately 30 wells, including 15 production, 9 water injection and 6 gas injection wells. Liza Phase 2 startup is expected in mid-2022 and will develop approximately 600 million barrels of oil. Liza Phase 2 will produce up to 220,000 barrels of oil per day and further capitalize on the significant development potential of the Stabroek Block.
Exhibit 1 — Major XOM Development Timeline
The Liza Phase 1 Project came online 6 months ahead of schedule and close to a billion dollars under budget. For those that cover the O&G E&P sector, they know this is quite an accomplishment especially for a deep water field. An impressive feat as most offshore oil development projects are notorious for lengthy lead times and massive cost over-runs. With oil production expected to ramp up quickly in 2020 to over 120Mboe/d, we expect another significant leg up in production volumes and associated petroleum proceeds as phase two of the project starts up in 2022, bringing total production volumes to over 360Mboe/d. The longer term opportunity is not fully captured by examining just the Exxonmobil project, though estimates are placing total gross production at upwards of 750Mboe/d in the next several years, and as high as 1MMboe/d in the 2026–2027 timeframe, which would put Guyana in the top 20 oil producing nations by volume.
Exhibit 2: Top 30 Oil Producing Nations
Conclusion.
The combination of sound market fundamentals and a local Guyanese economy poised to explode on the heels of a world class offshore development project make investments in Guyana an attractive risk/reward proposition in all sectors. As the local economy begins to experience tremendous incremental investment in all sectors, driven by the windfall of oil production royalties revenue, we believe Guyana — and nearly all local businesses — are poised to benefit.
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