ExxonMobil announces 'significant' discovery at Guyana's Whiptail field

An ExxonMobil-led consortium has made a "significant" discovery at Whiptail, on Guyana's offshore Stabroek block that could form the basis for a future oil development on the block's southeast area and add to current estimates of 9 billion boe of recoverable resources, according to partner Hess Corp.

The discovery actually involves two wells being drilled simultaneously. Whiptail-1 found 246 feet of net pay, while Whiptail-2 uncovered 167 feet of net pay – both in high-quality oil-bearing sandstone reservoirs, Hess and ExxonMobil said separately July 28.

Drilling continues at both wells to test deeper targets, and results will be evaluated for future development, the partners said in both written statements and during a Hess conference call.

"We see the potential for at least six FPSOs [floating, production storage and offloading infrastructure] by 2027, and up to 10 FPSOs to develop the discovered resources on the block," Hess CEO John Hess said during his company's second-quarter earnings call. "And we continue to see multi-billion barrels of future exploration potential remaining."

Mike Cousins, senior vice president of exploration and new ventures for ExxonMobil, said the discovery increases confidence in the resource size and quality around southeast Stabroek where the new wells are located.

Whiptail could become a future development as the partners, which include China's CNOOC, continue to evaluate "the best sequence of development opportunities within the block," Cousins, said.

Guyana's Minister of Natural Resources Vickram Bharrat welcomed the two latest oil discoveries.

Bharrat said the government would do all that is necessary for ExxonMobil to fast-track plans to bring its oil to production.

"In this regard, the Ministry and the Petroleum Sector regulatory agencies remain committed to working with all operators, in efforts to expedite their respective drilling programs as we seek the sector's expansion," he said.

Guyana has earned just over $400 million from its eligible share of oil sales.

Southeast of Uaru field

The Whiptail discovery is sited roughly four miles southeast of the partners' Uaru field which was unveiled as a discovery in January 2020, and about three miles west of the Yellowtail field. Whiptail-1 is being drilled in 5,889 feet of water while Whiptail-2, located three miles northeast of Whiptail-1, is being drilled in 6,217 feet of water.

The ExxonMobil-led partners began producing their first discovery, Liza, in December 2019 and by December 2020 reached peak production capacity of 120,000 b/d. It is currently producing at that level, ExxonMobil said.

Final work is progressing at the future Liza Phase 2 development, which is slated to come online early in 2022. Liza 2 will be produced through a floating, production, storage and offloading system named Unity with peak capacity of 220,000 b/d.

Unity is scheduled to sail from Singapore at the end of August 2021, Greg Hill, Hess chief operating officer, said.

The hull for the third Stabroek FPSO, Prosperity, is complete. Topsides fabrication has begun and development drilling started in June. The overall project, which will produce the Payara field, is about 45% complete, Hill said. Prosperity will have a capacity of 220,000 b/d; first oil is slated to begin in 2024.

The partners are also outlining plans for a fourth development at the Yellowtail field, which will include another find, Redtail. Startup is expected in 2025 although a final investment decision has not yet been made on the project. Yellowtail and Redtail are located about 19 miles southeast of the Liza developments.

More Stabroek developments eyed

The fifth development may be Uaru, combined with the Mako discovery. In Q2 the Mako-2 appraisal well confirmed the quality, thickness and aerial extent of that field's reservoir, Hill said.

But the partners continue to evaluate earlier as well as recent discoveries, said Hill.

After drilling winds up at the Whiptail, the Pinktail-1 exploration well, sited five miles southeast of Yellowtail-1, will be spudded. Following that, the Tripletail-2 appraisal well, located five miles south of the Tripletail-1 discovery, will be drilled, he said.

Other near-term drilling at Stabroek incudes an early-August spudding of the Cataback-1 exploration well, located 4.5 miles southeast of the Turbot-1 discovery. Then in Q4 2021, the first test of Stabroek's deep potential at the Fangtooth prospect, located nine miles northwest of Liza – in a different part of the block than most of the discoveries which are located in the southeast portion.

In the third quarter, an appraisal well will be drilled at Turbot, an early Stabroek discovery, followed by a series of appraisal drill stem tests at Uaru-1, then Mako-2 and finally at Longtail-2.

While the partners evaluate multiple developments, the Liza projects alone are shaping up to be an important cash generator for the partners, John Hess said.

Hess Corp's cash flow is estimated to grow at a compound annual growth rate of 42% between 2020 and 2023, which is 75% above its peers and puts the company in the top 5% of the S&P 500, he said.

Focus on fossil fuels

Michael Tamvakis, professor of commodity economics and finance at the UK-based Cass Businesss School, said ExxonMobil's discoveries were good news for the company as it continues to focus heavily on fossil fuels.

"ExxonMobil has a stronger incentive to do so. They don't really have a strategy to diversify in renewables and they were probably late in the US shale boom and lagging behind. They are best at optimizing supply chains and leveraging their expertise in E&P, shipping and refining," he said.

Professor Tamvakis noted that it is more profitable for ExxonMobil to produce oil in Guyana.

"The US is their biggest consumer market and short-haul reserves like those in Guyana are ideal. The oil quality matches well their refineries in the US Gulf and they have the incentive to drive the process. They have been disappointed in the past with their ventures in the Russian Arctic circle, so it makes sense to monetize reserves close to home at an affordable cost."