London — Guyana is seen as the hottest spot for oil explorers, raising the question as to whether this optimism is based in reality. Some see Guyana joining the top 10 biggest producers in the world next decade while others are more circumspect given the challenges around lack of infrastructure and the risks of extrapolating success from a number of big wins.
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Register NowExxonMobil has announced a string of large finds, with the Latin American country's offshore Stabroek block estimating recoverable resources at over 4 billion barrels of oil equivalent, most of it oil, while Tullow Oil's offshore Orinduik block potentially holds 3 billion boe.
Capitol Crude podcast: Crude output from Guyana could fill supply gap amid uncertainty in Nigeria, Libya, Venezuela
And there is more to come. Exxon's latest discovery, Hammerhead, has yet to be factored into the estimate and, according to several sources, this could put the Stabroek block's resources closer to 5 million boe. Tullow is expected to spud its first well on the Orinduik block in late 2019. Tullow operates the block with a 60% stake and Eco Atlantic holds a 40% interest.
"There is potential for additional production from significant undrilled targets and plans for rapid exploration and appraisal drilling," ExxonMobil said recently in a statement.
Indeed, Eco's CEO Gil Holzman could not contain his enthusiasm in an interview with S&P Global Platts. "Guyana is the jewel in the crown, the mother of dragons. That is the hottest exploration area in the world. It's no longer frontier, it's a sub-mature basin," he said earlier this month.
"This is phenomenal, over 4 billion barrels of pure, sweet, high grade API oil, which the refining itself is much easier than say neighboring Venezuela [which produces heavier sourer crude], in a place that is easy to operate. It's a paradise for exploring in that sense."
Analysts Wood Mackenzie's latest research also sounded an upbeat tone, noting the production ramp-up would be faster than anything ever achieved in a complex of giant fields in frontier deep water.
"The [Guyana] basin as a whole may hold another 8-10 billion boe of reserves...This would take the total to three times what's been found so far in Guyana's Stabroek block," WoodMac said.
"We expect around 50 exploration wells to be drilled over the next five years. Guyana itself might be headed for over 1 million b/d of production if exploration succeeds in converting YTFs [yet to finds]; the broader basin higher still if the plays extend into Suriname and French Guiana."
It was a view shared by Holzman who said he sees Guyana joining the world's top 10 oil producers in just a matter of years.
REALITY CHECK
Platts Analytics also said it is confident on production targets but with reservations. "From a resource point of view, we understand the reservoir conditions are very favorable to producing oil at commercial rates (e.g. thick reservoirs, good permeability, light oil).
In addition, we understand that the breakevens for development are very favorable (around $40/b)," said Platts Analytics' Rene Santos. That could mean Guyanese oil competing with a glut of shale from the neighboring US given their close proximities in terms of crude quality and geographies.
"There are obviously risks and challenges due to producing oil for the first time (lack of infrastructure), but everything seems to be progressing well so far and the use of FPSOs requires less infrastructure (versus multiple platforms or pipelines)," Santos said.
Platts Analytics doesn't see any major risks but said the border dispute with Venezuela could flare up at any point even though it has gone very quiet. It also highlighted presidential elections in 2020 given the fact the IMF has been critical of the deal ExxonMobil received.
WoodMac also played down the impact Guyana would have on the oil market, saying it doesn't compare in magnitude to the shale oil being produced from the Permian basin in the US. But in reality there appear few serious challenges.
"Perhaps the biggest lesson from Guyana is that it shows the way forward for conventional explorers emerging from the downturn looking for growth opportunities," WoodMac said. "There are new plays out there, giant oil discoveries waiting to be unearthed and which can compete on full cycle economics."
It would appear that with every new find, the cautiously optimistic mood from analysts is being replaced with that of Guyanese oil gushers.
--Paul Hickin, paul.hickin@spglobal.com
--Edited by Jonathan Fox, jonathan.fox@spglobal.com