12 minute read
A Caribbean success
Major oil discoveries off shore Guyana have propelled the former British sugar-growing colony from a frontier province to an oil and gas hot spot, writes EIC’s Pietro Ferreira
Guyana is the world’s newest oil and gas player. As multinationals fi rmly establish themselves in the capital, Georgetown, barges that once transported the country’s famed sugar on the Demerara River have been replaced by platform supply vessels carrying state-of-the-art oil and gas equipment. And a fl oating production storage and offl oading (FPSO) unit, sporting the colours of the Guyanese fl ag, is producing oil some 160km off the coast.
The Stabroek block
In December 2019, Guyana joined the ranks of world oil producers after ExxonMobil started operations at the 120,000bbl/d Liza Destiny FPSO. First oil came less than fi ve years after the oil major announced the Liza-1 discovery on the Stabroek block. Located in the deep waters of the GuyanaSuriname basin in northern South America, Stabroek is home to 16 discoveries to date – the most recent announced in January 2020. According to latest estimates, all discoveries combined contain recoverable reserves of 8Bbbl of oil equivalent – a number that is likely to increase as drilling work leads to new hydrocarbon discoveries.
Development phases
Liza Destiny was the fi rst of at least fi ve FPSOs to be installed on the Stabroek block. A second development phase will also feature an FPSO at the Liza fi eld, but with a 220,000bbl/d oil processing capacity. The vessel – Liza Unity – is under construction in Singapore, and the unit will be the fi rst to be provided by SBM Off shore under the contractor’s Fast4Ward standardisation programme. Similar to Phase 1, TechnipFMC
A Caribbean success story
A country of only 780,000 people, Guyana is set to jump into the world’s top 10 oil producers, on a per-capita basis At a conservative barrel price of US$50,that could mean revenues of close to
US$15bn per year
and Saipem will be responsible for subsea trees and SURF equipment, respectively, and start-up is scheduled for 2022.
A third development phase targeting the Payara prospect is already in the works and SBM Off shore has secured the front-end engineering design contract for the 220,000bbl/d unit. An engineering, procurement and construction contract is expected to be confi rmed once the project is sanctioned by ExxonMobil. In November 2019, Saipem was selected for the engineering, procurement, construction and installation of SURF equipment. Start-up is expected in 2023.
An additional fi eld development project is expected at the Hammerhead oil fi eld, which
has heavier oil than previous discoveries. A 150,000–190,000bbl/d unit could potentially be installed in the area, contributing to ExxonMobil’s target to achieve an output of 750,000bbl/d by 2025.
Other players
ExxonMobil’s discoveries off shore Guyana have motivated players hoping to achieve similar success. Tullow Oil conducted a drilling campaign on the Orinduik block, located next to Stabroek, in 2019, leading to the Jethro and Joe discoveries. The company later confi rmed that the two discoveries contain 10–15º API heavy crudes, with high sulphur content. Orinduik is estimated to contain 5.1Bbbl of oil equivalent.
Repsol, on the other hand, was not as successful. The company is the operator of the Kanuku block, where the company announced the Carapa-1 discovery in January 2020. Although Repsol initially announced the discovery of 27º API oil, the well was plugged and abandoned after the reservoir proved to be smaller than expected.
Political challenges
The development of Guyana’s oil reserves and the question of who will manage the windfall is at the centre of the country’s political debate. Guyana’s demographics are roughly split between Afro-Guyanese and Indo-Guyanese ethnic groups, a division refl ected in local politics.
In December 2018, incumbent President David Granger – whose party is supported by the Afro-Guyanese community – lost a vote of no-confi dence in Parliament, triggering elections on 2 March 2020. Although Guyana’s election commission announced a victory for Granger’s ruling party, the opposition – supported by Indo-Guyanese groups – and international observers questioned the transparency of the results, leading to a full recount (ongoing at the time of writing). Both parties support the development of oil and gas reserves, but the opposition has pledged to seek better contract terms with oil companies.
Looking ahead
It is just the beginning for Guyana’s fl edgling oil and gas sector. As the discoveries by ExxonMobil and other players increase, new fi eld development projects are likely to be announced. According to an estimate by the fi nancial services company Credit Suisse, there are 25 additional prospects to be explored on the Stabroek block alone, while discoveries already announced merit at least nine development phases.
Looking further ahead, it is possible Guyana’s massive reserves may off er opportunities in the mid and downstream segments as well. There have been discussions on how to monetise natural gas produced off shore, as well as the feasibility of a refi nery (GuyEnergy, a local company, has pledged to complete a small-scale modular refi nery this year). Current and future projects in Guyana are proof that the country has secured its place among oil and gas players, off ering a wealth of opportunities for the supply chain.
By Pietro Ferreira, Regional Analyst, EIC
Looking to expand into Guyana?
Prospects exist both for sales of services and equipment to existing concession holders and for the awarding of additional off shore concessions. To discover more about current projects and opportunities for the supply chain, please email EIC South America at:
pietro.ferreira@the-eic.com
Tapping into America’s energy potential
The Gulf of Mexico (GoM) is expected to set another oil production record in 2020 with most of the growth coming from deepwater projects, reaching an anticipated 1.9Mbbl/d. At the same time, investments in these projects are half the amount they were in 2019, as project costs have decreased by 60% and OPEX is down by 7% since 2015.
The outlook for the GoM is optimistic; despite the signifi cant decrease in investment, the Energy Information Administration expects the region will continue to break records as a result of infi ll drilling, increased production from existing fi elds, and new discoveries.
Between 2015 and 2019, the collective resource totalled more than 5Bbbl of oil valued at US$1.9bn (November 2019). For the US, approximately 17% of oil and 5% of natural gas production are sourced from federal GoM waters. The gulf ’s share of Mexico’s oil and gas production, however, soars to 75% of its total output.
Untapped resources
The US Bureau of Ocean Energy Management (BOEM) estimates that there are still 30Bbbl of oil and nearly 80Tcf of natural gas yet to be discovered. There are currently 2,579 leases spanning 13.7bn nautical acres in the US GoM. The region is poised for plenty of investment and business opportunity as BOEM is launching two lease sales each year through to 2022 – which will include all available unleased areas in federal waters, covering 78m acres. In Mexico, regulators estimate a total investment of US$96bn would be required if all 58 blocks awarded to private companies were fully developed.
There have been many signifi cant discoveries in deepwater GoM in recent years. Development options vary and are dependent on the condition and location of the fi eld. Clusters of discoveries are often tied back to centralised production hosts. Some of the most notable deepwater discoveries in 2019 include Shell’s 1Bbbl-discovery at its Blacktip Prospect, BP’s 122m of net oil pay discovery at its existing Thunder Horse fi eld, a 28m net oil pay encounter at Hess’ Esox-1 well, and Talos Energy’s 77m total net pay fi nd at its adjacent Bulleit and Orlov Prospects.
There is also opportunity in exploration activities in the GoM. Shell is proceeding with a deepwater drilling campaign on assets it won during Round 2.4, including the drilling of 10–13 wells for an estimated CAPEX of US$800m–2.4bn. Four of the wells will be drilled in 2020, and a similar amount in 2021. Repsol is investing US$98m for the drilling of two wells on acreage it won during the same round.
Across the gulf waters to Mexico, the Andrés Manuel López Obrador administration has set signifi cant targets while attempting to roll back the energy reforms of 2015 and bring the national oil company Petróleos Mexicanos (Pemex) back to the fore, promising an oil and gas market increase in net oil production to 2.697MMbbl/d by the end of 2024.
Decommissioning picks up
Although decommissioning in the GoM has slowed since the downturn, it is now picking up again as installations completed in the 1970s are reaching the end of their useful lifespans. Structures are being removed at a rate of 150–200 per year. The US Government Accountability offi ce and US Bureau of Safety and Environmental Enforcement estimate that more than 2,000 structures must be removed in addition to 9,000 wells that will need to be plugged and abandoned during the next few years.
Helping members do business
There are still many challenges in the off shore oil and gas market, but EIC’s DataStream database provides a positive outlook, showing approximately 95 active and future off shore upstream projects with an anticipated CAPEX of US$131.3bn. This is signifi cant, with many opportunities across the supply chain between now and 2026. Doing business across the Gulf is something EIC is well positioned to assist with. Our North America Offi ce is in the heart of the Houstons Energy Corridor, connecting us to top tier contractors, major operators and governmental bodies. We also have offi ce facilities available to rent.
We recently held our second EIC Connect event in Mexico City, bringing together companies working in the energy sector within the UK and globally, as well as buyers and procurement professionals that are active in the Gulf. Energy Focus puts the spotlight on the Gulf of Mexico – not only one of the most important areas in the region for energy resources, but also one of the most productive basins in the world
CANADA
Canadian fi rm TC Energy has approved the proposed 2023 NGTL Intra-Basin System Expansion through fi rm delivery contracts of approximately 309MMcf/d. The natural gas pipeline network includes 92,600km of gas pipeline, which transports more than 25% of North American natural gas demand. The liquids pipelines division includes 4,900km of oil pipeline, which ships 590,000bbl/d – about 20% of Western Canadian exports. Details of the NGTL Intra-Basin System Expansion include connecting the Western Canadian sedimentary basin to markets in Alberta on the NOVA gas transmission line. It is expected the project will help meet market demand in the power generation, oil sands, petrochemical and utility sectors.
ACTIVITY TO WATCH ACROSS THE
REGION
THE US
The US Department of Energy (DOE) recently approved four liquefi ed natural gas (LNG) export projects for construction on the Texas Gulf Coast in February 2020. The DOE’s permits will allow the four terminals combined to ship 47m metric tons per year of LNG to countries currently without free-trade agreements with the US, when the facilities become fully operational. The DOE authorised Exelon’s proposed Annova LNG export terminal, NextDecade’s Rio Grande LNG and Texas LNG export terminals, to be located at the Port of Brownsville, in addition to expansion of Cheniere Energy’s existing Corpus Christi LNG export terminal.
Looking to expand into North America?The EIC can help
If you are thinking about doing business in North America, our team in Houston is on hand to help. For more information on our EICLaunchPad service, which provides a low cost, low risk entry into this market, contact houston@the-eic.com. As part of the Launchpad service we can off er you serviced offi ce facilities, including hot desks, meetings spaces and virtual offi ce provision, enabling you to kick start your business within the region.
MEXICO
Pemex is looking to increase oil production at the Abkatun, Pol and Chuc reservoir complex – made up of 18 fi elds, of which 10 are currently productive. Part of the development plan is to bring the remaining eight fi elds into commercial production. Much of the future development will focus on advanced recovery techniques, including natural gas injection in wells at the Chuc and Abkatun fi elds. Pemex’s exploration and production unit PEP plans to drill a total of 54 new development wells (some vertical and some sidetrack), reopen four exploration wells and perform 38 major well repairs at the Chuc project. New infrastructure needed in the area will include 11 off shore drilling structures and 21 subsea pipelines stretching to a combined 136km.
TRINIDAD AND TOBAGO
Trinidad and Tobago has been involved in the petroleum sector for more than 100 years. There has been considerable oil and gas production on land and in shallow water, with cumulative production totalling more than 3Bbbl of oil. Recently Shell Trinidad and Tobago took a fi nal investment decision for the development of Block 22 and NCMA-4 in the North Coast Marine Area (NCMA). This development, Colibri, is expected to add a total of 43,100bbl of oil equivalent per day (250MMcf/d of gas production) through a series of four subsea natural gas wells. Drilling of these wells is expected to commence in the second half of 2020, with fi rst gas anticipated in 2022.
'LVFRYHUPRUH
.QRZVOH\6.DUHZRUOGOHDGHUVLQWKHGHVLJQDQGVXSSO\RIˋUH ˋJKWLQJV\VWHPVVHUYLQJWKHRLOJDVDQGSHWURFKHPLFDOLQGXVWULHV
f 'HOXJHV\VWHPV f )RDPV\VWHPV f +\GUDQWV KHDGHUV f 5HPRWHFRQWUROOHGPRQLWRUV f )L[HG RVFLOODWLQJPRQLWRUV f %HVSRNHV\VWHPGHVLJQ
.QRZVOH\6./LPLWHG &HQWUHSRLQW 0DUVKDOO6WHYHQV:D\ 7UDIIRUG3DUN 0DQFKHVWHU0$( 8QLWHG.LQJGRP 7 ) VDOHV#NQRZVOH\VNFRXN ZZZNQRZVOH\VNFRP
ENERGY SPECIAL ACCESS SOLUTIONS
Palmers special access and scaffolding solutions offer reduced work at height risk via bespoke engineering design solutions on leading energy, nucelar, waste to energy and power station projects.
Our extensive experience in the energy sector and highly trained scaffolding operatives help offer our clients safe, on time and on budget innovations right across the country.
Palmers Scaffolding: One of the country’s oldest scaffolding companies delivering ultra-modern special access and scaffolding solutions.
Palmers Scaffolding UK Ltd. // 331 Charles Street, Glasgow, G21 2QA, UK // P +44 141 553 4040 // F +44 141 552 6463 // info@palmersgroup.co.uk // palmersgroup.co.uk
