Guyana looking to use oil resources before alternatives take hold of international market

(CMC): Guyana has acknowledged the possibility of a “short window” to take full advantage of its oil industry before alternative forms of energy take hold of the international market and severely diminish the country’s ability to cash in on its energy sector.

Vice President Bharrat Jagdeo told a news conference today that many oil companies were losing value on the various stock exchanges and, as a result, are cutting back on their investments “because as they lose value, their ability to raise money etc. is diminished and especially if the outlook for market conditions is not that great…it becomes riskier."

He continued: “I will be frank about it, we want this investment to go forward. Guyana on its own cannot raise $9 billion that’s twice the size of our total economy. So we want that because [it] means we can’t raise the money by ourselves, and secondly, we want investments to go ahead because there is a stream of revenue that will come to Guyana in the future for its development."

He said the only way for Guyana to benefit from its oil is for it to make the necessary investments to tap into it. 

“So I would be frank we want the development investment to take place and they are not taking place in many parts of the world, people are cutting back. The only way you could get the oil out is to make the investments and more so now .because there is a short window of opportunity. The renewables are yapping at people’s feet and there could be a breakthrough technology that one day would cause oil prices to crash totally,” Jagdeo warned.

High quality of oil in Guyana

He said many countries were banning combustion engine for vehicles, so that they would not use fossil fuel anymore.

“So we want it to go forward, but we also have a duty as the Government of Guyana to protect our people’s interest. So all of those who believe you have great leverage, I have spoken to several people in the industry who believe that the reason why Exxon is here, and we all share this, even the naysayers and those who believe that we should go forward, they share the view that Exxon wants to invest in Guyana because of the quality of our oil and the low break even costs,” Jagdeo said.

Guyana earlier this week signed an agreement with the US oil giant, ExxonMobil for the development of the Payara field offshore.

Payara is the third project in the Stabroek Block and is expected to produce up to 220,000 barrels of oil per day after start up in 2024, using the Prosperity floating production, storage and offloading (FPSO) vessel.

Natural resources minister, Vickram Bharrat, signed the Payara offshore development licence with ExxonMobil.

“[The licence] represents the single largest investment in the history of Guyana. The investment is billed at US$9 billion, and with the amount of oil estimated to be in the Payara development area, it is estimated that Guyana will benefit from GUY$7.4 trillion in government revenue,” Bharrat said.

The Stabroek Block is 6.6 million acres (26,800 square kilometres), with current discovered recoverable resources estimated at more than 8 billion oil-equivalent barrels. The 18 discoveries on the block to date have established the potential for at least five FPSO vessels producing more than 750,000 barrels of oil per day by 2026.

ExxonMobil affiliate Esso Exploration and Production Guyana Limited is operator and holds 45 per cent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 per cent interest and CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds 25 per cent interest.

Jagdeo told reporters that Exxon is confident of making good returns on its investments here and “given the fiscal conditions too”, adding that “so everybody agrees to that, but we have to move forward with the investments."

Better deal

The new Irfaan Ali government said the licence to ExxonMobil included several clauses that were not part of the Liza production licence that it had signed with the previous administration and Jagdeo urged the media to compare the two documents, insisting that the new administration had negotiated a better deal than the David Granger –led government.

“I would like the media to look at the petroleum licence for Liza…and do a comparison with the petroleum licence for Payara that we signed and therein you will see the massive improvement and how we have moved to protect our patrimony, not necessarily from the fiscal perspective because that is subject of another agreement, but definitely in terms of our making sure we can adequately manage this area through information flow to see that we are getting our fair share of the deal.”

ExxonMobil said it “is committed to building on the capabilities from our Liza Phase 1 and 2 offshore oil developments as we sanction the Payara field and responsibly develop Guyana’s natural resources,” said Liam Mallon, president of ExxonMobil Upstream Oil & Gas Company.

“We continue to prioritise high-potential prospects in close proximity to discoveries and maximise value for our partners, which includes the people of Guyana.”

ExxonMobil’s first offshore Guyana project, Liza Phase 1, began producing in late 2019, well ahead of the industry average for development time. Liza Phase 2, remains on track to begin producing oil by early 2022. It will produce up to 220,000 barrels of oil per day at peak rates using the Liza Unity FPSO, which is under construction in Singapore.

ExxonMobil said as the new projects proceed, investment in the Guyana economy increases. More than 2,000 Guyanese are now supporting project activities on and offshore, a 50 per cent increase since 2019. ExxonMobil and its prime contractors have spent over US$300 million with more than 700 local companies since 2015.

Jagdeo told reporters that the agreement signed allows for production “:to international standards” and in terms of the environment protection regulations “like on flaring, we have even gone beyond…like most countries in this regard, where a fine is levied on both the economic loss side and the environmental pollution side”.

Jagdeo insisted that Guyana has a right to development and that he believes “our people have a right to a better life.

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