BREAKING NEWS: The parliament of Guyana voted in favor of a no-confidence motion in the government, triggering new elections in March in a surprise defeat for the APNU-AFC coalition.
ExxonMobil Makes 10th Discovery Increases Stabroek Resource Estimate to 5 Billion Barrels
More than 5 billion recoverable oil-equivalent barrels discovered in less than four years
reinforces potential for at least five floating storage, production and offloading vessels producing more than 750,000 barrels of oil per day by 2025. Pluma-1 well represents ExxonMobil’s 10th discovery.
Dateline: IRVING, Texas Public Company Information:
ExxonMobil said today it made its 10th discovery offshore Guyana and increased its estimate of the discovered recoverable resource for the Stabroek Block to more than 5 billion oil-equivalent barrels.
The resource estimate, up from the previous estimate of more than 4 billion oil-equivalent barrels, is a result of further evaluation of previous discoveries and includes a new discovery at the Pluma-1 well.
“The discovery of a resource base of more than 5 billion oil-equivalent barrels in less than four years is a testament of our technical expertise and rigorous evaluation and pursuit of high-potential, high-risk opportunities in this frontier area,” said Neil Chapman, ExxonMobil senior vice president. “We will continue to apply what we’ve learned to identify additional exploration prospects and potential future discoveries that will deliver significant value to Guyanese people, our partners and shareholders.”
The Pluma-1 well encountered approximately 121 feet (37 meters) of high-quality hydrocarbon-bearing sandstone reservoir. Pluma-1 reached a depth of 16,447 feet (5,013 meters) in 3,340 feet (1,018 meters) of water. The Noble Tom Madden drillship began drilling on Nov. 1. The well is located approximately 17 miles (27 kilometers) south of the Turbot-1 well. The Noble Tom Madden will next drill the Tilapia-1 prospect located 3.4 miles (5.5 kilometers) west of the Longtail-1 well.
“Together with the government and people of Guyana, we are continuing to grow the value of the Stabroek Block for Guyana, our partners and ExxonMobil with successful exploration investments,” said Steve Greenlee, president of ExxonMobil Exploration Company. “Our ongoing work will evaluate development options in the southeastern portion of the block, potentially combining Pluma with prior Turbot and Longtail discoveries into a major new development area.”
The Liza Phase 1 development is expected to begin producing up to 120,000 barrels oil per day by early 2020, utilizing the Liza Destiny floating storage, production and offloading vessel (FPSO). As previously announced, Liza Phase 2 is expected to start up by mid-2022. Pending government and regulatory approvals, Liza Phase 2 project sanction is expected in early 2019 and will use a second FPSO designed to produce up to 220,000 barrels per day. Sanctioning of a third development, Payara, is also expected in 2019 with start up as early as 2023.
The Stabroek Block is 6.6 million acres (26,800 square kilometers). ExxonMobil affiliate Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
[About ExxonMobil The largest publicly traded international energy company, uses technology and innovation to help meet the world’s growing energy needs. ExxonMobil holds an industry-leading inventory of resources, is one of the largest refiners and marketers of petroleum products, and its chemical company is one of the largest in the world. For more information, visit www.exxonmobil.com or follow us on Twitter www.twitter.com/exxonmobil.]
Cautionary Statement: Statements of future events or conditions in this release are forward-looking statements. Actual future results, including project plans and schedules, resource recoveries and production rates could differ materially due to changes in market conditions affecting the oil and gas industry or long-term oil and gas price levels; political or regulatory developments including the grant of necessary approvals; reservoir performance; the outcome of future exploration and development efforts; technical or operating factors; the outcome of future commercial negotiations; and other factors cited under the caption “Factors Affecting Future Results” on the Investors page of our website at www.exxonmobil.com. References to oil-equivalent barrels and similar terms include quantities that are not yet classified as proved reserves under SEC rules but are expected ultimately to be moved into the proved reserve category and produced in the future.
International Small Business Summit
Director of the Institute of Applied Science and Technology (IAST), Dr. Suresh Narine claims GUYANA can lead the narrative of modern development if it embraces its multiplicity of cultures and manages its resources well.
Addressing the Summit, Narine contended that across most of Latin America, there is a trend towards urbanization; a removal of the importance of unique cultures and a measurement of success by GDP (Gross Domestic Product). Development encompassed harnessing resources to promote economic growth. Guyana finds itself in a heightened state of underdevelopment. “Our ability to produce food is dwindling as our amounts of arable acreage exponentially dwindle; and the amount of freshwater resources is being increasingly [used up].”
The director of Canadian oil and gas exploration company CGX Inc. noted that Guyana is in a unique position now, amidst discussions on transformation into a ‘green’ state in the wake of massive oil finds. “…most of our environment is in a pristine state and suddenly… Guyana is able to capitalise on some growth. It is on the cusp of being able to define how that growth will be and ..… now has the opportunity to define what development can be.” Development has been plagued by a plethora of issues, but racial insecurity allows a multiplicity of solutions- a rich nation comprising six different peoples, from six distant places who can contribute to development. “.. the patrimony.. is not only in the capital heading our way… not only the pristine environment … .. this collective approach to defining what we can be draws from wellsprings across this globe. If we don’t..seize on what that is valued, then the Green State Development Strategy will mean nothing.” With the advent of oil, the pressures from persons coming to direct the country on the way forward will be unrelenting.“The opportunity that we have .. is quite remarkable.. for a small country .. to have massive problems absorbing the capital that’s coming our way, to .. say we will nucleate “green” growth rather than pursue the profligate trajectories that other oil-producing states have [deserves] an applause.”
Director of the United Nations Environment Programme, Leo Heileman, lauded Guyana’s ambition to use oil revenues to facilitate it’s transformation into a “green” state. Guyana has a unique opportunity. If managed correctly, oil revenues can relieve constraints to economic growth, boost social development and safeguard environment assets of the future. But this is not guaranteed: sound fiscal and monetary policies must guide this effort to ensure benefits reach the entire population and are sustained for the future generations.
“This is the direction the world needs to take in order to have a planet that is safe for all of us in the future.”
Both Heileman and Narine acknowledged that the pursuit of green development will take very careful stewardship. ..” Appeal to ingenuity here and make ‘Made-in-Guyana’ solutions.”
Guyanese could get increased salaries, improvements in 2020, the year of First Oil The Finance Minister cautioned against pumping too much money into an economy when production is low which could result in depreciation of the Guyana dollar and inflation. Civil servants would receive salary increases when Guyana begins producing oil estimated to rake in about US$300 million in 2020. Government foresees improvements in the social and economic status, progressive improvements in the human, cultural and every other developmental aspect of the country.
Asked specifically whether the planned improvements to the social, human and economic development of Guyanese would include increased wages and salaries. “…including everything but we have to take everything in context. We don’t want a situation where I give you two dollars and you lose three so one of the big things that has to happen is that production has to be pulled up, we have to diversify.”
All of the US$300 million (GYD$60 billion) from Liza Phase One production of 120,000 barrels per day would be deposited into the Sovereign Wealth Fund and some withdrawn for economic development in keeping with the fiscal rules that would govern the fund. That would be 50 percent of profit oil plus two percent royalty, but the actual earnings could be more if the world price moves up to about US$70 per barrel. Cash set aside from economic development would be withdrawn and deposited into the Consolidated Fund after converting American dollars into Guyanese dollars through the Bank of Guyana.
“At no point will 300 million be available to the government for spending and the way how the 300 million become offline and it will go offline so it doesn’t create disturbances to the economy; so much money flooding the economy, few goods are around, large imports it suddenly attracts.”
G-Boats
The doors of oil services company G-Boats’ local office were officially opened l with a heavy emphasis on supporting local content through the employment of Guyanese.
G-Boats, now located at Lot 126 Quamina and Carmichael streets, Georgetown, is a subsidiary of Edison Chouest Offshore, a global company that provides supply vessels to Oil & Gas operators around the world, including ExxonMobil.
Long-lasting relationship between Guyana and North Sea
Guyanese ambassador to the UK, Frederick Hamley Case and the British high commissioner to Guyana, Greg Quinn. © DC Thomson
Diplomats yesterday praised the “long-lasting relationship” being forged between Aberdeen and the South American nation of Guyana, while on a trade mission to the city.
The Guyanese ambassador to the UK, Frederick Hamley Case and the British high commissioner to the country, Greg Quinn, are leading the delegation, aimed at building relationships to support the country’s fledgling oil and gas sector.
Guyana has emerged as a global hotspot for offshore energy, with Exxon Mobil recently discovering the Liza prospect off the country’s coast, containing 4.2 billion barrels of oil.
World Bank Partners With Guyana for New Oil Sector
Prime Minister Hon. Moses V. Nagamootoo held discussions with a high-level, five-member team from the World Bank, which is visiting Guyana.
At the hour-long meeting, led by Mexican-born Mr. Jorge Familiar, Regional Vice-President for Latin America and the Caribbean region, the World Bank assured support to Guyana in capacity building as the country prepares for first oil.
The visit is part of an on-going engagement with Guyana, simultaneously in several sectors. Others on the team include regional director, Mrs. Tahseen Sayed; country manager for Guyana and Jamaica, Mrs. Galina Sotirova; regional programme leader, Mrs Abha Prasad; and operations officer, Mr. Federico Baechili.
Mr. Familiar shared the recent dismal experiences of a few regional states that depended on oil wealth, and stressed that Guyana would need solid governance systems to avoid pitfalls, and to protect and beneficially spend anticipated revenues.
In welcoming the team to Guyana, Prime Minister Nagamootoo emphasised the efforts of the Coalition Government in promoting open, democratic, multi-party governance in Guyana, and the mechanisms in place to combat sleaze by public officials and accountability for public property.
He explained democratic innovations over the past three years, and invited the World Bank to partner with the Government to strengthen these institutions and to build human capital to manage the new economy.
The Prime Minister, who was performing the functions of the President, referred to the Green Paper for a Natural Resources Fund, which was tabled in the National Assembly; and the crafting of a Green State Development Strategy, to provide a generational vision for the future oil-producing Guyana. He noted that the Fund policy is underlined by stringent fiscal rules to guide the use of petroleum resources.
Mrs. Tahseen Sayed, remarked that towards this end, the World Bank has approved a US$35 million development policy credit to better prepare the country to benefit from its oil and gas reserves, and to support Guyana’s effort to strengthen financial sector development and fiscal management. The World Bank team is expected to meet other key government officials and other stakeholders.
SBM Offshore puts pen to paper on new FPSO order, Lays keel for 1st Fast4Ward hull
Dutch FPSO giant SBM Offshore has officially signed a contract for the second Fast4Ward FPSO hull with the Chinese SWS shipyard. SBM Offshore is ordering the FPSO hull on speculation and with no firm contract awarded for the FPSO.
SBM Offshore CEO Bruno Chabas / Image by SBM Offshore
The signing ceremony in Shanghai on Wednesday coincided with the keel laying ceremony for its first Fast4Ward FPSO hull which SBM Offshore had ordered earlier, and which is expected to serve ExxonMobil’s Liza 2 development in Guyana.
The hull is the second FPSO hull ordered under SBM Offshore’s Fast4Ward program developed to standardize, speed up, and lower cost of an FPSO construction. According to the company, the Fast4Ward program speeds up FPSO delivery by a year and could save half a billion dollars per FPSO.
To remind, SBM Offshore last week said it had ordered the second hull, and this is now just an official confirmation of what was said last week.
“With the signing for this second hull in its planned series of Fast4Ward FPSOs, SBM Offshore is signaling to the industry that it means business and its game-changing solution is on track and ready for when clients come calling. The level of client endorsement to date demonstrates that the concept is winning the confidence of the industry,” SBM Offshore said on Wednesday.
The Dutch company also explained that the order, while on speculation, is based on sound signals in the market.
“Although there is no concrete EPC contract for this second hull, the company views the continuing positive industry outlook as a good indicator, hence the move to sign with SWS for a second floater. Parallel projects for Fast4Ward are now in motion at the yard,” SBM said.
SBM Offshore CEO, Bruno Chabas, said: “The timing of our Fast4Ward strategy fits in perfectly with the market upturn. We have been preparing for this exact scenario since 2014 and today, we see tangible evidence of how Fast4Ward matches the industry’s need for cost-conscious, standardized solutions, which de-risk and accelerate projects.
As previously reported, ExxonMobil in July awarded SBM Offshore contracts to perform Front End Engineering and Design (FEED) for a second Floating Production, Storage and Offloading vessel (FPSO) for the Liza development located in the Stabroek block in Guyana.
Following the FEED and subject to requisite government approvals, project sanction and authorization to proceed with the next phase, SBM Offshore will construct, install and then lease and operate the FPSO for a period of up to 2 years, after which the FPSO ownership and operation will transfer to ExxonMobil.
The hull for the first Fast4Ward, for which the keel was laid on Friday, had also been ordered on speculation in August 2017.
The FPSO is designed to produce 220,000 barrels of oil per day and will have associated gas treatment capacity of 400 million cubic feet per day, as well as water injection capacity of 250,000 barrels per day.
Commenting on Wednesday, Chabas said: “Major players are starting to invest in projects and are seriously considering our game-changing solution, as we saw with our July announcement of an FPSO FEED for the Liza development, which is based on our Fast4Ward program.”
The CEO last week said it could take some in 24 to 30 months for the second hull to be completed. He also provided an optimistic outlook for FPSO demand, saying SBM Offshore was tracking 45 potential FPSO projects in 25 countries, that could materialize in the coming two to three years.
Long term benefits from oil exploitation
Shelly-Ann Mohammed, head of the Association of Chartered Certified Accountants (ACCA) Caribbean;
The discovery of significant oil and gas reserves off the coast of Guyana could be transformational for the country, and brings opportunity for local companies. ACCA examines what this means for finance teams in the sector.
Oil prices collapsed from over $100 per barrel (pb) n 2013 to around $30 pb by early 2016. Shale oil in the US, produced at relatively low marginal cost and with supply switched on and off relatively easily, seemed to suggest a new “permanent” low oil price. But this has not proved to be the case and over the last year or so oil prices have risen by almost 50% to around the $80 pb mark. The combined effect of rising demand as the global economy gathered strength and supply restricted by OPEC – including sanctions to be re-imposed on Iranian oil – pushed prices higher. So the era of volatile oil prices is not over – yet.
In the longer term demand for oil is set to be on a declining trend as the transportation industry moves towards autonomous and electric vehicles. Peak oil demand may be reached within the next 20 years or so, depending on the speed of the transport revolution. If demand is in long-term decline then there is likely to be downward pressure on prices too.
In any case it seems that finance mangers will have to deal with volatile prices for the foreseeable future. The same is broadly true for gas prices which have tended to be correlated with oil prices. In the long term gas demand will be influenced by the renewable share in global energy supply – again unlikely to be supportive of prices.
When the oil price is high, oil and gas company CFOs may have the luxury of considering long-term profitability and financing ambitious projects. But in a world of continued volatile oil prices, the external influences on supply means that finance teams have to think differently. Gas is attractive to buyers, and this looks set to continue. The US could fundamentally reshape the gas sector: the rise of the US as a gas producer will have a serious impact on global gas markets – forcing prices down not only at home but also in Asia and even Europe.
Oil is not necessarily less attractive than gas. Price volatility makes new drilling a risky undertaking. For sellers, gas is a long-term option. More complex than oil, wells cannot be as easily turned on or off according to the current price. Infrastructure has to be built to store and transport gas, whereas oil can go straight into barrels. Oil prices vary less by region compared to gas. Oil is arguably therefore a more attractive short-term investment than gas.
Companies are still looking at replacing reserves, but mostly they seek quality assets that will become commercially viable relatively quickly. Guyana seems well placed in this respect. The Guyanese government must ensure that their people benefit from oil exploitation for the long term. That requires expert planning, oversight and monitoring, and the Guyanese accounting profession is well placed to support the government and provide that expertise.
For companies in the sector uncertain times mean that focus is on cash flow. As management’s attitude to risk changes, it changes what finance teams have to focus on. There is greater financial scrutiny of upstream projects and supply contracts, and spot markets are expected to grow as supply increases. And with plenty of room left for consolidation in the sector, merger and acquisition activity is set to increase.
With finance teams having to consider these factors, their jobs are becoming more complex and more pressured. They need strong relationships across their organization to understand risks, opportunities, key dependencies, and external pressures. More than ever the finance team must be a business partner at the heart of the company’s strategy development, implementation and decision making. Companies, meanwhile, will have to be flexible to cope with the pressures that in the main are outside their control.
Guyana Manufacturing and Services Association
Former Prime Minister of Trinidad and Tobago, Kamla Persad Bisssessar, Opposition Leader advised Guyana to be very careful as its builds its new found gas and energy sector as she criticised the decision of Government to shut down the state-owned oil company, Petrotrin.
Speaking at the 23rd Annual Awards and Dinner of the GMSA, Persad Bissessar said the decision to shut down the loss making oil company had generated many questions which remain unanswered about the supply of imported fuels, exported crude and mystery of what is actually happening to the Pointe-a-Pierre refinery.
“These questions remain unanswered and continue to concern the Opposition, many citizens, as well as the multinational and foreign investors. As leader of the Opposition in Trinidad and Tobago, I remain firm in my position that this decision is not in the best interest of Trinidad and Tobago.
“This is apparent in the position in which we now find ourselves—a high energy consumer now made even more vulnerable in a volatile sector, tethered to the vagaries of international superpowers that will now control our energy requirements and outputs.” She is hopeful and “fairly certain that this is one path that Guyana should never find itself on. Guyana should, above all other things, especially having been an importer of energy for so long, work towards ensuring its energy security and energy independence…these are critical to a country’s success and indeed future”.
Since 2015, US-oil giant Exxon has been successful in its exploration for oil and gas and Guyana is now a global exploration hotspot. With oil production to begin in 2020 and expected to ramp up to 750,000 barrels of oil a day by 2025, Persad-Bussessar recommended some policy directions for the authorities in Guyana.
“Firstly, I recommend that leadership at the governmental level needs to be based on a national vision for the improvement of the lives of all in your society. I recommend a National Policy for Development of Guyana, one that includes contributions from the Government, the Opposition, Labour, Civil Society and the business community be pursued,” she said. In T&T, although attempts at this process have been made with policies such as Vision 2020 and now Vision 2030, “these are not inclusive and have been shown to be biased in favour of a particular political ideology.”
“Such unbalanced policies do not benefit the people of the country. The sale and production of resources must be able to not just move the GDP rankings but have a tangible effect on the daily life of every single citizen in the country. Leaders will need to make bold and brave decisions to move industries forward whilst at all times ensuring that the social safety net covers the most vulnerable in society.”
This task also requires vision and agility in navigating the perils of volatile pricing and resource availability.
Sovereign Wealth Fund
… legislation should have clause to protect against drawdowns
The establishment of the prospective SWF, a state owned investment fund primarily for the proceeds of the impending oil and gas sector, should not be used on recurring expenditure which brings no returns.
This is the contention expressed by Mrs Persaud-Bissesar, the main speaker at the awards ceremony held in Guyana by the GMSA, – warning that this accumulation of money once in place should not be used as a “cash cow” for whenever there is a deficit in financial budgeting.
Funding for the SWF comes from Central Bank reserves that are set aside as a result of budget and trade surpluses and from revenue generated from the exports of natural resources.
In Trinidad, a similar Heritage and Stabilisation Fund (HSF) exists but Government has been burrowing into the reserve to support any financial imbalance. This brings no development and Guyana should put legislation in place to protect against unnecessary withdrawals.
“I do not recommend that the SWF be used to supplement recurring expenditure as has been happening recently in Trinidad and Tobago. Recurrent expenditure brings no return. It beings no development and therefore whatever legislation you make, I suggest you put within it, a prohibition for drawdowns not to be utilized for recurrent expenditure.”
“Your SWF is an insurance policy, it is not nor should it be seen as a cash cow that anytime you have a financing deficit that you will dip into it. It doesn’t work like that. It is only to be used in specific circumstances,” she added.
When looking at ways in which excess resources can be channeled into the SWF, the former Prime Minister asserted that the emerging oil and gas industry is positively identified as a source. It can also cushion the sector when prices are low.
“SWFs are often linked to oil prices or can be a legal clause in a petroleum license or petroleum production contract. In fact, there are many economic tools which can used to channel resources into such a fund. These funds act as buffers given the volatile pricing and political issues involved in the hydrocarbon industry.
Other supplemental tools such as petroleum production taxes, supplemental petroleum taxes, a petroleum impost and clauses for increased scales of taxation for supernormal finds may be worthy of consideration as adjunct strategies to enable equity in profit sharing across the board and sustainability during low price periods.”
The Green Paper for the establishment of the SWF was laid in early August of this year. At that time, Finance Minister, Winston Jordan told the National Assembly that this sets out preliminary proposals to stimulate discussion and also points to possible courses of action open to the SWF legislation.
Given that the establishment of the SWF is relatively complex and there can be substantial administrative costs, the paper noted that if two completely separate funds are established, then this infers that there are two investment policies, two governance structures and two external audits. The Government is hyping the Natural Resources Fund, which is focused on the management of the oil resources. For the management of the Fund, the Green Paper has recommended that Parliament be responsible for passing the Natural Resource Fund Act, reviewing the Annual Report and approving the Annual Budget, which would include the annual withdrawal from the Natural Resource Fund.
Guyana’s reserves have been depleted significantly over the past three years and the Opposition Leader, Dr Bharrat Jagdeo also announced recently that the proceeds of the SWF may very well go towards replenishing Guyana’s reserves.
According to him, State reserves have been “run down” by the present coalition Administration and he maintained that once the resources are paid into the revenue stream of the Government, it must go through the required parliamentary procedure.