Exxon Hits More Oil Pay

• Guyana added 7 links to the Petrochain from Mexico to Argentina ,
• After 10 discoveries 2015-2018, ExxonMobil found two fields at the Tilapia-1 and Haimara-1 wells on the Stabroek Block, raising the total to 12.
• ExxonMobil made a 13th discovery at Yellowtail-1 well on Stabroek Block.
• Tullow Oil made a discovery at Jethro-1 exploration well, the first on the Orinduik license.
• Tullow Oil made a second discovery at Joe-1 exploration well which opened a new Upper Tertiary oil play in the Guyana basin.
• ExxonMobil made the 14th oil discovery at the Tripletail-1 well in the Turbot area on the Stabroek Block.
• Exxon Mobil made a 15th discovery at the Mako-1 well on the Stabroek Block.
• Exxon Mobil finds Pay in 15th Oil Strike

December 23, 2019

Exxon Mobil Corp. and Hess Corp. report 15th oil discovery offshore at the Mako-1 well

Exxon Mobil Corp. and Hess Corp. reported another oil discovery offshore at the Mako-1 well six miles (10 kilometers) southeast of the giant Liza Field, which produced first oil 3 days earlier, a historic achievement for Guyana,

Mako-1 adds to over 6 billion oil-equivalent barrels of estimated recoverable resources on the Stabroek Block acreage.

ExxonMobil’s senior vice president of exploration and new ventures, Mike Cousins said, “New discoveries in this world-class basin have the potential to support additional developments. Our proprietary full-wave seismic inversion technology continues to help us better define our discovered resource and move rapidly to the development phase.”

Supermajor ExxonMobil continues activities with four drillships to further explore and appraise new resources and develop discoveries within approved projects. Esso Exploration and Production Guyana Limited operates the Stabroek Block where it owns 45-percent interest. Owners of the block include coventurers Hess Guyana Exploration Ltd. (30 percent) and CNOOC Nexen Petroleum Guyana Limited (25 percent).

Hess reported that Mako-1 encountered approximately 164 feet (50 meters) of high-quality oil-bearing sandstone. The well was drilled in 5,315 feet (1,620 meters) of water by drillship Noble Don Taylor. CEO John Hess. said,“Mako-1 is the 15th discovery on the prolific Stabroek Block and further underpins a growing resource base for future developments.”

Liza Phase 1 development online December 20, 2019

Announcing record-breaking First Oil ExxonMobil said that that oil production started from the Liza field ahead of schedule and less than five years after the first discovery of hydrocarbons, “well ahead of the industry average for deepwater developments.”

Production from the first phase of the Liza field, located in the Stabroek Block, is expected to reach full capacity of 120,000 barrels of oil per day in coming months and the first cargo is set to be sold within several weeks.

Darren Woods, chairman and chief executive officer said: “This historic milestone to start oil production safely and on schedule demonstrates ExxonMobil’s commitment to quality and leadership in project execution. We are proud of our work with the Guyanese people and government to realize our shared long-term vision of responsible resource development that maximizes benefits for all.”

The concept design for the Liza Phase 1 development project features SBM Offshore supplied Liza Destiny FPSO moored 190 kilometers offshore Guyana and four subsea drill centers supporting 17 wells.

A local Guyanese workforce comprises 1,700 of ExxonMobil employees and others supporting its activities in Guyana are – more than 50 percent of the total workforce.
“This number will continue to grow as additional operations progress. ExxonMobil and its direct contractors have spent approximately $180 million with more than 630 local suppliers since the first discovery in 2015.”

The Liza Phase 1 development will produce up to 120,000 barrels of oil per day utilizing the Liza Destiny floating production storage and offloading vessel (FPSO).

The second FPSO Liza Unity also ordered from SBM Offshore is under construction and will be employed for the second phase of Liza development . Expected to start production by mid-2022, it will have a production capacity of 220,000 bpd.

Front-end engineering design is underway for a potential third FPSO, the Prosperity, to develop the Payara field. Production from the Payara field north of the Liza discoveries could start as early as 2023, reaching an estimated 220,000 barrels of oil per day, pending government and regulatory approvals and project sanctioning of a third development,

Commenting on first oil Bruno Chabas, CEO of SBM Offshore, said: “We are proud of FPSO Liza Destiny reaching first oil for our client and the people of Guyana. The vessel is producing the first oil in Guyana’s history.

“The delivery time from the engineering study phase until first oil, three years, is impressive and a clear testimony of our capabilities and industry-leading experience. We are looking forward to further generating value for our client ExxonMobil and in particular with respect to making a contribution towards Guyana becoming a significant oil-producing country.”

ExxonMobil expects that by 2025 at least five FPSOs will be producing over 750,000 barrels per day from the Stabroek Block.

“The timely development of these additional projects will ensure that the local workforce and the utilization of local suppliers will continue to grow,” ExxonMobil said.

The current estimated discovered recoverable resource for the Stabroek Block iexceeds 6 billion oil-equivalent barrels.

” I saw three ships come sailing in”

17th Century English Carol

SMALL, SWEET AND LIGHT in Kanuku

Published on: 02 JANUARY 2020

Result of Kanuku exploration well

Tullow Oil plc announced that the Carapa-1 exploration well, drilled on the Kanuku licence offshore, encountered approximately four metres of net oil pay based on preliminary interpretation, extending the prolific Cretaceous oil play into Tullow acreage.

Preliminary results of drilling, wireline logging, pressure testing and sampling of reservoir fluid indicate the discovery of oil in Upper Cretaceous sandstone reservoirs.

Rig site testing indicated that the oil is 27 degrees API with a sulphur content of less than 1%. A detailed laboratory analysis of the oil quality will follow in due course.

The Carapa discovery suggests the extension of the Cretaceous oil play from the Stabroek licence southwards into the Kanuku licence. While net pay is lower than pre-drill forecasts, the 27 degree API oil supports the significant potential of the Cretaceous play on both the Kanuku and adjacent Orinduik licences.

The Valaris EXL II jack-up rig drilled the Carapa-1 well to a Total Depth of 3,290 metres in 68 metres of water and the well will be plugged and abandoned. Repsol Exploración Guyana, S.A. is the operator of the Kanuku block with a 37.5% stake. Tullow Guyana B.V. also holds a 37.5% stake. Total E&P Guyana B.V. holds the remaining 25%.

Mark MacFarlane, Chief Operating Officer, commented :

“The Carapa-1 result is an important exploration outcome with positive implications for both the Kanuku and Orinduik blocks. While net pay and reservoir development at this location are below our pre-drill estimates, we are encouraged to find good quality oil which proves the extension of the prolific Cretaceous play into our acreage. We will now integrate the results of the three exploration wells drilled in these adjacent licences into our Guyana and Suriname geological and geophysical models before deciding the future work programme.”

MARKET REACTION

Tullow Slumps After Oil Find Is Smaller Than Expected

By Paul Burkhardt January 2, 2020,

Net pay of Carapa-1 well is lower than the pre-drill forecast. Preliminary interpretation of results shows light oil in field

Tullow Oil Plc discovered light oil at its Carapa-1 well in Guyana, but the reservoir was smaller than the company had expected prior to drilling.

Tullow shares fall after drilling results

The Financial Times Limited

Tullow Oil shares fell again after the FTSE 250 explorer announced drilling results that fell short of expectations, adding further pressure on the struggling stock.

The oil and gas group’s share price fell as much as 20 per cent at the open in London after Tullow said net pay – the thickness of the oil reservoir – at its Carapa-1 well was below pre-drill forecasts. It later narrowed losses to trade down 6 per cent.

Davies stockbrokers, described the oil quality as “very acceptable” but the reservoir thickness was “sub-optimal and not commercial”.

Tullow warned in November that two Orinduik discoveries contained heavy oil, arousing fears that the projects will be costly to commercialise.

In a difficult 2019 its stock price fell nearly 70 per cent as it was forced to cut its production outlook and its chief executive after CEO Paul McDade and head of exploration quit. Worth more than £14bn at the height of its valuation, today the company is a shadow of those heydays, with a market capitalisation of £900m.

 

Hess dodges shale decline, via ‘fairy tale’ find

By KEVIN CROWLEY on 1/2/2020 (Bloomberg)

Hess rose above the carnage in shale stocks with a more traditional approach to oil exploration – partnering in a massive offshore discovery in a frontier location.
Investors flocked to New York-based Hess in 2019 to participate in Exxon Mobil Corp.’s gigantic Guyana oil find, and avoid cash-burning shale specialists. Hess, which holds a 30% stake in the Guyanese discovery that’s turned into the world’s biggest new deepwater oil prospect, climbed 65% last year, leading gains in the S&P 500 Energy Index.

“Most of the outperformance is attributable to the company’s continued success offshore Guyana,” Raymond James & Associates, said . The rally in Hess shares is poised to carry on “if it continues to see success” from drilling in Guyana and neighboring Suriname.

Hess outperformed every other stock in the S&P 500 Energy Index of 28 companies last year. That was in stark contrast to index peers such as Occidental Petroleum Corp., which posted it steepest decline in two decades after the ill-received acquisition of Anadarko Petroleum Corp., and Cabot Oil & Gas Corp., which tumbled more than 20%.

It was a remarkable turnaround from 2018 when the company led by Chief Executive Officer John Hess was targeted by activist investor Elliott Management Corp. for pursuing high-cost shale projects in North Dakota.

“Hess has been on fire,” Mizuho Securities USA, said. While much of the success in Guyana already is reflected in the stock price, Hess’ could see further uplift when cash from the development begins to flow in. “At this point, we think production from Guyana developments over the next five or so years are in expectations. We would need to see more connection of Guyana operational success back to cash return growth to drive re-rating higher.”

The genesis for ’ success was in 2014, when crashing oil prices spurred Royal Dutch Shell Plc to pull out of its 50-50 partnership with Exxon in Guyana. The American supermajor found new partners in its high-risk, wildcat drilling campaign in a region that had never before produced any oil when Hess entered, as did CNOOC Ltd., which bought a 25% stake.

It became one of the best bets of the century, with Exxon uncovering an oil deposit so massive that its boundaries have yet to be discerned. Exxon Senior Vice President Neil Chapman characterized the discovery as a “fairly tale” in 2018. In subsequent years, Exxon and partners made 14 more finds totaling over 6 billion barrels. Commercial production began in late December as exploratory drilling continues.

ENERGY GUYANA  joins Atlantic Petrosphere

Dec 21, 2019

The moment all awaited finally arrived as Guyana joined the ranks of the oil producing club. The caretaker president announced that petroleum production commenced three months ahead of the original schedule. “Guyana has become a petroleum-producing state.”

On 20 December, the caretaker President stated, “I have been advised that petroleum production is about to commence – three months ahead of the original schedule. Guyana has become a petroleum-producing state.”

A proclamation declared December 20 ‘National Petroleum Day’ to mark this auspicious day and remind citizens of their duty to protect the country’s patrimony and ensure sustainable management of finite hydrocarbon resources.
Petroleum production will be a transformative process in the country’s economic development, The sector will serve to stimulate increased employment and expand services.
To ensure that the resources benefit the people, Government will unveil a ‘Decade of Development, 2020-2029’ aimed at ensuring that the petroleum resources will be utilized to provide the ‘good life’ for all.
The ‘Decade’ is a 10-year plan to intensify development and improve citizens’ quality of life. Every Guyanese will benefit from petroleum production and “no one will be left behind” as Government has taken steps to safeguard the national interest. The Department of Energy was established to manage the hydrocarbon resources. It is seeking the best advice and using international best practices as it builds the institutional, legislative and regulatory capability to manage this sector effectively and efficiently.
Government established the Natural Resource Fund Act which was passed by the National Assembly in January 2019.
The legislation provides for ensuring that the resource wealth “…benefits both current and future generations…”; it incorporates oversight, accounting, reporting and auditing mechanisms to promote prudent, transparent and accountable management of oil revenues.

“Guyanese, I assure that your Government will manage petroleum revenues prudently to ensure fiscal discipline, financial sector stability, sustainable levels of public debt and low inflation.”
“Withdrawals from the ‘Fund’ will follow a balanced approach, prioritising investment in public education, public health, public infrastructure, public security, social protection and other social services and will support private sector development.”

Petroleum production brings the prospects of a higher quality of life closer to all households and neighbourhoods. It is a momentous event which all should commemorate for perpetuity.

“Guyana’s future is brighter with the beginning of ‘first oil’. The ‘good life’ for everyone beckons. Let us work together to build a happy and prosperous country for the present and future generations.”

Crude oil sales will be made public

To ensure transparency and accountability in the oil sector, the Energy Department will provide access to records on the sale of the oil.

Records will explain how, when, and for how much the country’s crude oil is being sold. It will collaborate with the Guyana Extractive Industries Transparency Initiative Secretariat regarding the mechanisms to allow public access to this information.

The department announced that the first three lifts of Liza Crude. from the Stabroek Block will be sold to Shell Western Supply and Trading Limited, a subsidiary of Shell, the third largest oil company in the world, based in Barbados. The three lifts, of three million barrels are due in February 2020.

The decision to make details of the oil sales public is a key recommendation from the International Monetary Fund (IMF).
From 2015 , the IMF played a key advisory role to the Government, particularly on oil-related matters and , impressed upon the government, the need to carefully monitor every aspect of the process to sell Guyana’s oil, as significant revenue is at stake.

The IMF stressed that the sale of the Stabroek Block oil will require significant decisions to be made based on technical experience and expertise. In all its dealings, the Fund categorically stated that all decisions and activities regarding the sale of oil must be “transparent” and “undertaken in the public’s interest.” Its advice was outlined in a special report prepared months ago.

The IMF’s Fiscal Affairs Department said that since the sale of crude could bring significant revenue, establishing an optimal selling price is key. This requires professional expertise, careful understanding of the process, and oversight. Crude oil sales are made through a network of buyers known to the trader who identifies and reaches out to potential buyers with. whom it is familiar.
The Fund noted that the government must be vigilant and monitor as well as control the selection of buyers, terms of sale, and the transfer of revenues to ensure that those decisions and activities are transparent

Shell returns to trade Guyana oil

Barbados-based Shell Western Supply and Trading Limited was selected to buy the country’s first three million barrels of oil as a result of the introductory phase of the Liza crude grade into the market.

The Department of Energy said the first phase of its announced two step crude marketing process is close to completion after it previously announced a two-phased approach to lifting and marketing of crude.

“The first phase being a direct sale process in December 2019 and the second an open market Request for Proposals (RFP) to be launched in early 2020 for a marketing agent to market Guyana’s crude entitlements from the Liza 1 field on a term basis. This was necessary to allow, amongst other things, for adequate preparation in structuring and completing the RFP for marketing in early 2020.”

The DoE remains committed to these timelines and is “pleased to announce the near completion of Phase 1 for a direct sale, conducted over the last week. The process produced Shell Western Supply and Trading Limited as the company which will buy Guyana’s first three lifts, in the introductory phase of the Liza crude grade into the market,”

Given the accelerated timing of first oil and with Guyana’s first lift expected in February 2020, a short-term phase one process became necessary. Companies participating in the phase 1 process include three partners in the Stabroek Block and IOCs with integrated upstream, midstream and downstream value chains, global refining footprints, and experience in the introduction of new crude grades from and into multiple geographies.

“After careful consideration and options evaluated, a select group of nine listed international oil companies (IOCs) were invited to express interest for the lifting and subsequent placement of the first three cargoes of Guyana’s entitlement from the Liza development.

“The first lifting entitlement has been confirmed for February 2020 and the completion of the three (3) cargoes will be approximately by mid-2020. By the end of the third lift, the quality of the crude and any operational issues around production are expected to have stabilised.”

The decision was due to a competitive pricing that limits the government’s exposure to market uncertainty; the size, scale and global reach of Shell trading operations’ and the high level of integration between Upstream, Trading and Downstream, the strong foothold in the Latin American markets, the size and scale of shipping and storage operations in the region, allowing for multiple options on the Liza crude commercialisation, the range of new grades Shell recently introduced into the market, willingness to share critical refinery information with the Department and readiness to support the Department in operating these cargoes, while the department strengthens its structures and human resource capacity.

“As 2020, dawns full of goodness and promise, The Department of Energy looks forward to introducing … Liza grade into the market in a stable, structured manner with the result of a good market value for Guyana crude.”

“Shell looks forward to supporting the development of Guyana’s oil marketing as it establishes itself as a major new source of crudes for the market,” a spokesman for Shell said.

Jagdeo prefers Exxon to sell state share of first oil in open bidding

December 19, 2019

The People’s Progressive Party wants state oil to be sold through a public tendering process.. Opposition Leader Bharrat Jagdeo believes that Guyana’s share of the first lift of crude should be sold by Exxon .

“Because they have to sell it, it’s a publicly-traded company. They can’t tamper with the price and we can verify the price they receive and put in a proper system through open public tender for the sale of our oil”

He believes that public tendering is the best and most transparent way to sell Guyana’s share of first oil. He does not approve of face to face bidding.

Jagdeo warned that any company that enters into an arrangement with the caretaker government under the current system being put in place for the purchase of first oil, could find itself excluded from future sales if his party is elected to Government.

“And the companies who have tied up arrangements with them (government) now shall be excluded from any open public tender. That is our position now because they are entering into a contract with a government that has its powers reduced and should not be tying up any arrangements.”

The government should have had more widespread consultation on the process for the sale of Guyana’s share of first oil. “...we believe you can’t decide who to invite to a bidding process on the basis of internal consultation. So they need to tell us who are the people they internally consulted.”

As concern rose over the selective bidding for state oil, the Energy Department defended the move as the best, not being in breach of any procurement regulation.

Exxon launched oil production early with first oil on 20 December 2019. before elections in March 2020.

Energy Department utilizes best practices to secure value

Dec 21, 2019

The Energy Department will continue to act in the country’s best interest, following the announcement that Guyana is officially a petro-state. “Guyana’s future is bright, but we can only secure that future by strengthening legislation, conducting due diligence, emphasizing education, following a balanced development paradigm and utilizing the best skills in the industry through partnerships. This historic development … is a culmination of substantial investments, perseverance, dedication, ingenuity, and the establishment of the appropriate policy environment that has the capacity to propel our nation towards sustained development. It is imperative that Guyanese appreciate that the direct and indirect benefits from this sector will go far beyond anything seen to date. The Department of Energy, therefore, will continue to utilize prudence and best practices to ensure that it extracts the best value for oil.”

Production from the first phase of Liza field,in the Stabroek Block, is expected to reach full capacity of 120,000 barrels of oil per day in coming months with the first cargo set to be sold in January 2020.

The Liza Phase One development project features the Liza Destiny floating, production, storage and offloading vessel moored 190 kilometres offshore , and four subsea drill centres supporting  17  wells.

The Liza Unity, a second FPSO with a capacity to produce up to 220,000 barrels of oil per day is being constructed to support the Liza Phase 2 development.

Front-end engineering design is underway for a potential third FPSO, the Prosperity which is geared at developing the Payara field upon government and regulatory approvals.

The current discovered recoverable resource for the Stabroek Block exceeds 6 billion oil equivalent barrels. It is anticipated that by 2025 there would be at least five FPSOs producing more than 750,000 barrels of oil daily from the Stabroek Block.

Exxon, Hess to export first oil early 2020

Dec. 11, 2019 By: Carl Surran, SA News Editor

Exxon Mobil and Hess plan to export the first-ever shipments of crude oil from Guyana between January and February.

XOM will ship two 1M-barrel cargoes of crude from the Liza field in the giant Stabroek block in January, to be followed by similarly sized shipments from Hess and the government in February.

“We are expecting Liza to be traded at $4-$6 over Brent crude prices during the first three months of exports. First buyers would test it and then prices could go up a little,” according to a trader.

The Liza project is expected to produce up to 120K bbl/day of oil in 2020-22 and reach 750K bbl/day by 2025.

Orinduik partners enter next phase of exploration

Tullow Oil and its joint venture partners in the Orinduik Block located offshore Guyana elected to enter the next exploration phase of the Orinduik Petroleum Agreement signed on January 14, 2016 and submitted their official notice to the Department of Energy of the Government of Guyana.

Eco said that the entering into of the first renewal period, which will start from January 14, 2020, would see the JV Partners maintain control of the license for further three years, through to January 13, 2023, and until the second renewal period.

Work completed by the JV Partners on the Orinduik Block to date, including the completion of a 2,550 km2 3D seismic program in 2017 and the drilling of two exploration wells, both leading to discoveries, on Jethro-1 and Joe-1, exceeded all of the original license commitments required within the initial phase of the Orinduik Petroleum Agreement.

Gil Holzman, President and Chief Executive Officer of Eco Atlantic, commented: “We are very pleased that the JV Partners have unanimously elected to enter into the next phase of exploration and development at the Orinduik Block. We have met and exceeded all of the license commitments to date and stand ready to further appraise and explore the significant hydrocarbon potential of the Orinduik Block license, both in the proven discoveries of the Tertiary layer and in the deeper Cretaceous layer, estimated to hold an additional 3.2 bn barrels of oil (gross unrisked prospective (P50) resource) according to the CPR resource report published in March 2019. As we look to next year, we will continue to work closely with all our stakeholders, including our host Governments and the JV Partners, to determine the budget and drilling program for 2020, and we look forward to publishing an updated CPR on Orinduik Block and sharing our upcoming plans on our Namibian and Guyanese licenses over the coming months.”

Following two recent oil discoveries, Tullow Oil and its partners in the Orinduik block are reviewing multiple prospects on the block and working to approve the budget for the 2020 drilling campaign.

Tullow may decide on discoveries in a year

December 15, 2019

U K-headquartered Tullow Oil may take another year to decide the fate of its two oil discoveries offshore.  Crude in Jethro-1 and Joe-1 is heavy with high sulfur content

Tullow Guyana Country Manager, Joachim Vogt told a Science Technology Engineering and Mathematics (STEM) exhibition which it sponsored that his company’s oil discoveries offshore require a lot more work. “For Tullow, it was an important year in Guyana. We drilled two wells which are discoveries with some challenges ahead as the hydrocarbons we found in the Orinduik Block come with some specifications which entail a lot of work, home work to design a potential production outcome.”

He also cautions against using ExxonMobil’s discoveries as a benchmark for expecting results of other exploratory drilling. “With Tullow’s discoveries in Guyana this year, you see the usual incredible success rate of discoveries made by ExxonMobil don’t necessarily apply to any location in the Guyana offshore. It should be understood as a ‘wake-up call’ (that) finding oil in Guyana, like elsewhere in the world, is not an easy task and no one should think that the default outcome is a given.”

Children displayed their skills in designing, programming and making robots to solve a number of challenges including security, waste management and oil-spill clean-ups.

The STEM Guyana team won the Albert Einstein gold medal for excellence at the First Global robotics competition in Dubai

Exxon will have final say in sale price

Dec 11, 2019

ExxonMobil told a workshop that Guyana’s oil prices will be set based on the best international benchmarks from the North Sea basin—a prolific hydrocarbon province in Northwestern Europe.

Based on advice of a partner that was enshrined in the Production Sharing Agreement (PSA) since 2016, ExxonMobil will determine prices at which Guyana’s crude will actually be sold
S&P Global Platts was identified as the publication against which Guyana’s light sweet crude will be valued and priced.
Under the PSA, ExxonMobil will ultimately decide on the price.
Article 13.2 of the PSA which deals with Valuation of Crude Oil, states that the Contractor—ExxonMobil Guyana— shall be responsible for determining the relevant prices.
Esso Exploration and Production Guyana Limited (EEPGL) is the lead operator on the Stabroek Block with a 45 percent working interest.
Hess Guyana Exploration Ltd holds 30 percent interest and CNOOC Petroleum Guyana Limited has 25 percent interest.
The general international benchmark prices of a barrel of North Sea crude is calculated based on a competitive set of crudes extracted from fields in the North Sea.
Typically, oil in the West is compared against two major benchmarks, North Sea Brent and West Texas Intermediate (WTI).
The value of Guyana’s oil, according to the PSA, will be set by ExxonMobil Guyana, using the data supplied by S&P Global Platts.
Compounding the situation, it was stipulated that the value of a barrel of crude shall be considered as at the fair market value versus any technical benchmarks.
Government officials did not report on meetings for talks with the company’s Global Director of Market Development, Eswaran Ramasamy.

The PSA stipulates that at the end of each month crude is sold, the price shall be re-evaluated as soon as practicable, ExxonMobil and partners will decide a new value for the price of oil from the Stabroek Block each month. Variation in monthly prices will also be recorded separately for fields based on the quality.

Initial exploration and appraisal drilling determined that the quality of crude varies across Guyana’s Exclusive Economic Zone (EEZ).
In two successful drills at the Jethro-1 and Joe-1 wells, Tullow, encountered commercial quantity of heavy oil versus the lighter sweet crude found deeper in the Stabroek Block.
The Hammerhead discovery by ExxonMobil located south of the Liza Discoveries also bears oil of different quality. Hess said the oil is heavier at the shallower find but remains convinced of standalone development potential

Bank of Guyana will manage Sovereign Wealth Fund

December 11, 2019

Governor Dr. Gobind Ganga says the New York Fed was selected since 2017 because of its integrity and track record in doing business with Guyana. “Let me tell you, you want to pit your money in the safest possible institution. There are a number of them but the Fed is one of them. The Fed was approached long back,” he said following the signing of a memorandum of understanding between the Central bank and the Ministry of Finance.

In terms of the interest rates, the monies will be invested in different classes of assets aimed at earning about three percent per year long-term.

The New York Fed has not yet approved the Bank of Guyana application to open the SWF account because it is conducting a routine due diligence in keeping with international rules that guard against financial crimes. The Finance Minister said “.. they want to know that this is a credible activity that we are seeking to do so there are different pieces that will lead to the credibility is what they will ask.”

The operational agreement between the Central bank and the Finance Ministry’s expected monthly amount to be transferred is “to make certain that it’s above aboard”.

The memorandum of understanding with the Ministry of Finance covers several aspects of the daily operation of the SWF including receiving deposits, making withdrawals, investing the fund and accounting for all deposits and withdrawals. The Minister of Finance will give the Bank of Guyana a written notice of five days to transfer monies from the sovereign wealth fund to the Consolidated Fund.

US Federal Reserve must approve Guyana account

Dec 12, 2019

Guyana has passed legislation to establish a Natural Resource Fund (NRF) as a repository for oil and other natural resource revenues but waits for the United States Federal Reserve Bank to approve the foreign account after two years of talks. Central Bank Governor, Dr. Gobin Ganga said this is to govern management of the account. He inked a Memorandum of Understanding with the Minister of Finance.

The US Bank was approached in 2017 and the process is an ongoing one . “We have been having discussion with the federal reserve not only with respect to this Fund but with respect to other things that we are doing.”

Bank of Guyana has shared a 50-year history with the US Federal Reserve but with the NRF, advance notice had to be given about Guyana’s expectations. Correspondence has been continuous over the years and due diligence is expected to be completed “very shortly.”
The officials expressed confidence that the process including the Bank’s due diligence on Guyana and the source of the revenues will be completed by the time the country is ready to receive its first tranche of revenues.
Despite the announcement that first oil from the Stabroek Block is due, there is still time before the country begins to receive its first revenues.
The fund will be in operation before the first set of revenues from petroleum.
When opening an account at a bank, following any due diligence and approval, there needs to be money to put into the account and oil revenue is not due for some time.
The US Federal Reserve Bank was described as perhaps the safest place for oil revenues to be deposited with Dr. Ganga pointing out that there would be no interest earned had the deposits been made locally.

Short-term, direct sale of crude is best

The short-term arrangement is the best option as Guyana enters the new industry.

Only the first three cargo lifts of crude following ‘first oil’ will be for direct sale to international traders in the country, Director of the Department of Energy said.

Decisions are guided by a full team of international experts, internal experts and the Guyana Public Procurement Commission (PPC).

Traders from Houston, Geneva and London were expected to bid on some of the first-oil cargoes.

A report first came from Bloomberg which acknowledged that Guyana is poised to produce more oil than neighbour Venezuela but the country has no experience in trading oil and will learn the basics from its first buyer.

The process is not for marketing services to sell Guyana’s crude in the open market as this is not scheduled until January 2020. Selected operators will take three initial cargo lifts for which the quality is being determined. Selling to the open market uncertain about its quality could cause Liza Crude to be priced downwards off the bat, hampering future sales.

“The full extent of the quality of crude is not yet known. It usually takes several lifts to determine crude only quality and the cost of refining it. Guyana is embarking on its very first new crude introduction into the market of the Liza grade. The quality of the crude and its yield have not yet been tested within a refinery system. This interim arrangement is put in place just for this period.”

“Guyana’s main incentive in taking this approach is to establish a norm in terms of quality standard and quantity availability so as to prevent any possible down-pricing. What the DE is seeking to accomplish with the short-term approach is to allow for stabilisation and standardisation to prevent our Liza Crude from being priced downwards due to uncertainty of the quality.”

At negotiations, Guyana will be represented by a Crude Marketing Specialist, a Commercial Specialist and an external Legal Adviser, among others. After careful consideration of all aspects, the Department initiated a conversation with a selected group of companies for a potential placement of first three cargoes of Guyana’s entitlement. The International Oil Companies (IOCs) have a global refining footprint and integrated oil value chains best suitable to support the Energy Department during this incubation and launching phase. They were invited to bid to buy Guyana’s product in the short term and are required to make offers from which Guyana’s team will choose the most acceptable proposals.

Given its inexperience and the impending early date of the first lifts, an introduction phase of the grade was more advantageous to Guyana and will focus on setting national benchmarks for selling Guyana’s portion of its crude in future.

This marks the first phase of crude sale. The second will involve a public Request for Proposals (RFP) for marketing services for Guyana’s crude. This is in the final stages of preparation currently and in January 2020 a full RFP will be issued inviting companies to bid for the marketing of Guyana’s portion of oil on a longer-term basis. It could take about three months to finalisation.

In July the department noted the risk associated with not getting this right. Industry-standard documents, based on the Association of International Petroleum Negotiators Crude Lifting Agreement (CLA), are being applied.

“While this may be considered by some to be a novel approach, it is a strategic one which brings the best value to the country and one which has been used in other places. The Department … continues to leave ‘no stone unturned’ to secure the best value for our national resources. We look forward to introducing our own Liza grade oil into the market in the new year when the full RFP has been executed.”

Media are urged to revise interpretations which tarnish the judgment of the President and the Department of Energy.

The Liza field is scheduled to start production in December and will reach 120,000 barrels a day next year. By 2025, it is expected to ramp up to 750,000 barrels daily. At that rate, Guyana is set to produce as much oil as Venezuela in five years.

Face-to-Face bidding

Dec 16, 2019

Bloomberg reported that the Government was taking an “unusual” approach for the sale of its share of the Stabroek Block oi, inviting global refiners to bid “face-to-face”. for three million barrels of light-sweet oil and take the “unusual role” of handling “all operating and back office responsibilities” related to exporting the crude. Such a voyage is rare for traders, who do most of their business on instant-message platforms and by phone. Local transparency advocates said that the Department of Energy is taking Guyana on a dangerous adventure. The Department claims the decision is above board and followed consultations with international advisors and the Public Procurement Commission.

Guyana will be taking its first lift by February and a direct sale of the first three lifts will be in two phases. Selected companies will make offers from which Guyana’s team will choose the most acceptable proposals.This process will set national benchmarks for selling Guyana’s portion of its crude in future.
The second phase in January 2020 involves a public request for proposals (RFP), for marketing services for Guyana’s crude. The Department of Energy previously announced that a full RFP would invite companies to bid for the marketing of Guyana’s portion of oil on a longer-term basis. The Department will issue this RFP in January 2020. It could take about three months to finalisation.”
This is in final stages of preparation and was employed on advice by an international team. a Crude Marketing Specialist, a Commercial Specialist and an external Legal Advisor, among others.
The early date of the first lifts underscored the need for an introductory phase of the grade which was more advantageous to Guyana at this time.

The full extent of the quality of crude is not yet known. It takes several lifts to determine the crude quality and the cost of refining it. While the testing of the first crude is taking place, the true economics or refined cost per barrel of the particular grade, LIZA is still being calculated.
A Crude Marketing Specialist advised that in order to take Guyana through this limited short-term phase, a few high quality IOCs with a global refining footprint and integrated oil value chains would be best given an opportunity to support it during this incubation and launching phase.
The approach allows for stabilisation and standardisation, which would therefore prevent the Liza Crude from being priced downwards due to uncertainty of the quality.
Guyana will be represented at these first oil negotiations by a full team of international experts, inclusive of its Crude Marketing Specialist, its Commercial Specialist and Legal Advisor, among others.

Energy Czar denies violation

December 16, 2019

The Department of Energy denied breaching the procurement process for sale of Guyana’s first three million barrels of oil aimed at removal of impurities and setting of standards for Guyana to get the best price for its oil.

“This is sale; this is not the procurement of a good or a service…It doesn’t require going through a procurement process.” When Guyana launches a Request for Proposals, that would go through the National Procurement and Tender Administration Board.

Before inviting ExxonMobil, Hess, China National Oil Company, Shell, Chevron and British Petroleum to Georgetown to wrap up the deal, the Department consulted the Public Procurement Commission “to ensure that we were not contravening any of the laws of Guyana as such.”

Crude Marketing Specialist, Virginia Markouizue said Guyana could not seek a Request for Proposal (RFP) at this stage because the aim is to first ensure that a designated refinery extracts the impurities and ascertains the true quality of the oil based on standards and stability. “They are very much aware of the intricacies of introducing a new grade into the market…The most important thing is that they can help us introduce a grade into the market in a very standard way.”

Markouizue explained that the RFP would be issued for one-year marketing contracts for the sale of Guyana’s entitlement of oil. The renewal of the contract would be based on the performance of the marketer and the price. If Guyana had gone through the RFP process before testing the true quality at a reputable refinery, Guyana would not know the “real fair market value of our crude”.

“What we are trying to do is test it, run it through a refining system, take the feedback from the refiner, from the people who have not just refining but also the marketing channels. They have the value of the pump, of the petrol all around the world. We want to run it through systems who will give us the feedback of what is the fair market value at this point so the RFP would have been too premature and most probably would not allow us this introduction of the grade as such and that’s what we are trying to achieve here.”

The decision was made after advice was provided.

ExxonMobil launched production and, as the majority of shareholder in Esso Exploration and Production Guyana Limited entitled to the first million barrels of oil, it will use that entitlement to conduct similar tests.

Markouizue said that the bidders selected are international oil companies with integrated value chains.

“They are companies with very vast experience, well-known to the market. We reached out to a wide range of companies. Not only do they have vast experience in crude oil but they have experience but they have a global refining footprint. They are very much aware of the intricacies of introducing a new grade.”

The request for proposal  will be a marketing contract term for Guyana barrels. It’s going to be at least one year depending on the marketer. It is going to be based on a marketing fee.”

The request for proposal will be a marketing contract term for Guyana barrels. It’s going to be at least one year depending on the marketer. It is going to be based on a marketing fee.”

The Department is currently in talks about an introduction phase. “The international market traders and international oil companies are all looking at us, to see how we perform in just the first few months and how the grade is going to perform its incubation or initialization into the market.

“The request for proposal would not have served us because the RFP would have been at a point if we were doing it now where we don’t know the real market value of our crude. What we are trying to do is try to test through a refining system and take back from the refiners but also marketing channels. We want to run it through systems who will give us feedback on the fair market value for this grade. So the RFP would have been too premature and would not have allowed the introduction of the grade…Guyana would not be charged for transporting the fuel from Guyana to the refinery.”

Markouizou noted that Bloomberg only gave half of the story.
“Bloomberg …are quoting .. part of the truth. Trading of the commodity is a very global, transparent and in-the-minute business. It happens in front of screens and it happens through phones…If you were introducing the third, or fourth or fifth grade, then telephone conversations would have been sufficient.”

Guyana is seeking to build relationships. It goes beyond price negotiations. The companies engaged will provide valuable feedback on the quality of the crude while helping to introduce it to the international market. For such an important task, a telephone call just wouldn’t cut it.
The oil would be sold Freight On Board (FOB) sot the government will not bear costs associated with freight.
After the introductory phase, the Department will issue a public request for proposals (RFP), for marketing services for Guyana’s crude. The RFP at this stage would be premature, since the quality of the crude is still to be known. It is a marketing contract with an option to renew depending on the performance of the marketer.“

World Oil report

December 27, 2019

For a few days beginning on Friday December 20th when ExxonMobil announced its first ‘lift’ from its Liza 1 well in the Stabroek Oil Block to Monday December 23 when the news broke that a fifteenth oil discovery had been made at the Mako-1 Well southeast of the Liza field in the same Stabroek Block, Guyana grabbed the international headlines in a manner that it had never done previously.

On Monday, the new oil find was placed third on the list of news items that appeared on the on-line version of the prestigious international publication World Oil, the article asserting that Guyana is now set “on a path to potentially vast flows of oil revenues.”

Insofar as a national response was concerned, we had passed that way before, over fourteen oil find announcements, so that ‘first oil’ and the fifteenth Exxon oil find created far more muted responses, never mind the fact that President David Granger, in an address to the nation had announced that he would issue a proclamation declaring December 20th National Petroleum Day.

EEPGL to drill 31 wells on 3 blocks

ESSO Exploration and Production Guyana Limited , a subsidiary of ExxonMobil, has applied to the Environmental Protection Agency for the authorisation to explore 31 wells in three oil blocks offshore Guyana.
EPA published a notice indicating that the projects include a 25- well exploration programme in the Stabroek Block; a 3-well exploration programme in Kaieteur Block and a 3-well exploration programme in Canje Block. EPA screened each application and they will not significantly affect the environment. They are thus exempt from the requirement of an Environmental Impact Assessment (EIA).

EEPGL will present an Environmental Assessment and Management Plan for the projects. “The Environmental Assessment and Management Plan will assess any possible impacts to the environment and, or, human health, and detail specific mitigation measures to be undertaken to ensure that the proposed project is implemented in an environmentally-sound and sustainable manner.”

Exxon Mobil noted in November, that its value position in Guyana had increased and it was considering its undrilled potential. On completion of operations at Tripletail, the Noble Tom Madden drillship will next drill the Uaru-1 well, l approximately six miles east of Liza field.

Exxon planned two more wells . Hassa-1, also to be drilled by the Noble Tom Madden, and the Mako-1 discovery well drilled by the Noble Don Taylor. The explorations have been labelled as “near term” and fall with Exxon’s short-term drilling outlook.

“We are making excellent progress on our long-term growth strategy,” ExxonMobil Chairman and Chief Executive Officer (CEO), Darren W. Woods said . “…we are ahead of schedule for first oil in Guyana. The value of our position in Guyana improved further this quarter with an additional discovery, our fourth this year.”

In the Canje Block, ExxonMobil holds a 35 per cent interest; in the Kaieteur Block it owns 35 per cent and in Stabroek, 45 per cent. This will be the first wells to be drilled by Exxon in the Canje and Kaieteur Blocks by ExxonMobil. The company has already had 14 discoveries in the Stabroek Block.

The discovery adds to the previously announced estimated recoverable resource of more than 6 billion oil-equivalent barrels. The supermajor achieved ‘first oil’ in the Liza Phase 1 Development Project, expected to generate over $7B in royalty and profit oil revenues for Guyana over the life of the project. In accordance with the Environmental Protection Agency Act and Environmental Protection (Authorisations) Regulations, any person who may be affected by the project has been invited, by the agency, to lodge an appeal against the Agency’s decision to the Environmental Assessment Board, within 30 days.

Spotlight on Saipem

Italian contractor on Payara scheme delivered SURF system for Liza-1 project

by Gareth Chetwynd

Saipem has consolidated its position as a preferred vendor on ExxonMobil’s flagship projects, after delivering the subsea umbilical, riser and flowline system for the Liza-1 scheme and starting engineering and procurement work on what will be its biggest job in Guyana, the yet-to-be sanctioned Payara development.

The Italian contractor recently concluded hook-up and commissioning of risers for the Liza Destiny floating production, storage and offloading vessel and has moved ahead with the follow-up Unity and Prosperity FPSOs for the Liza-2 and Payara-1 projects, built on similar concepts but getting progressively bigger.

The three projects involve the detailed engineering, procurement, construction and installation of flowlines and rigid risers in lazy-wave configuration, along with terminations, jumpers, manifolds, flexible risers, and dynamic and static umbilicals.

The Liza-1 project set the standard for using a combination of J-lay and reel-lay. Installation work began in March, using the FDS2 vessel for reel-laying flowlines.

The Constellation ultra-deepwater rigid and flexible pipelay and heavy lift vessel was mobilised to Guyana to install umbilicals, risers and jumpers in rigid reeling mode, dealing with water depths of 1500 to 1900 metres and thick pipe cladding.

“The Constellation’s tension capacity and its capacity for carrying product is higher than anything else on the market. Guyana was the vessel’s first big job since we acquired it. It is top of the class,” enthused Saipem’s Americas unit chief Giorgio Martelli.

Liza-1 was also a testing ground for Saipem, starting with exposure to challenging metocean conditions in a remote region, 190 kilometres offshore. The project covered eight oil producing wells, six water injection wells and three gas reinjection wells.

“Liza-1 was a great learning process. “Saipem is used to working in harsh environments but this was a first in many ways. We are out in the Atlantic margin, exposed to the extremely strong Brazilian loop currents, as well as big swells and cross currents coming from different directions”.

Guyana still lacks many of the services that an offshore operator needs.

“This makes preparation and planning very important,” explained Martelli.

The Liza-2 project is bigger in scale, covering 110 kilometres of subsea pipe, compared to 70 kilometres on Liza-1, plus additional umbilicals and jumpers serving more than 20 wells.

The ExxonMobil-led consortium is developing at breakneck speed its string of discoveries on the Stabroek block and awarded Saipem its third subsea construction contract for Payara.

This award was placed before the field development plan has received government sanction, such is the growing confidence surrounding this project.

The Payara FPSO will have the same oil production capacity as Liza-2 — 220,000 barrels per day compared to 120,000 bpd on Liza-1 — but, because it covers a wider catchment area drawing from three different reservoirs, it needs almost 140 kilometres of subsea pipe, with 47 wells including 12 production and more for gas and water injection.

The preferred vendor role started with a design concept for Liza-1 which was “pretty-well defined”, according to Martelli.

“Our task was to go along with it and show we had the capacity and equipment to deal with it in a quality and scheduled manner. There is a more engaged approach in the following projects, with plenty of input from us and what could be improved, and how, and this includes participating in the design concept for future stages. Standardisation doesn’t mean we don’t consider different concepts.”

Preferred vendor status has allowed Saipem to forge its own alliances, such as a partnership with Toronto-based Shawcor for the supply of sophisticated five-layered pipe coating, which is designed to tackle the risk of hydrate formation were Liza’s high temperature service to enter a shutdown scenario. In turn, the long-term horizons for the Liza-Payara project have underpinned investments in Shawcor’s plant in Veracruz, Mexico.

“Having long-term partnerships with critical suppliers help us respond to the quick starting and optimising of projects by taking less time with selection or the need for refining technical solutions. A lot is already clear, allowing for more standardisation in the way we engineer and execute the project,” said Martelli.

The relationship has allowed Saipem to conclude pre-front end engineering and design work on Payara and, even before project sanction, the company recently got the go ahead to start engineering and procurement.

“I have been doing this work for many years and in many different places. I am finding ExxonMobil a really exciting partner to work with — (they are) open-minded, honest, transparent and approachable. Mutual trust helps both sides to be at their best, in terms of optimisation and continuous improvement.”

The Constellation’s ability to use transportable mobile reels means Saipem’s operations in Guyana do not need a local spoolbase and can make good use of the new facility planned for Pascagoula, Mississippi.