FDI surges by 64 per cent in 2023

August 9, 2024

The 2024 edition of the “Foreign Direct Investment in Latin America and the Caribbean” report by the Economic Commission for Latin America and the Caribbean (ECLAC), which shows Guyana bucking the regional trend of decline.

As many regional states grappled with dwindling Foreign Direct Investments (FDI), Guyana stood out as a pillar of hope, drawing the eyes of investors worldwide and recording a staggering 64 per cent increase in Foreign Direct Investment (FDI) in 2023.

Guyana has attracted large FDI inflows since 2017 when resources related to the discovery of the Stabroek Oil Block started flowing into the country. In 2023, there were inflows of US$7.198 billion, a 64 per cent increase over 2022, positioning Guyana as the sixth-largest inward FDI recipient country in Latin America and the Caribbean that year.

Guyana’s FDI inflows now represent a significant portion of the overall increase in the Caribbean, which saw a 28 per cent rise in FDI, largely attributable to the booming investments in Guyana and the Dominican Republic.

Contrasting Guyana’s growth, the broader Latin American and Caribbean region experienced a challenging year for FDI. The 9.9 per cent decline in FDI inflows, amounting to US$184.3 billion was mainly driven by substantial drops in Brazil and Mexico, the largest recipients of FDI in the region.

However, Brazil experienced a 14 per cent decline, while Mexico recorded 22.8 per cent reduction in FDI inflows, primarily due to the extraordinary inflows from large corporate mergers and restructurings in the previous year.

NATURAL RESOURCES DRIVE FDI RUSH
Guyana’s impressive FDI growth could be largely attributed to its burgeoning oil and gas sector. Vast reserves positioned it as a critical player in the global energy market, attracting significant investments from multinational corporations.

These investments are not only boosting the local economy, but also enhancing the country’s infrastructure and technological capabilities. The natural resources sector also continues to be a magnet for foreign investment , with the country capitalising on rich petroleum deposits.

The influx of capital into this sector has been pivotal in driving the overall increase in FDI inflows, reinforcing Guyana’s status as a key destination for energy-related investments.
While the natural resources sector remains dominant, there has been a notable increase in investments in the local manufacturing industry.

The ECLAC report highlighted that manufacturing FDI in the region grew by nine per cent in 2023, reflecting a strategic shift towards building local production capacities and integrating into global supply chains. Guyana’s manufacturing sector, although still developing, is beginning to attract foreign investors looking to capitalise on the favourable investment climate and lower labour costs.

This trend aligns with broader regional patterns, where nearshoring and friendshoring are becoming increasingly attractive strategies for multinational companies. Guyana’s success in attracting FDI can be attributed to several strategic factors.

The People’s Progressive Party/Civic (PPP/C) government implemented policies aimed at creating a conducive environment for foreign investors.
Policies such as tax incentives, streamlined regulatory processes, investment in critical infrastructure and establishment of special economic zones provided an added impetus for investment, particularly in sectors such as manufacturing and services.

The positive trajectory of FDI also reflects Guyana’ s proactive approach to international engagement. Participating in regional and global economic forums, Guyana has successfully positioned itself as a viable investment destination. This has been complemented by efforts to enhance transparency and governance, thereby boosting investor confidence.

SUSTAINING MOMENTUM
Sustaining the momentum in FDI inflows will require continued focus on policy innovation and economic diversification. While the natural resources sector will remain a cornerstone of Guyana’s FDI strategy, there is significant potential for growth in other areas. The government is keen on developing the renewable energy sector, leveraging the vast natural resources to attract green investments. It aligns with global trends towards sustainability and could position Guyana as a leader in renewable energy within the region.

Enhancing skills and capabilities of the local workforce will also be critical in attracting high-value investments. By investing in education and technical training, Guyana could build a robust talent pool that meets the needs of foreign investors, particularly in advanced manufacturing and technology industries.

Since the discovery of oil, Guyana has attracted significant attention from the international community, which the government is harnessing to showcase the country’s capabilities of addressing pressing global challenges.

With an impressive average economic growth rate over the past three years, Guyana stands out as one of the fastest-growing economies globally, recording a Gross Domestic Product (GDP) growth rate of 33 per cent in 2023.The heart of Guyana’s economic success lies in its strategic management of its burgeoning oil industry.

President, Dr. Irfaan Ali said that Guyana’s intention is to leverage its oil discoveries to foster strong global leadership in these critical areas.

Of particular importance is commitment to forest conservation and its role in combating climate change. In February, Parliament approved the historic $1.146 trillion budget which aims to accelerate the improvement of the lives of Guyanese. It was the third budget that would benefit from financing from the proceeds of Guyana’s growing oil and gas sector.

The National Assembly had approved the Fiscal Enactments Bill which balances immediate withdrawals and long-term savings from the National Resource Fund (NRF) which will support public infrastructure and social services development.

Tender For Utility-Scale Solar PV Plants With Battery Storage
The Government of Guyana, in partnership with the Inter-American Development Bank (IDB), announced the launch of a competitive bidding process for the Engineering, Procurement and Construction (EPC) of three utility-scale ground-mounted solar photovoltaic (PV) plants with battery energy storage systems. This initiative is part of the Guyana Utility-Scale Solar Photovoltaic Program (GUYSOL), financed under the Guyana – Norway Partnership.

The project, Lot 2 under GUYSOL, aims to install a total of 15MWp of solar PV capacity and 22MWh of battery storage in Linden. The tender, titled “Engineering, Procurement, and Construction of Three Utility-Scale Ground-Mounted Solar PV Plants with Battery Energy Storage Systems – Lot 2,” invites bids from eligible and qualified international contractors.

Interested bidders are required to comply with International Competitive Bidding (ICB) procedures and meet the qualification criteria outlined in the bidding documents. This includes submission of business registration, compliance certificates from the Guyana Revenue Authority and National Insurance Scheme, VAT registration (for local bidders), and demonstrating technical and financial capabilities.

A pre-bid meeting and site visit on August 5-6, 2024, provided potential bidders with an opportunity to inspect the project site and clarify queries related to the bidding process.

Bidding documents can be obtained upon payment of a non-refundable fee of GYD 20,000.00 or equivalent in a freely convertible currency. Bids must be accompanied by a bid security of USD 250,000.00. Deadline for bid submission is 09:00 hours on September 26, 2024, with bids to be opened during an online session on the same day.

For further information and access to bidding documents, interested parties can contact the Program Coordinator at Guyana Power and Light Incorporated or visit the Ministry of Finance’s National Procurement and Tender Administration. This initiative underscores Guyana’s commitment to expanding renewable energy infrastructure and achieving sustainable development goals through strategic partnerships and investment in clean energy technologies.

 

 

 

Hess

Jov Onsat|Rigzone August 05, 2024

Hess Corp. posted $757 million, or $2.46 per share, in net profit for the second quarter, up more than six times compared to the same period last year as oil and gas output grew and prices rose. Adjusted for nonrecurring or extraordinary items, net income of $809 million, or $2.62 per share beat the Zacks Consensus Estimate of $2.48.

E&P [exploration and production] results include a charge of $48 million ($38 million after income taxes) to write off previously capitalized exploration wells, and a charge of $18 million ($14 million after income taxes) related to materials and supplies inventory recorded to operating costs and expenses, both in the JDA [Malaysia-Thailand Joint Development Area], based on the regulator’s notification that the existing production sharing contract (PSC) for Block A-18 will not be re-awarded to the existing PSC contractors upon its expiration in 2029. New York City-based Hess recorded a net production of 494,000 barrels of oil equivalent per day (boepd) in April–June 2024, up 28 percent year-on-year. The North Dakota side of the Bakken shale play contributed 212,000 boepd, up 17 percent with 31 new wells put into production and 38 wells drilled. However, Hess expects Bakken production to fall to 200,000–205,000 boepd in the third quarter,

“reflecting lower anticipated volumes received under percentage of proceeds contracts and planned maintenance at our gas infrastructure”.

In Guyana, where a dispute over the Stabroek block delayed Chevron Corp.’s acquisition of Hess, net production was 192,000 bopd, up 75 percent against the second quarter of 2023.

Hess expects oil production from Stabroek to scale down to 170,000–175,000 bopd, “reflecting downtime associated with the Liza Destiny and the Liza Unity floating production, storage and offloading vessels related to pipeline and field hook-up for the Gas to Energy project, and production optimization work at the Liza Unity”.

In the Malaysia-Thailand Joint Development Area, Hess increased production to 66,000 boepd in the second quarter from 64,000 boepd in the corresponding period the prior year.

Average realized crude oil price was $80.29 a barrel in the second quarter of 2024, up from $71.13 in the comparable period 2023. The realized price for natural gas liquids stood at $20.07 per barrel, up from $17.95 compared to the second quarter of 2023. Hess’ natural gas had a realized price of $4.22 per thousand cubic feet, up from $3.82 in the second quarter of last year.

The company collected $1.9 billion in net cash from operating activities, up from $974 million for the second quarter of 2023. Hess logged $1.2 billion in capital and exploratory expenditures for the second quarter of 2024, climbing from $933 million for the comparable period 2023 due to more development activities in Guyana and increased drilling in the Bakken and the Gulf of Mexico. Hess ended the second quarter with cash and cash equivalents of $2 billion and debt and finance lease obligations of $9.1 billion. It repaid a $300 million principal amount of senior unsecured notes last month.

email jov.onsat@rigzone.com

 

 

 

Guyana logs 668k barrels of oil in June

August 06, 2024 News

ExxonMobil Guyana Limited (EMGL), operator of Stabroek Block, recorded its highest production in June this year, after pushing the three Floating Production Storage and Offloading (FPSO) vessels to produce a combined 668,000 barrels of oil.

Ministry of Natural Resources Data also shows that Guyana’s second oil project, Liza Two, recorded its highest daily production of 260,000 barrels on June 4. FPSO, Liza Unity, designed to safely produce at 220,000 barrels per day (bpd) reached a new record of 260,000 barrels.

This milestone marks the highest production on record to date for a single project though the company did try to repeat this accomplishment.

Liza Two recorded 258,000 and 257,000 barrels on June 8 and June 12 respectively.On June 30, the company reported a daily production of 668,000 barrels- the highest on record since the country commenced production activities in 2019. Previously, the highest daily production was recorded on March 22, production climbed to 651,000 barrels. In June the company broke its record with production reaching a high of 660,000 barrels of oil.

All three FPSOs are producing above the initial design capacity. Vice President, Bharrat Jagdeo said in May that the ramping up of oil production beyond safe operating limits is being done safely. The process was analyzed by technical staff of both the Environmental Protection Agency (EPA) and the Ministry of Natural Resources.

Experts warned that the risk of an oil spill significantly increases with the accelerated production. It was reported that the US$2B oil spill guarantee by the Stabroek Block Consortium does not cover ramping up of oil production.

The affiliate company guarantee, makes it explicit “…the Operator is permitted to carry out the activities authorized by the Environmental Permits in accordance with their respective terms and conditions.”

The Environmental Permits granted by the EPA were approved based on EIAs conducted by Exxon. These documents outline the company’s plans to produce oil at a specific capacity and assess the damage of an oil spill accordingly. The FPSOs were also designed to produce crude oil in accordance with the EIAs. VP Jagdeo when asked if government considered this in granting the company’s approval to breach the safety limits said he requested a full report from technical staff.

 

 

Greater Guyana Initiative champions workforce development, females

August 28, 2024

Greater Guyana Initiative (GGI), exemplifying the transformative potential of strategic investment, has emerged as a pivotal driver of growth in a swiftly evolving economic environment. The GGI was launched with the overarching goal of fostering sustainable growth.   An ExxonMobil-led partnership exploring Stabroek Block is leading this US$100 million project, anticipated to last for 10 years. The initiative is taking a comprehensive strategy to support development across various sectors.

In a recent episode of the Energy Perspectives Podcast—powered by the Guyana Energy Conference and Supply Chain Expo—Alicia Bess-Anderson, Adviser on the GGI for ExxonMobil Guyana, highlighted the initiative’s achievements thus far, with a particular focus on its role in education, workforce development and food security. The initiative is designed to address key developmental challenges while leveraging opportunities presented by the rapidly expanding oil and gas industry.

Recognising the importance of human capital in sustaining long-term economic growth, the initiative has channeled significant resources into educational programmes.

The GGI upgraded numerous facilities, including laboratories, at the University of Guyana (UG). In the technical field, the initiative GGI teamed up with the Council for Technical and Vocational Education Training and the Ministry of Education to improve the welding and electrical programmes and to introduce basic industrial safety training.

The GGI partnered with UG to launch the Annual Regional Accelerator for STEM [Science, Technology, Engineering and Mathematics]. The STEM project is helping youth to explore opportunities in this field.

The Initiative made substantial investments in enhancing food security. “We have projects centred in the hydroponics space as well as poultry rearing in the hinterland.”

These projects will assist the Caribbean Community (CARICOM) in achieving its goal of reducing the region’s high food import bill by 25 per cent by 2025.
GGI funds the Centre for Local Business Development (CLBD), which assists small and medium-sized enterprises (SMEs) to grow their capacity and improve competitiveness to gain contracting opportunities. The Initiative pays special focus on providing opportunities for female entrepreneurs.

“Female entrepreneurs have been able to get access to different levels of training courses… from safety elements to financial elements, leadership, empowerment and so much more. One aspect would be the active mentorship that comes with that programme to ensure that females are given the support to not only leverage the growth of their businesses but the growth of themselves.”

Women encounter challenges in the oil and gas industry, which has traditionally been male-dominated. “But over the years, I’ve seen the glass ceiling being broken and basically barriers being removed to ensure women can actively take up spaces.”

Increasing presence of women in other male-dominated fields, such as agriculture, construction, and mining demonstrates how women are making their mark in non-traditional sectors, contributing significantly to the economy’s growth and workforce development and urges companies to invest in women.

Bess-Anderson encouraged those keen on joining the oil and gas industry, to take the leap, while emphasising the importance of maintaining a work-life balance, having a strong support system and building a network.

“Think big; if you can dream it, you can achieve it. Take a risk, step out of your comfort zone. Remember, you are not just doing this for yourself but for the benefit of your [children] and your family… so that you can leave a lasting legacy…”

In February 2021, the GGI was created by the Stabroek Block consortium, ExxonMobil, Hess Guyana Exploration and CNOOC Petroleum Guyana to support capacity development for the next decade. The companies pledged GY$20 billion (US$100 million) to support the initiative, which includes programmes focused on building human capacity, advancing education, improving healthcare and promoting sustainable economic development.

 

 

 

 

Modernising grid to transform landscape

August 6, 2024

Vice-President Dr Bharrat Jagdeo told media that an important aspect of the ongoing transformation of Guyana is modernisation of the local power grid. To ensure this vision is soon realised, the government has been actively pursuing initiatives such as the gas-to-energy project to supply cheaper and reliable electricity.

Responding to a question on evolution of the capital budget, he highlighted the advancements. Many oil-producing countries make the mistake of increasing their recurrent budget which results in prices falling and states being stuck with high costs and welfare loss.

Guyana will avoid this, as the PPP studied this for years and will not make the same mistakes. As major projects such as the new Demerara River Bridge come on stream, it will contribute to life enhancement.

“..these are big items we are carrying now that will come off our budget in the future. That will give us room to focus more on welfare, benefits and other things.. . we need ..stable, cheap power, so we are making the investments now.”

“Once the big projects come off…You can do all sorts of things in a modern grid… but you can’t modernise this country without modernising the grid.”
.

The government is making significant advancements towards the realisation of a more cost-effective and dependable electricity infrastructure. It signed a US$8.6 million contract for the establishment of a national control centre, a key component of the project, with Power China Caribbean.

Completion of the centre is anticipated within 384 days. The agreement was officially signed at the Office of the Prime Minister (OPM), with Chief Representative Dan Shen signing for Power China Caribbean, and OPM’s Permanent Secretary Alfred King signing on behalf of the government. Kesh Nandlall, Head of the Executive Management Committee at Guyana Power and Light Inc. (GPL), observed the signing.

The equipment for the Supervisory Control and Data Acquisition/Energy Management Systems/Generation Management System (SCADA/EMS/GMS) will be housed in the facility .

Together with CNOOC and Hess, its consortium partners on the Stabroek Block, ExxonMobil is working with the Government to advance the gas-to-energy project.

The 200-km, 12-inch diameter pipeline will channel natural gas from the Liza Phase One and Liza Phase Two Floating, Production, Storage, and Offloading (FPSO) vessels to a power plant and Natural Gas Liquids (NGL) facility to be built in Wales, West Bank Demerara (WBD). The pipeline will land on the West Coast of Demerara (WCD) shore and continue approximately 25 kilometres to the NGL and power-plant facilities.

Estimated total cost of US$1.8 billion and is cost recoverable. Government will fund the power plant and NGL facilities. In December 2022, the government and US-based integrated energy solutions group – LINDSAYCA – in partnership with a local firm – CH4 Group – signed a US$759 million contract for construction of the facilities.

Conversion of natural gas from ExxonMobil’s offshore operations to electricity is a key component of the government’s objective to lower energy costs by at least 50 per cent through an energy mix which incorporates gas, solar, wind and hydropower.

Major groundwork continues for the project, expected to be up and running by the first half of 2025 with a 25-year lifespan.

 

 

 

Guyana oil deal

August 06, 2024 News

…ExxonM negotiator tells Bloomberg of contract

“I have examined my conscience about it over a period of time, but I don’t feel bad about it…It was a complete fit for what we knew and what we didn’t know.”

Former ExxonMobil Exploration Manager for South America, geoscientist Rod Limbert told Bloomberg that he does not feel bad about the deal Guyana signed with the United States oil giant.

U.S based media company, Bloomberg in a report, “The untold story of how Exxon scored a US$1 trillion oil bonanza that 30 rivals passed up” by Kevin Crowley, featrured the story of the Stabroek Block, now producing over 600,000 barrels of oil per day from three projects ( Liza Phase 1, Liza Phase 2 and Payara). Exxon controls the block that holds 11 billion barrels of recoverable oil, worth nearly US$1 trillion at current prices.

Limbert was on Exxon’s team that negotiated the Production Sharing Agreement (PSA) for the Stabroek Block which was later signed in 2016 by the previous APNU+AFC administration after oil was discovered offshore Guyana in 2015.

The PSA for the prolific Stabroek Block has been at the center of contentious debates with experts as well as citizens citing that Guyana signed onto a deal that benefits the oil companies more than the country. While  leaders have long accepted the lopsided nature of the deal, it remains in place as ExxonMobil Guyana Limited (EMGL) and its partners Hess Guyana Exploration Ltd. and China National Offshore Oil Corporation (CNOOC) Petroleum Guyana Limited continue to benefit from it.

Former Minister of Natural Resources, Raphael Trotman, who served under the Coalition government between 2015 and 2020, signed the heavily criticized PSA with Exxon which l gives Guyana an industry-low 2% royalty. Guyana shares revenue with ExxonMobil after the company deducts 75 percent towards the costs incurred to develop resources in the Stabroek Block.

In this arrangement, with the lack of ring-fencing, Guyana pays for projects that are yet to begin production activities. Each month bills from future producing developments are added to the list of expenses to be cost recovered by Exxon.

After the 75 percent is deducted to pay back the oil company, Guyana then shares 50/50 of the 25 percent remaining with Exxon as profits. This amounts to 12.5 percent of profits from the operations.

Bloomberg reported that Guyana has become the bedrock of Exxon’s post-Covid corporate revival. The Texas oil giant has a 45% share of a field that costs less than US$35 a barrel to produce, making it one of the most profitable outside of the Organization of the Petroleum Exporting Countries (OPEC). With crude currently trading at US$85 a barrel, the oil field would make money even if the transition from fossil fuels caused demand to collapse and prices dropped by half.

The report states that Exxon’s rivals no doubt have aching regret. Almost 30 other companies, including Chevron Corp., passed up the chance to buy into the Guyana discovery. Shell Plc, previously a 50% partner, walked away. Chevron is now paying US$53 billion for Hess Corp., which has a 30% stake in the project. Exxon this year filed an arbitration case against Hess, claiming it has a right of first refusal over the stake. Hess says that right doesn’t apply in a merger.

Like many geoscientists, Limbert knew that the source rock for Venezuela’s oil—the La Luna formation—extended under the Atlantic into maritime territory held by Guyana, Suriname and French Guiana. The straight-talking Australian became fascinated with an onshore discovery in Suriname in the 1960s, when villagers accidentally found what became a billion-barrel oil field while drilling for water in a schoolyard.

Limbert thought the schoolyard’s oil had originated off Guyana’s continental shelf and migrated more than 100 miles onshore over millions of years. He took the idea to the Exxon team responsible for entering new basins in mid-1997.

“They had a picture of a downward-pointing thumb at the end of their presentation,” Limbert says. He contacted Guyana’s government about acquiring drilling rights anyway. “I just didn’t tell anyone.”

In 1997, Guyana was one of the poorest countries in South America, still suffering from the socialist, racist and isolationist policies of strongman Forbes Burnham, who rose to power after independence from the UK in 1966. Limbert and two colleagues flew from Houston to Georgetown to acquire old well logs and discuss the potential for drilling rights with the Guyana Geology and Mines Commission (GGMC).

“The ground floor was literally the ground floor,” Limbert says. “By that I mean the desks and chairs were on the dirt.” The Exxon team met Samuel Hinds, Guyana’s president at the time who talked mostly about cricket, Guyana’s national pastime. “I wasn’t in any particular hurry to talk about business, because I had no authority to do anything,” Limbert says. On returning to Texas and armed with fresh data, Limbert won permission to begin contract negotiations for exploration rights.

Citing the legions of failed wells, Limbert pushed for and won a highly favourable deal. The Stabroek block offered to Exxon was over 1,000 times bigger than the average oil block in the Gulf of Mexico. It required no upfront payment, and if Exxon struck oil, the company would keep 50% of the profit after deducting costs.

Bloomberg reported that Guyana later received heavy criticism for the contract. “I have examined my conscience about it over a period of time, but I don’t feel bad about it,” Limbert says. “It was a complete fit for what we knew and what we didn’t know.”

The deal helped Guyana in another way. Guyana faced serious border disputes with Suriname to the east and Venezuela to the west. Aligning with Exxon would mean anyone picking a fight with Guyana would also be picking a fight with the world’s most powerful oil company

 

 

 

Henry Djaba signs billion-dollar Oil & Gas project

28 August, 2024 By Isa Isawade

Henry Djaba Jnr. Ghana signed agreements for the development of two oil blocks in March with a local partner in Guyana.

The Chairman of Lakeland Oil and Gas International Trading and Supply Company Limited, with an interest in acquiring more Oil Blocks in Guyana, will proceed to engage directly with the government of Guyana in the next bid round or by direct negotiation.

At the recent Afrexim AGM in Nassau, Bahamas, it was confirmed that one of Lakeland Exploration group of companies has agreements and is focusing on the acquisition of strategic oil assets in the South American/Caribbean region and the African continent.

He said:

1. 1. 1. “$1bn would be invested in Guyana,
      2. $3bn in Namibia, Chad and Suriname,
      3. $500m in an ongoing Refinery project, and
      4. $1.5bn in an FLNG project.”

Agreements had been signed with local partners in Guyana to invest $1bn (one billion US Dollars) in a Deep offshore and a Shallow oil block in Guyana.

“Oil prices having maintained consistently high levels for such a long period is a major factor in our drive to enhance Lakeland’s portfolio by acquiring strategic assets in different countries.”

 

 

 

ExxonMobil drilling risks offshore Guyana reaped $1 Trillion in rewards

Kevin Crowley, Bloomberg August 01, 2024

(Bloomberg Markets) – Scott Dyksterhuis was convinced. Or as convinced as you can be when predicting what lies more than 3 miles beneath the seabed. The then 32-year-old geoscientist for Exxon Mobil Corp. figured there was a good chance a vast trove of oil lay buried off the coast of Guyana, near where the Atlantic Ocean meets the Caribbean Sea.

Transocean’s Deepwater Champion
Now came the hard part. He had to persuade his bosses to drill a well that would prove it. “It was high-risk,” ­Dyksterhuis says. “But Guyana was a casino you wanted to play in because when you win, the profits are so high.”

In late 2013, hunting for oil in Guyana was among Exxon’s lowest priorities. Companies had drilled more than 40 dry holes in the region. The target formation—named Liza, after a local fish—was under a mile of water, and drilling it would cost at least $175 million.

Even Dyksterhuis estimated there was only a 1 in 5 chance of success. But if he was right, it would open an oil frontier, proving a theory that the same geology behind Venezuela’s reserves, the world’s largest, extended across the north coast of South America. Many at Exxon had no interest in making that bet. Neither did much of the rest of the oil industry.

Today, Liza is the world’s biggest oil discovery in a generation. Exxon controls a block that holds 11 Bbbl of recoverable oil, worth nearly $1 trillion at current prices. The find has transformed Guyana from one of South America’s poorest countries into one that will pump more crude per person than Saudi Arabia or Kuwait by 2027. Guyana is on track to overtake Venezuela as South America’s second-­largest oil producer, after Brazil.

Guyana has become the bedrock of Exxon’s post-Covid corporate revival. The Texas oil giant has a 45% share of a field that costs less than $35 a barrel to produce, making it one of the most profitable outside of OPEC. With crude currently trading at $85 a barrel, the oil field would make money even if the transition from fossil fuels caused demand to collapse and prices dropped by half.

The untold story of the Guyana find’s origins—based on interviews with more than a dozen people involved in the Liza well, most of whom have since left Exxon—reveals some surprising truths about oil’s past and future.

It shows how others in the business overestimated the shift from oil to renewables. Only three years ago, Exxon lost a battle over board seats with activist investors who argued it wasn’t doing enough to prepare for the transition. Exxon stuck to its core business.

“When everyone else was pulling back, we were leaning in,” says Liam Mallon, president of Exxon’s production division.

Since Guyana production began at the end of 2019, the company’s shares have more than doubled, the highest return among its supermajor peers.

Exxon’s rivals no doubt have aching regret. Almost 30 other companies, including Chevron Corp., passed up the chance to buy into the Guyana discovery. Shell Plc, previously a 50% partner, walked away.

Chevron is now paying $53 billion for Hess Corp., one of Exxon’s two partners in Guyana, which has a 30% stake in the project. Exxon this year filed an arbitration case against Hess, claiming it has a right of first refusal over the stake. (Hess says that right doesn’t apply in a merger.)

But the tale of the Guyana discovery isn’t about taking swashbuckling risks for a huge payoff. Exxon, it turns out, is as much a financial engineering company as an oil explorer. It hedged its bets, reduced its exposure and bought itself an option to make a fortune on an unlikely outcome.

That strategy dates to a key moment in 2013. Exxon’s top geoscientists concluded that Dyksterhuis and his colleagues hadn’t made the case that drilling Liza was worth the risk. Dyksterhuis was downbeat.

If it didn’t drill, Exxon would have to hand the Stabroek block, or concession—its license to explore and drill the territory—back to Guyana’s government within months. (Stabroek was the former name of Guyana’s capital, Georgetown.)

In the hallway after a meeting, Rudy Dismuke, a ­commercial adviser, pulled one of the geoscientists aside. “Would you support Liza if we could drill it for free?” he asked. “Of course,” the geoscientist replied.

And so, a small group of lower- and midlevel employees figured out a way to drill for nothing. Or close to it.

Like many geoscientists, Rod Limbert knew that the source rock for Venezuela’s oil—the La Luna formation—extended under the Atlantic into maritime territory held by Guyana, Suriname and French Guiana.

The straight-talking Australian became fascinated with an onshore discovery in Suriname in the 1960s, when villagers accidentally found what became a billion-barrel oil field while drilling for water in a schoolyard.

Limbert thought the schoolyard’s oil had originated off Guyana’s continental shelf and migrated more than 100 miles onshore over millions of years. He took the idea to the Exxon team responsible for entering new basins in mid-1997.

“They had a picture of a downward-pointing thumb at the end of their presentation,” Limbert says. He contacted Guyana’s government about acquiring drilling rights anyway. “I just didn’t tell anyone,” he says.

In 1997, Guyana was one of the poorest countries in South America, still suffering from the socialist and isolationist policies of strongman Forbes Burnham, who rose to power soon after independence from the UK in 1966.

Limbert and two colleagues flew from Houston to Georgetown, to acquire old well logs and discuss the potential for drilling rights with the Guyana Geology and Mines Commission. “The ground floor was literally the ground floor,” Limbert says. “By that I mean the desks and chairs were on the dirt.”

The Exxon team also met Samuel Hinds, Guyana’s president, who talked mostly about cricket, Guyana’s national pastime. “I wasn’t in any particular hurry to talk about business, because I had no authority to do anything,” Limbert says. On returning to Texas and armed with fresh data, Limbert won permission to begin contract negotiations for exploration rights.

Citing the legions of failed wells, Limbert pushed for and won a highly favorable deal. The Stabroek block offered to Exxon was more than 1,000 times bigger than the average oil block in the Gulf of Mexico.

It required no upfront payment, and if Exxon struck oil, the company would keep 50% of the profit after deducting costs. It would pay the ­government a royalty of only 1%.

The deal helped the government in other ways. Guyana faced serious border disputes both with Suriname to the east and Venezuela to the west. Aligning with Exxon would mean anyone picking a fight with Guyana would also be picking a fight with the world’s most powerful oil company.

Guyana’s concerns proved valid. Suriname gunboats forced a different oil and gas operator out of disputed waters between the two countries. Exxon couldn’t work on the block for eight years.

When the Suriname conflict was nearing resolution in 2007, Exxon executives realized they’d need to spend money on seismic studies to meet work requirements under the contract. They suggested giving up the block to free up cash for ­higher-priority explorations in Brazil, the Gulf of Mexico and emerging U.S. shale basins.

Dismuke, a Texas-schooled engineer who was Exxon’s Western Hemisphere commercial adviser at the time, took one look at the contract with Guyana and couldn’t believe his eyes.

The deal Limbert negotiated had a huge upside. Dismuke and a colleague suggested a farm-out deal that would hand a portion of the block to a company willing to pay for the seismic study.

Exxon’s management approved the idea and sold 25% of Stabroek to Shell in 2008. Exxon and Shell spent the next three years interpreting the seismic waves bounced off underground rock layers to understand the region’s geology. The early data was promising, showing indications of fossil fuels.

But this data also confirmed many geoscientists’ worst fear: a complete absence of structural traps. These formations are geological faults or impenetrable bands of rock that act like dams, capturing oil as it seeps through layers of sediment over millions of years.

Without a solid trap, oil can’t accumulate in large enough quantities to be commercially viable. Guyana instead had stratigraphic traps, the riskiest of all geological formations for an oil and gas operator.

Although they can be secure, stratigraphic traps are subtle and very difficult to analyze on seismic charts. They often contain what’s known as a “thief zone” from which oil can escape.

By the late 2000s, however, the oil and gas industry was warming to such formations. Crude was trading for more than $100 a barrel, so big discoveries meant big profits. Technology was also improving.

Shell decided to raise its stake in the Stabroek block to 50%. Around the same time, two geoscientists at APA Corp., a small company in Houston then called Apache, were watching closely.

Tim Chisholm studied Venezuela for Exxon in the 1990s, and Pablo Eisner had worked the region for Repsol SA. The pair wanted a slice of Stabroek, but when that wasn’t an option, they led Apache into Suriname instead.

Before they could drill a well, Apache management had a change of heart and cut its exploration team. Chisholm and Eisner were laid off within a half-hour of each other. Chisholm went to Hess and Eisner joined CNOOC. Each says they believed they had unfinished business.

At Exxon in 2013, one geoscientist in a company of 75,000 people worked full time on Guyana. A trove of data was coming from the Shell-financed seismic studies. Exxon turned to Dyksterhuis, the Australian geoscientist, to help interpret it.

He was drawn to the subject in college because it had “every single field of science in it,” including the physics of seismic modeling and the biology of creatures that had died millions of years ago, he says. “And then you go into oil and gas, you’ve got, like, big-dollar decision-making.”

One such decision came soon after Dyksterhuis arrived in Houston from Melbourne. Exxon, which by then had held Stabroek for more than a decade, had a matter of months to decide whether to drill an 8-inch-diameter hole somewhere in an area the size of Massachusetts.

Signs pointed to no. Exxon was more focused on established oil provinces, and Shell was souring on the region after drilling in French Guiana didn’t pan out. Dyksterhuis started analyzing two-dimensional seismic data shot about five years earlier. One prospect, Liza, stood out. The readings showed fluid. But what kind? Water or oil? The uncertainty prompted constant challenges from his bosses.

Using complex computer modeling, Dyksterhuis combined more than 300 3D seismic images to determine it was likely oil sitting on top of water.

“The more I worked it, the more I was, like, ‘There’s something going on here,” Dyksterhuis says. Toward the end of 2013, he and two colleagues presented their findings to more than a dozen of Exxon’s top geoscientists.

The good news was that Liza had a “pay zone” 90 m (295 ft) thick packed with porous sand that fluids could move through very easily. They estimated it could contain 890 MMbbl recoverable oil, worth almost $1 billion at the time.

Their high-side estimate was twice as big. The bad news was there was only a 22% chance of success, mainly because Liza was a stratigraphic trap. It wasn’t enough to win the bosses’ approval, and the trio left discouraged.

Dismuke, who sat at the back of the meeting, saw it differently. “I thought, if this hits and the trap holds, then I’ve got 6 million more acres to explore under a very good contract,” he says.

He made a plan similar to the approach in 2008: reduce the financial downside by finding partners who would disproportionately pay for the well, in return for a stake in the block. Of course, Exxon would now be far richer if it hadn’t laid off that risk.

Mallon, the Exxon oil production chief, says it would have been inappropriate to bet hundreds of millions of dollars on a single well, given the company’s many other opportunities.

“You can’t sit as an armchair quarter­back,” he says. “Was it right or wrong? It was the decision based on what we knew at the time.”

Management approved, and Exxon quickly set up a data room at its Greenspoint office in Houston, inviting about 30 oil companies. Only about 20 showed up.

Geoscientists from each interested party got a daylong presentation from the Exxon team and a second day to analyze the data. Hess was the last to come through.

Chisholm grilled Dyksterhuis for more than two hours. “He did a very good job of, I would say, not overselling it,” Chisholm said in a 2020 lecture. “That was very critical to me believing. He had passion for what it was.”

In mid-2014, as Hess was considering entering the block, Shell dropped a bombshell: After six years of paying for seismic data, the Anglo-Dutch supermajor wanted out. The decision was “part of a broader groupwide review of our frontier exploration portfolio,” the company said in response to questions. Exxon now had 100% of Stabroek and only weeks before it had to inform the Guyana government whether or not it planned to drill.

Within Hess, Guyana was a tough sell, but the company agreed to take a 30% stake. “I bet my career on it,” Chisholm says. “I would have definitely been fired if it had not worked.”

Eisner, who’d coveted Guyana since working with Chisholm at Apache, was now working at CNOOC. “Everybody was offered Stabroek, but you need a maverick, big-headed geologist banging the table, even breaking the table to say, ‘This is good,” he says.

“At CNOOC, that was me.” Eisner convinced his bosses, and CNOOC took a 25% stake. Exxon’s share of Stabroek was now 45%, but crucially, the two newcomers agreed to fund most of the well cost. With Exxon’s own money now largely protected, management gave the go-ahead to drill Liza.

The well cost $225 million. Though Exxon will end up investing more than $25 billion in the Guyana project, its initial outlay—the one that secured its control of the epic discovery—was pretty close to the zero that the small group of Guyana believers had mentioned back in 2013: less than $100 million, according to people familiar with the matter. Possibly much less.

Exxon hired Transocean Ltd.’s Deepwater Champion for the job. The high-spec drill rig was as long as two football fields, carried 10 truckloads of cement and mud, and could drill more than 7 miles deep. With helicopter crews and support vessels at the ready, the well was soon costing more than $1 million a day.

Inside Exxon it was dubbed “the well from hell.” A section of pipe got stuck, unable to move up or down, compromising the integrity of the entire well. Drillers sheared off the drill bit and filled the bottom section of the well with cement. They lost equipment worth more than $15 million.

But the drillers made a side-track hole that saved the project. The night before Liza reached its target, Dyksterhuis and a colleague slept on the floor in separate meeting rooms at Exxon’s newly built Houston campus.

As soon as the drill bit hit Liza on May 5, 2015, real-time well data being fed back to Houston showed a sudden change in rock density. That meant Liza was stacked with fossil fuels. But it wasn’t immediately clear whether it was oil or gas. To really hit the big time, it had to be oil.

A few hours later, the Deepwater Champion circulated drilling mud on its deck and shook out rock cuttings onto a conveyor belt. Kerry Moreland, a senior geoscientist and Dyksterhuis’ boss, noticed a familiar smell in the salty sea air. “Maybe like a gas station,” she says. She put on gloves and picked up some of the rocks. They were dripping in oil.

 

 

 

Chevron’s $53 billion Hess merger delayed to 2025

Joe Carroll and Joe Ryan, Bloomberg August 01, 2024

Chevron Corp.’s $53 billion proposed takeover of Hess Corp. suffered another setback as an arbitration hearing to settle an ownership dispute with Exxon Mobil Corp. wil nott be held until next year. The international arbitration panel handling Exxon’s claim that Chevron’s acquisition does not give it the right to control Hess’ stake in a Guyana oil project has scheduled the hearing for May.

“Hess and Chevron had expected and requested that this hearing be held earlier. But the arbitrators’ common schedules did not make this possible.”

The delay is a significant blow to the embattled deal, which remains far from completion more than nine months after it was announced. It is still under review by the U.S. Federal Trade Commission, which plans to delay its decision whether to try to block the merger until after the arbitration case is settled.

Hess shares fell as much as 3.5% after the close of regular trading in New York. Chevron dipped as much as 1.7%.

Chevron announced its agreement to buy Hess in October, marking what would be the company’s biggest takeover in two decades. The centerpiece was Hess’s 30% stake in a giant Guyana oil field controlled by Exxon, the largest oil discovery of the past decade. Exxon operates the block and owns a 45% stake. Hess and China’s Cnooc Ltd. own the remaining 30% and 25%, respectively. Chevron said it would scrap the entire deal to buy Hess if the company’s stake was not included in the transaction.

Exxon dealt the merger a body blow in March when it filed for arbitration, claiming it has a right of first refusal over Hess’ stake.

Hess investors approved the Chevron takeover in May by just 51% after several large shareholders and Institutional Shareholder Services Inc. argued the vote should be delayed until after the arbitration case. The investors expressed concern that they would not receive Chevron dividends until the deal is complete, eroding the value of the transaction.

Chevron has said it is confident it will prevail in arbitration. The companies said,

“The views of Chevron and Hess on the merits remain unchanged. Exxon and Cnooc continue to ignore the plain language of the operating agreement, and Chevron and Hess remain confident.”

 

 

 

Exxon Guyana oil production posts temporary drop

Aug. 26, 2024

Carl Surran, SA News Editor Reuters

Oil output from the Exxon Mobil consortium fell to 400K-500K bbl/day from July 2 through the end of the month, in a sign that work on production facilities has begun.

Update: A consortium spokesperson told Reuters crude output has been fully restored at two floating production facilities after workers completed a natural gas pipeline tie-in.

Exxon had said earlier this year it would shut two offshore oil production vessels for two weeks each in July and August to connect a gas pipeline that would feed planned onshore electric power plant and gas-processing facilities. Output from the consortium’s two Liza floating production facilities off the coast of Guyana was halted during July 19-31 while output from a third platform was unaffected . The consortium’s three production vessels had been pumping up to 669K bbl/day on June 30.