ExxonMobil won the prize. The greatest offshore oil discovery in recent decades was secured by the worlds largest exploration and production company in May 2015. The windfall for the oil giant is also a fortune for the people of Guyana, a former Dutch and British colony at the north-eastern tip of South America. The tiny countrys neighbor is Venezuela, itself rich in oil reserves, so there is no surprise Guyana shares the same luxury.
Disputed Waters
In December 2016, the Venezuelan Navy intercepted an exploration vessel conducting seismic survey work on behalf of ExxonMobil. The Venezuelan government insisted that the ship was within its territory and had every right to approach the vessel during a routine patrol. The Norwegian-owned vessel with 70 crew members from various nations stopped the exploration and headed back to safety. Guyana officials insisted that the vessel was operating in its economic zone and Venezuela was violating the sovereignty and territorial integrity of its country.
The offshore spat goes back to a longstanding land dispute. In 1899, Venezuela agreed to relinquish control of the Essequibo region, a dense jungle area that is sparsely populated. The dispute increased over the years when ExxonMobil announced the oil discovery, which was a windfall for Guyana with no significant history of oil production. Suriname also claimed a section of Guyanas territorial sea that was settled in 2007.
Significant Discovery
Guyana always had the potential to strike oil; however, for decades, explorers drilled dry holes. The financial risks involved in offshore exploration are tremendous. Royal Dutch Shell pulled out of the partnership during the 2014 oil price crash. It has been a long road for ExxonMobil, first signing a production sharing agreement with Guyana in 1999. With previous unsuccessful exploration attempts by competing oil producers, territorial disputes, and the oil price crash, ExxonMobil persevered, discovering an estimated four billion barrels of oil in the Stabroek block, 125 miles off the Guyana shore. Shell, Total, and other major oil producers have completed oil discoveries off the coast and drilled a number of wells, but nothing even close to this magnitude.
In a partnership with Hess, with 30 percent interest, CNOOC, also 30 percent interest, and ExxonMobil, with 45 percent interest, the oil giant drilled its first well, Liza, followed by several more wells. The subsequent well discoveries increased reserves to eight billion barrels of oil equivalent in the 6.6-million-acre block. The Liza 1 development is expected to start this year and produce up to 120,000 barrels of oil per day using a floating production storage and offloading unit (FPSO). Liza Phase 2 has been approved for development by the Guyanese government and is expected to start in mid-2022, also using an FPSO to produce 220,000 barrels per day of oil. There are numerous drill ships in the block studying the basin with a possible third development, Payara, coming online in 2023.
Guyana exported its first crude cargo earlier this year headed for the U.S. Gulf Coast for refining in the ExxonMobil network. The Yannis P vessel loaded light sweet crude from the offshore FPSO, marking the countrys long-awaited debut as an oil exporter. Shell is also back in the partnership. Guyana awarded the company the right to cargo three vessels of crude and the government plans to open bidding for a marketing agent to trade and export its share of production.
Prosperity
Will Guyana be ready to manage the historic windfall it now has in its lap? Many still ponder at the thought. Some think they will end up mired in corruption like oil producing nations in Africa, such as Angola, and even Guyanas neighbor Venezuela. Guyana really is a country at risk, said David Goldwyn, president of Goldwyn Global Strategies.
Yet others think Guyana has the opportunity to prove that, as a developing nation, it will be able to manage and prosper with its newfound national treasure. Guyana is going to need a small, tight team of people making decisions in a timely way; theyre not there yet, Goldwyn said. The Guyanese government has slowly implemented measures, such as forming the State Asset Recovery Agency (SARA) to stamp out corruption and watch over the countrys prized offshore leases.
There are now several companies from around the world with wide-eyed interest in exploring for oil in offshore Guyana with hopes of the next big discovery. Guyana has approved several offshore leases and now that interest is high, officials in government have signaled Guyana did not get the best tax and royalty rates in the lease deal with ExxonMobil and subsequent oil companies.
Guyana will take 60 percent of the oil profit and is estimated to receive $5 billion in oil revenue per year by 2025. The government in the small developing nation of 778,000 citizens set up a sovereign wealth fund to manage the incoming revenue, but has not identified plans on how to spend it. Goldwyn mentioned, Today, they have the per capita income of Tonga, but by 2024, theyll have the per capita income of Brazil, a country whose population dwarfs Guyanas by over 200 million people. Goldwyn notes, if the right team is in place, Guyana will be successful and emphasized, If not, and I hope this is not the case, in ten years well be talking about how hard it is for countries with resource wealth to turn that into real prosperity.
Guyana potentially becoming the regions richest petrostate has a lot at stake. The countrys department of energy has an annual budget of $2 million, very modest compared to its neighbor. Goldwyn states that job number one is a fiscal rule that must be in play where a certain amount of money will go into the budget and the rest into a fund. Guyana will receive $300 million the first year and $100 million will go to the budget and $200 million into the sovereign wealth fund. Accountability is job two and anti-corruption is job three, Goldwyn says. If managed correctly, the oil bonanza could transform Guyana into a new global player in fossil fuel production for decades to come.
Excerpt from:
The Great Offshore Oil and Gas Discovery in Guyana - OILMAN Magazine
- Home | Discover Oil & Gas | Rigzone - December 8th, 2016 [December 8th, 2016]
- Offshore - Wikipedia - December 8th, 2016 [December 8th, 2016]
- EscapeArtist - Live, Work, Travel, Retire & Invest Overseas - December 15th, 2016 [December 15th, 2016]
- Offshore installation manager - Wikipedia - December 30th, 2016 [December 30th, 2016]
- Offshore Energy 17 - January 12th, 2017 [January 12th, 2017]
- Offshore Drilling and Exploration - The New York Times - February 2nd, 2017 [February 2nd, 2017]
- Offshore - novenco-marine.com.php56serv2.webhosting.dk - February 5th, 2017 [February 5th, 2017]
- Further decline in North Sea offshore supply work - BBC News - February 7th, 2017 [February 7th, 2017]
- Japan ignores protests, begins offshore construction work on ... - RT - February 7th, 2017 [February 7th, 2017]
- Offshore Drillers Are Still Seeking Recovery Enjoyed by Shale - Bloomberg - February 7th, 2017 [February 7th, 2017]
- Offshore Profits and US Exports - Council on Foreign Relations (blog) - February 8th, 2017 [February 8th, 2017]
- Diamond Offshore Surprises Everyone With a Fourth Quarter Earnings Gain - Madison.com - February 8th, 2017 [February 8th, 2017]
- Dems: Don't repeal offshore tax rules - The Hill - February 8th, 2017 [February 8th, 2017]
- Offshore Wind Moves Into Energy's Mainstream - New York Times - February 8th, 2017 [February 8th, 2017]
- Trump's Plan to Tap Offshore Profit for Infrastructure Gains an Ally - Bloomberg - February 8th, 2017 [February 8th, 2017]
- China Regulator Urges Insurers to Avoid 'Reckless' Offshore ... - Insurance Journal - February 9th, 2017 [February 9th, 2017]
- Perriello comes out against pipeline and, in a shift, says he is skeptical of offshore drilling - Washington Post - February 9th, 2017 [February 9th, 2017]
- AGL to head offshore amid limited growth options locally - The Sydney Morning Herald - February 9th, 2017 [February 9th, 2017]
- Should Diamond Offshore (DO) Stock Be in Your Portfolio? - Zacks.com - February 9th, 2017 [February 9th, 2017]
- Wind Overtakes Coal Power in Europe as Turbines Head Offshore - Bloomberg - February 9th, 2017 [February 9th, 2017]
- Cuba Eager to Develop Offshore Oil Reserves | OilPrice.com - OilPrice.com - February 10th, 2017 [February 10th, 2017]
- Eni starts production of East Hub Development Project, offshore Angola - Offshore Technology - February 10th, 2017 [February 10th, 2017]
- 'Fifty Shades Darker' Unmasks $22M In Offshore Foreplay International Box Office - Deadline - February 10th, 2017 [February 10th, 2017]
- Statoil looks to Newfoundland offshore after selling off all oilsands assets - Globalnews.ca - February 10th, 2017 [February 10th, 2017]
- Coalition urged to charge 10% royalty on offshore oil and gas projects - The Guardian - February 10th, 2017 [February 10th, 2017]
- Israel Puts Off License Award In First Offshore Oil, Gas Bid Round - OilPrice.com - February 10th, 2017 [February 10th, 2017]
- Cost Impact of Immigration and Visa Reform to US Customers Using Offshore Services - Forbes - February 10th, 2017 [February 10th, 2017]
- These Offshore Drilling Stocks Are Up Big as Earnings Season Starts - Fox Business - February 10th, 2017 [February 10th, 2017]
- Offshore projects help raise profile of wind power in US, Europe - WorkBoat (blog) - February 11th, 2017 [February 11th, 2017]
- Shares of Seadrill Went in the Exact Opposite Direction of Other Offshore Drillers in January - Motley Fool - February 11th, 2017 [February 11th, 2017]
- After selling off all oilsands assets, Statoil looks to Newfoundland offshore - Calgary Herald - February 11th, 2017 [February 11th, 2017]
- Oil and Gas Stock Roundup: The Outlook for Offshore Drilling Continues to Dim - Fox Business - February 11th, 2017 [February 11th, 2017]
- Diamond Offshore Surprises Everyone With a Fourth Quarter ... - Motley Fool - February 12th, 2017 [February 12th, 2017]
- Diamond Offshore Is A Hold - Seeking Alpha - February 12th, 2017 [February 12th, 2017]
- Trudeau: Arctic offshore drilling too dangerous - The Independent Barents Observer - February 12th, 2017 [February 12th, 2017]
- Don't Overlook This Cost-Effective Alternative To Offshore Services - Forbes - February 14th, 2017 [February 14th, 2017]
- Legislation could mean an economic boost in New Bedford offshore wind projects - SouthCoastToday.com - February 14th, 2017 [February 14th, 2017]
- Ontario signals extension on offshore wind project moratorium - BNN - February 14th, 2017 [February 14th, 2017]
- Oil Majors' Plans - No Relief For Offshore Drillers - Seeking Alpha - February 14th, 2017 [February 14th, 2017]
- Director hits back at offshore worker blacklisting claims - BBC News - February 14th, 2017 [February 14th, 2017]
- OPEC Report: Pressure On Offshore Drilling Remains - Seeking Alpha - February 15th, 2017 [February 15th, 2017]
- UK Offshore Wind Construction Had Bumper Year In 2016, Barbour ABI - CleanTechnica - February 16th, 2017 [February 16th, 2017]
- Trump urged to back offshore - Offshore Wind | reNEWS ... - reNews - February 16th, 2017 [February 16th, 2017]
- Russian Spy Ship Spotted Offshore From Connecticut; Congressman Says Goal Is To Test US - CBS Local - February 16th, 2017 [February 16th, 2017]
- Australia Accused Of Committing Crimes Against Humanity In Offshore Detention Centres - BuzzFeed News - February 16th, 2017 [February 16th, 2017]
- US Wind Secures Cabling Partner For MD Offshore Project - North American Windpower - February 16th, 2017 [February 16th, 2017]
- Professional Diversity Network: Offshore Investment Fund, Dropping ... - Seeking Alpha - February 16th, 2017 [February 16th, 2017]
- Vineyard Power vying for offshore wind farm - News - capecodtimes ... - Cape Cod Times (subscription) - February 16th, 2017 [February 16th, 2017]
- Liquidity Warnings Send Hornbeck Offshore Services, Inc.'s Stock Plunging - Motley Fool - February 16th, 2017 [February 16th, 2017]
- Will Offshore Stymie Oil States? - Seeking Alpha - February 16th, 2017 [February 16th, 2017]
- Enbridge Partners with EnBW on 497-MW German Offshore Wind Project - Marketwired (press release) - February 17th, 2017 [February 17th, 2017]
- JDR lands US offshore bounty - reNews - February 17th, 2017 [February 17th, 2017]
- Natural gas leaks from offshore pipeline in Alaska - Press Herald - February 17th, 2017 [February 17th, 2017]
- Halliburton's GRIP delivers rapid response to offshore source-control incidents - WorldOil (subscription) - February 18th, 2017 [February 18th, 2017]
- Model advances analysis of offshore BOP closure during extreme conditions - WorldOil (subscription) - February 18th, 2017 [February 18th, 2017]
- IRS Cracks Down on Offshore Tax Cheats - CPAPracticeAdvisor.com - February 18th, 2017 [February 18th, 2017]
- Vineyard Power vying for offshore wind farm - Cape Cod Times (subscription) - February 18th, 2017 [February 18th, 2017]
- Offshore Yuan Exposed to Onshore Risks as Spread Narrows - DailyFX - February 18th, 2017 [February 18th, 2017]
- Offshore Somalia: East Africa's Oil Frontier - Midnimo Information Center - February 20th, 2017 [February 20th, 2017]
- Emas Offshore refinancing deal delayed - Splash 247 - Splash 247 - February 20th, 2017 [February 20th, 2017]
- The Offshore Markets: 2016 In Review - Hellenic Shipping News Worldwide - February 20th, 2017 [February 20th, 2017]
- Court Declines to Halt Long Island Offshore Wind Lease - RTO Insider - February 20th, 2017 [February 20th, 2017]
- Fuel the American economy with offshore energy - The Detroit News - February 20th, 2017 [February 20th, 2017]
- Congress says won't renew liquor licenses of offshore casinos in Goa - Times of India - February 20th, 2017 [February 20th, 2017]
- An offshore deal for Indigenous people? - Policy Options (registration) - February 20th, 2017 [February 20th, 2017]
- Exclusive: Petronas considers $1 billion stake sale in offshore gas project - sources - Reuters - February 20th, 2017 [February 20th, 2017]
- JDR wins US offshore wind farm work - OE Digital - February 20th, 2017 [February 20th, 2017]
- Offshore Drilling - 2 Floaters Needed In The Verbier Field And In The Partridge Prospect In UK North Sea - Seeking Alpha - February 20th, 2017 [February 20th, 2017]
- Rystad Energy Believes That Offshore Projects Are Becoming Competitive Again - Seeking Alpha - February 20th, 2017 [February 20th, 2017]
- EnBW Hohe See 500 MW Offshore Wind Farm To Proceed With Siemens & Enbridge - CleanTechnica - February 20th, 2017 [February 20th, 2017]
- Offshore catering staff reject offer after phone ballot - BBC News - February 21st, 2017 [February 21st, 2017]
- Child abuse inquiry to hold limited public hearings into offshore ... - The Guardian - February 21st, 2017 [February 21st, 2017]
- Iberdrola Completes Installation Of First Turbine At 350 Megawatt ... - CleanTechnica - February 22nd, 2017 [February 22nd, 2017]
- Offshore drilling opponents re-gear for new round of battles | News ... - Charleston Post Courier - February 22nd, 2017 [February 22nd, 2017]
- Hornbeck Offshore Services: Too Many Problems Will Drag The Stock Further Down - Seeking Alpha - February 22nd, 2017 [February 22nd, 2017]
- US grid can handle more offshore wind power, cutting pollution and power costs - Science Daily - February 22nd, 2017 [February 22nd, 2017]
- Fugro to conduct natural leakage survey in offshore Kenya ... - Offshore Technology - February 23rd, 2017 [February 23rd, 2017]
- Russia inks second Turkish Stream pipe offshore construction contract - New Europe - February 23rd, 2017 [February 23rd, 2017]
- Trump to seek jobs advice from firms that offshore US work - Reuters - February 23rd, 2017 [February 23rd, 2017]
- W&T Offshore Expected to Reduce Net Losses in 4Q16 - Market Realist - February 24th, 2017 [February 24th, 2017]