And the hits keep coming in Guyana. This week, ExxonMobil announced that it had made a new discovery – called the Hammerhead-1 – in the South American nation. It is the ninth in a string of major offshore discoveries that have turned the once sleepy nation into the world’s newest hotbed of upstream exploration.
Located in the Stabroek Block, the Hammerhead-1 well encountered ‘approximately 60 metes of high quality, oil-bearing sandstone reservoirs’, the fifth discovery in the basin and just 21 km southwest of Liza-1, the well that kicked off the bonanza in January 2017. The discovery brings the estimated gross recoverable resources in the Guyana-Suriname basin to 4 billion barrels of oil equivalent, up from the initial 1.4 billion barrels when Liza-1 was discovered and 3.2 billion barrels in January 2018, when the Ranger-1 well struck oil.
The current timeline has Phase 1 of Liza – which is already sanctioned - reaching first oil by early 2020, using the Liza Destiny FPSO to produce an initial 120,000 b/d. Liza Phase 2 is set for FID at the end of the year, bringing in another FPSO with 220,000 b/d capacity by 2022, while sanctioning for Payara (using a 180,000 b/d FPSO) is set for 2019 for a 2023 startup. Beyond that, ExxonMobil, Hess and CNOOC Nexen have noted that the discoveries in Stabroek could support up to five FPSO vessels, producing some 750,000 b/d by 2025.
That is, if things stay the way they are. The current exploration program in Guyana has a success rate of 82%, and there are almost 18 prospects left in the Stabroek block that can be pursued. The consortium led by ExxonMobil (45%) with Hess (30%) and CNOOC Nexen (25%) is currently the only player in Guyana, operating the 26,800 square km Stabroek Block. Buoyed by that resounding success, there are more players knocking at the door – in search of assets that the US Geological Survey estimated could contain as much as 13.6 billion barrels of oil and 32 tcf of natural gas. Even neighbouring countries of Suriname and French Guiana are gearing up for some action.
With this much riches on the horizon, Guyana could become the new Qatar or Brunei – a tiny nation punching well above its weight economically, or what Wood Mackenzie is calling ‘the richest corner of the continent’. However, there are warning signs that the current institutional and regulatory framework is insufficient to handle the influx of discoveries; a national oil company is being developed and a new taxation system for oil contract is being mooted to prevent the ‘lopsided’ ExxonMobil contract from repeating, but more needs to be done. The future looks very bright for Guyana, but with petro-dollars always come major risks. Here’s hoping the opportunities Guyana has been blessed with will not be squandered.
Major oil discoveries in Guyana
Estimated recoverable volumes: 4 billion barrels oil (August 2018)
Sign-up to NrgEdge for weekly new and analysis
Something interesting to share?
Join NrgEdge and create your own NrgBuzz today
A month ago, crude oil prices were riding a wave, comfortably trading in the mid-US$70/b range and trending towards the US$80 mark as the oil world fretted about the expiration of US waivers on Iranian crude exports. Talk among OPEC members ahead of the crucial June 25 meeting of OPEC and its OPEC+ allies in Vienna turned to winding down its own supply deal.
That narrative has now changed. With Russian Finance Minister Anton Siluanov suggesting that there was a risk that oil prices could fall as low as US$30/b and the Saudi Arabia-Russia alliance preparing for a US$40/b oil scenario, it looks more and more likely that the production deal will be extended to the end of 2019. This was already discussed in a pre-conference meeting in April where Saudi Arabia appeared to have swayed a recalcitrant Russia into provisionally extending the deal, even if Russia itself wasn’t in adherence.
That the suggestion that oil prices were heading for a drastic drop was coming from Russia is an eye-opener. The major oil producer has been dragging its feet over meeting its commitments on the current supply deal; it was seen as capitalising on Saudi Arabia and its close allies’ pullback over February and March. That Russia eventually reached adherence in May was not through intention but accident – contamination of crude at the major Druzhba pipeline which caused a high ripple effect across European refineries surrounding the Baltic. Russia also is shielded from low crude prices due its diversified economy – the Russian budget uses US$40/b oil prices as a baseline, while Saudi Arabia needs a far higher US$85/b to balance its books. It is quite evident why Saudi Arabia has already seemingly whipped OPEC into extending the production deal beyond June. Russia has been far more reserved – perhaps worried about US crude encroaching on its market share – but Energy Minister Alexander Novak and the government is now seemingly onboard.
Part of this has to do with the macroeconomic environment. With the US extending its trade fracas with China and opening up several new fronts (with Mexico, India and Turkey, even if the Mexican tariff standoff blew over), the global economy is jittery. A recession or at least, a slowdown seems likely. And when the world economy slows down, the demand for oil slows down too. With the US pumping as much oil as it can, a return to wanton production risks oil prices crashing once again as they have done twice in the last decade. All the bluster Russia can muster fades if demand collapses – which is a zero sum game that benefits no one.
Also on the menu in Vienna is the thorny issue of Iran. Besieged by American sanctions and at odds with fellow OPEC members, Iran is crucial to any decision that will be made at the bi-annual meeting. Iranian Oil Minister Bijan Zanganeh, has stated that Iran has no intention of departing the group despite ‘being treated like an enemy (by some members)’. No names were mentioned, but the targets were evident – Iran’s bitter rival Saudi Arabia, and its sidekicks the UAE and Kuwait. Saudi King Salman bin Abulaziz has recently accused Iran of being the ‘greatest threat’ to global oil supplies after suspected Iranian-backed attacks in infrastructure in the Persian Gulf. With such tensions in the air, the Iranian issue is one that cannot be avoided in Vienna and could scupper any potential deal if politics trumps economics within the group. In the meantime, global crude prices continue to fall; OPEC and OPEC+ have to capability to change this trend, but the question is: will it happen on June 25?
Expectations at the 176th OPEC Conference
Global liquid fuels
Electricity, coal, renewables, and emissions
Source: U.S. Energy Information Administration, U.S. liquefaction capacity database
On May 31, 2019, Sempra Energy, the majority owner of the Cameron liquefied natural gas (LNG) export facility, announced that the company had shipped its first cargo of LNG, becoming the fourth such facility in the United States to enter service since 2016. Upon completion of Phase 1 of the Cameron LNG project, U.S. baseload operational LNG-export capacity increased to about 4.8 billion cubic feet per day (Bcf/d).
Cameron LNG’s export facility is located in Hackberry, Louisiana, next to the company’s existing LNG-import terminal. Phase 1 of the project includes three liquefaction units—referred to as trains—that will export a projected 12 million tons per year of LNG exports, or about 1.7 Bcf/d.
Train 1 is currently producing LNG, and the first LNG shipment departed the facility aboard the ship Marvel Crane. The facility will continue to ship commissioning cargos until it receives approval from the Federal Energy Regulatory Commission to begin commercial shipments. Commissioning cargos refer to pre-commercial cargo loaded while export facility operations are still undergoing final testing and inspection. Trains 2 and 3 are expected to come online in the first and second quarters of 2020, according to Sempra Energy’s first-quarter 2019 earnings call.
Cameron LNG has regulatory approval to expand the facility through two additional phases, which involve the construction of two additional liquefaction units that would increase the facility’s LNG capacity to about 3.5 Bcf/d. These additional phases do not have final investment decisions.
Cameron LNG secured an authorization from the U.S. Department of Energy to export LNG to Free Trade Agreement (FTA) countries as well as to countries with which the United States does not have Free Trade Agreements (non-FTA countries). A considerable portion of the LNG shipments is expected to fulfill long-term contracts in Asian countries, similar to other LNG-export facilities located in the Gulf of Mexico region.
Cameron LNG will be the fourth U.S. LNG-export facility placed into service since February 2016. LNG exports rose steadily in 2016 and 2017 as liquefaction trains at the Sabine Pass LNG-export facility entered service, with additional increases through 2018 as units entered service at Cove Point LNG and Corpus Christi LNG. Monthly exports of LNG exports reached more than 4.0 Bcf/d for the first time in January 2019.
Source: U.S. Energy Information Administration, Natural Gas Monthly
Currently, two additional liquefaction facilities are being commissioned in the United States—the Elba Island LNG in Georgia and the Freeport LNG in Texas. Elba Island LNG consists of 10 modular liquefaction trains, each with a capacity of 0.03 Bcf/d. The first train at Elba Island is expected to be placed into service in mid-2019, and the remaining nine trains will be commissioned sequentially during the following months. Freeport LNG consists of three liquefaction trains with a combined baseload capacity of 2.0 Bcf/d. The first train is expected to be placed in service during the third quarter of 2019.
EIA’s database of liquefaction facilities contains a complete list and status of U.S. liquefaction facilities.