With several developments on the horizon… Guyana must study economic impact of multiple FPSOs – University of Houston Instructor

Aug 24, 2019 News

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By Kiana Wilburg

ExxonMobil, Hess Corporation and CNOOC/NEXEN have all indicated that the Liza field within the oil-rich Stabroek Block holds the potential for at least five Floating Production Storage and Offloading (FPSO) units. These vessels are used for the production and processing of hydrocarbons, as well as for the storage of oil.

Considering the fact that ExxonMobil will soon be moving towards the development of other fields in the Stabroek Block, as well as the significant discovery in the Orinduik Block, analysts are cautioning that there are some FPSO economics involved which must be given due attention.
Specifically making this comment was University of Houston Instructor, Tom Mitro. During an exclusive interview with Kaieteur News, the Petroleum Consultant noted that the government may want to consider whether continuing to develop these offshore fields using separate FPSO configurations, still makes sense.
Mitro said, “FPSO’s are self-contained production, storage and export units that do allow a very quick start of a production, but when there are several of them, they tend to be less than cost-efficient, and do not lend themselves to monitoring and control by the government.”
The Consultant, who has over 30 years experience in the industry added, “Now with multiple developments on the horizon, the government may want to consider the economic cost and other impacts of requiring a pipeline system to be built to take the oil to shore to a common terminal in Guyana for treating, export and possible future connection to domestic pipelines.”
Mitro said that this type of common infrastructure has the potential to reduce overall costs, enable more local content, and enable future marginal oil discoveries in the region to be more economically viable by utilising existing infrastructure.
He opined that it would also allow for much easier and cheaper government monitoring and auditing of oil measurement and fiscalisation. Further to this, Mitro said it should be pointed out that these results would not necessarily be automatic, but would have to be studied.
“I would submit that now would be an ideal time to study these options before the government is inundated with a lot more new development plans submitted to it,” the University Instructor concluded.
FIELD DEVELOPMENT
With respect to developments on the block, Hess Corporation recently noted that the second phase of the Liza Field was sanctioned by its other two partners, ExxonMobil and CNOOC/NEXEN, following regulatory approval from the Government of Guyana.
Hess noted that Liza Phase Two will utilise the Liza Unity FPSO, which will have the capacity to produce up to 220,000 gross barrels of oil per day. It said that six drill centres are planned with a total of 30 wells, including 15 production wells, nine water injection wells, and six gas injection wells.
The company noted that first oil is expected by mid-2022 and the development is expected to have a gross capital cost of approximately $6 billion, including a lease capitalisation cost of approximately $1.6 billion for the FPSO, and will develop approximately 600 million barrels of oil.
Excluding pre-sanction and lease costs, the corporation said its net share of development costs is forecast to be approximately $1.6 billion, of which $210 million is included in its 2019 capital and exploratory budget.
Turning its attention to Liza Phase One, Hess noted that this remains on track to achieve first oil by the first quarter of 2020. It said that Phase One will produce up to 120,000 gross barrels of oil per day at peak rates, utilising the Liza Destiny FPSO, which is expected to arrive offshore Guyana next month.
Further to this, Hess said that planning is underway for a third phase of development at the Payara Field, which is expected to produce between 180,000 and 220,000 gross barrels of oil per day, with first oil as early as 2023.
Reminding of the exploration and appraisal activity on the Stabroek Block in the second quarter of 2019, Hess noted that the Yellowtail-1 well encountered approximately 292 feet of high-quality oil-bearing sandstone reservoir and is located approximately six miles northwest of the Tilapia discovery. As the fifth discovery in the greater Turbot area, it underpins another potential major development hub.
Further, Hess said that the Hammerhead-2 appraisal well, located approximately 0.9 miles from the Hammerhead-1 discovery well, and the Hammerhead-3 appraisal well, located approximately 1.9 miles from Hammerhead-1, were both successfully drilled and encountered high quality, oil bearing sandstone reservoir.
Hess said that a successful drill stem test was also performed on Hammerhead-3. The appraisal results will be evaluated for potential future development, the company asserted.
Additionally, it was noted that the Stena Carron drillship is currently drilling a second well at the Ranger discovery, while the Noble Bob Douglas and the Noble Tom Madden drillships are conducting drilling operations for the Liza Phase One development.
This newspaper understands that the Noble Tom Madden is next expected to drill the Tripletail exploration well, which is in the greater Turbot area, beginning this month.
Hess has also said that the operator, being ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), plans to add another drillship, the Noble Don Taylor, in the fourth quarter, bringing the number of drill-ships offshore Guyana to four.

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