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Hess sells out lucrative Gulf of Mexico oilfield for Guyana
Kaieteur News – Hess Corporation has announced that it has entered an agreement to sell out its stake in a producing Gulf of Mexico oilfield to raise capital for its Guyana investment opportunities. The move is just one of many signals of the enviable position of Exxon, Hess and CNOOC offshore Guyana. Together, the joint venture partners enjoy the world class Stabroek Block, with crude at extremely low breakeven prices, and a lopsided contract in their favour.
A floating structure installed in the Shenzi Field (BHP)
“Proceeds will be used to fund our world class investment opportunity in Guyana,” Chief Executive Officer of Hess, John Hess said. “This sale is aligned with our strategy to preserve cash and preserve the long term value of our assets in the current low oil price environment.”
The sale, once completed before year end, would have an effective date of July 1, 2020 and will grant Hess US$505M. Hess is selling its 28 percent stake in the lucrative oilfield to the Australian operator, BHP Billiton. The operator already has a 44 percent stake in the block, alongside Repsol with 28 percent.
The Shenzi oilfield is one of the most successful fields in the Western Atwater fold belt area of the Gulf of Mexico, under the jurisdiction of the United States. Spread across four blocks, the operation has a namesake capacity of 100,000 barrels of oil per day. It has been producing an average of 11,000 net barrels of oil equivalent per day for the first eight months of 2020.
While the Shenzi oilfield is lucrative, Hess has placed Guyana at the top of its portfolio. The company has stakes in two blocks in Guyana, Kaieteur (15 percent) and Stabroek (30 percent).
The Stabroek Block has thus far grown in success, with 18 discoveries by ExxonMobil proving the area to have over eight billion oil-equivalent barrels. Guyana has approved three developments in the block: Liza Phases One & Two, and Payara. Liza One came on stream in December 2019, ahead of schedule. The Liza Destiny Floating Production, Storage and Offloading (FPSO) vessel operating there has the capacity to produce as many as 120,000 barrels of oil per day, but production has been curtailed due to flaring. Exxon claims the reason for the flaring is a defective gas compressor.
First Oil for Liza Two and Payara are scheduled for 2022 and 2024 respectively. The three developments will take Guyana to peak production capacity of 560,000 barrels per day. Following government approval of Payara late last month, Hess announced that it made a final investment decision to plug US$1.8B into the development.
As for the Kaieteur Block, exploration started recently in the Tanager-1 well, which is estimated to hold 256.2 million barrels. The entire Kaieteur Block is estimated to have 2.1 billion oil-equivalent barrels.
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