Low-cost Liza Phase 2 arguably best project in oil industry – Hess’ Chief Financial Officer

Nov 05, 2020 News

– with world class breakeven price of US$25 per barrel

The Liza Unity FPSO

Kaieteur News – The Liza Phase Two operation, on track for first oil in 2022, is arguably the best project in the exploration and production industry, says Executive Vice President and Chief Financial Officer at Hess Corporation, John P. Rielly.
During its most recent earnings call for 2020, the Stabroek block co-venturer’s principals discussed Hess’ 2020 third quarter performance.
Rielly pointed to the Liza Phase Two project as a bright light in its future, in spite of how the industry has tanked due to the fallout from COVID-19.
Rielly regards the Liza Phase Two operation, at a total estimated development cost of US$6.6 billion, as “arguably the best” due to its world-class Brent breakeven price of US$25 per barrel. The breakeven price, in economics, is the price at which the production and sale of a commodity would not return a profit or a loss. Oil companies utilize this, among other indicators to determine whether an operation would be economically feasible.

Executive Vice President and Chief Financial Officer at Hess Corporation, John P. Rielly

In October, Rystad Energy said that Onshore Middle East is the least expensive source of new production with an average breakeven price of around US$30 per barrel. The energy intelligence firm pointed to Offshore deepwater as the second cheapest source of new production, with an average breakeven price of US$43 per barrel – Liza Phase Two is in deep water.
Hess sold out producing Gulf of Mexico block for Liza Phase Two
Hess expects before the year is out, to close a deal it announced early in October to sell out its 28 percent stake in the Gulf of Mexico’s Shenzi oilfield to raise US$505 million. BHP Billiton, Shenzi’s operator, is buying Hess’ stake, and is expected to continue its operations in the block in cooperation with Repsol, which also has a 28 percent stake.
Hess had announced that the sale decision was taken to raise cash for Guyana. Rielly further revealed during the earnings call that the cash will be plugged directly into Liza Phase Two.
“The proceeds from the Shenzi sale will allow us to fund our Guyana investment program in a $40 oil price environment through the start-up of Liza Phase 2 with cash flow from operations and cash on hand,” he said.
“As Phase 2 comes online, our operations in Guyana will begin to generate free cash flow for the corporation, even in a $40 oil price environment and depending on commodity prices at that time, the Corporation will begin generating free cash flow between 2022 and 2024.”
The Executive Vice President said that this will allow the company to reduce its debt, and to increase returns to its shareholders.
Project progress and specifications
Hess’ President and Chief Operating Officer, Gregory Hill said that the Liza Phase Two development plan is progressing, with approximately 80 percent of the overall top sides whole, and subsea work completed. The Floating Production, Storage and Offloading (FPSO), the Liza Unity is under construction in Singapore, and will join the Liza Phase One operation in 2022, adding 220,000 barrels per day at peak performance, to the Liza Destiny’s 120,000 barrels per day. Liza Phase Two targets 600 million barrels of oil.
A total of six drill centers are planned for Liza Phase Two, as well as approximately 30 wells, including 15 production, nine water injection and six gas injection wells.
SBM Offshore, Exxon’s Dutch FPSO solutions provider is using its Fast4Ward hull, a standard design it intends for use across deepwater regions. The hull is also being utilized for the third project (Payara) FPSO, slated to come on stream in 2024.
“Guyana will create extraordinary long-term value for our shareholders and for the citizens of Guyana,” Hill said.