Latest update December 23rd, 2024 3:40 AM
US$9B Yellowtail Project is the best on the planet, has “outstanding economics” that works in our favour – Hess
By Kiana Wilburg
Kaieteur News – Even though the Yellowtail Project, the fourth to be developed in the Stabroek Block is poised to see its costs going beyond US$9B, it is still regarded by Hess Corporation as having “outstanding economics” that will work in the company’s favour.
Hess Corporation CEO, John Hess
The American oil producer, which holds a 30 percent stake in the Stabroek Block, made this disclosure during its 2021 third-quarter earnings call on Wednesday last.
Specifically, the company’s Chief Operating Officer (COO), Greg Hill, disclosed that the final numbers have not been decided for the project, as this would only follow approval by the government. Be that as it may, it has predicted that inflationary pressures on the market will push the cost beyond the preliminary estimate of US$9B. Hill was keen to note however that the “superefficient” provisions of the Stabroek Block Production Sharing Agreement (PSA) will allow for all expenditure to be recouped.
Hill noted too that the economics of the project work in the company’s favour as it has a breakeven of US$25 to US$32 a barrel. Taking these factors into consideration the COO said, the Yellowtail Project is, “One of the best projects on the planet…”
Chief Executive Officer, John Hess agreed with Hill’s perspective as he said, “This development has simply outstanding financial returns, some of the best in the industry…So, it’s outstanding economics. Yes, the costs are higher, but the resource we’re recovering is much higher, and these are some of the best economics in the industry.”
As regards the production capacity of the project, Hill said it is poised to be at 250,000 barrels of oil per day but noted that it is not unusual to see a 10 to 20 percent increase after the relevant data has been gathered.
COO for Hess Corporation, Greg Hill
He said, “I don’t think that’s an unreasonable expectation for future vessels and I think the second point is, remember, these increases in capacity are typically achieved for very low investment. And obviously, with PSA, the rapid cost recovery, these are very profitable things to do.”
The operator of the Stabroek Block has explained via the project’s Environmental Impact Assessment (EIA) that the costs for developing Yellowtail are expected to be higher since there would be a greater number of development wells and associated drilling costs when compared to its Payara project, which will also cost Guyana $1.8 trillion.
Despite the astronomical costs, Exxon believes that the project should be supported as it would generate benefits for the citizens of Guyana in several ways, which would otherwise not be there in the absence of the project.
According to project documents, Yellowtail will consist of drilling approximately 41 to 67 development wells (including production, water injection, and gas re-injection wells); installation and operation of Subsea, Umbilicals, Risers, and Flowlines equipment; installation and the operation of a Floating, Production, Storage and Offloading (FPSO) vessel in the eastern half of the Stabroek Block; and— ultimately—project decommissioning.
Initial production is expected to begin by the end of 2025–early 2026, with operations continuing for at least 20 years.
The project is expected to employ up to 540 persons during development well drilling, approximately 600 persons at the peak of the installation stage, and 100 to 140 persons during production operations.
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