Developing Stabroek Block to cost Guyana over $1 trillion in next 3 years

Jul 15, 2022 News

Kaieteur News – The oil and gas industry is often referred to as a capital intensive industry and according to recent forecast, the development of the Stabroek Block is expected to cost the country in excess of a trillion dollars to be expended over the next three years.

This information can be gleaned from the most recent Financial Statements and accompanying notes for Stabroek Block Operator, Esso Exploration and Production Guyana Limited (EEPGL).

Under its capital commitments listed in the statements prepared for issue in April last, EEPGL has committed to spend some $489,412,563,110 for its 45 percent working interest in the block to be expended between 2021 and 2024.

According to the Financial Notes, last year, the company would have committed a total of $235.7B. This year, EEPGL has committed some $196.3B, while next year some $38.8B has been earmarked and another $568.3M for 2024. It would mean that EEPGL has committed for Capital Expenditure between 2021 and 2024 a total of $498.5M for its 45 percent share. As indicated in the documents, the figures represent the amount for the working interest held in the Stabroek Block. As such, it would mean that the financial capital commitment for the partner with the second largest share—30 percent—Hess Petroleum Exploration Guyana Limited, for the same period would be some $326,275,042,074.

According to the projections, Hess last year was responsible for $169B of the committed spending while this year $130.8B has been earmarked. As it relates to next year and the following year, Hess would be responsible for 25.8B in 2023 and $378.8M in 2024. CNOOC Petroleum Guyana Limited which holds the remaining 25 percent share would as such, be responsible for the remaining $271.9B in spending over the period bring the total spending on Capital commitments for developing the Stabroek Block during that time to just about $1.1T. With the installation of the second oil field completed earlier this year, it would mean that the bulk of the spending would be directed towards the development of the Payara and Yellowtail oil fields.

Guyana currently has two Floating Production Storage and Offloading (FPSO) units and is currently producing crude oil from the Stabroek Block—the Liza Destiny and Liza Unity and a third, is currently under construction. That FPSO named the Prosperity will be used to produce the Payara development and is the largest of the first three production vessels to be put into operation in Guyana with a capacity of 220,000 barrels per day. The FPSO will be spread-moored in water depth of about 1,900 meters and will be able to store around 2 million barrels of crude oil. The project is part of the Payara development, which is the third development within the Stabroek Block, located 200 kilometers offshore Guyana.

According to recent financial statements filed by the oil companies, in excess of $94B has already been deducted as part of the 75 percent cost oil recovery, to repay expenses incurred by the oil companies. According to statements filed by Hess Guyana Exploration Limited, in 2020 the first year of oil production in Guyana, it turned over $131,66,534,497 ($13.2B) while the following year, a sum of $14,834,549,944 ($14.6B). Collectively, it would represent $28,001,084,441 ($28B) over the two years being set aside by Hess for the Prosperity vessel.

The monies are reflected as advances to operator in the company’s statement of financial position for the two years.

SBM Offshore the Dutch Floater Specialist that secured the contract for the Prosperity, in addition to the Unity and Destiny had disclosed that the vessel which will be used in the Stabroek Block’s Payara Project will cost US$1.05B (over GYD $200B). SBM at the time of the announcement had said the financing was secured from a consortium of 11 international banks while adding that it expects to draw the loan in full, phased over the construction period of the Prosperity Vessel. With regard the fourth project—Yellowtail—that project was initially pegged at approximately US$9B but it has now jumped to US$10B. The company’s fourth and largest project in the Stabroek Block is expected to produce approximately 250,000 barrels of oil per day starting in 2025.

ExxonMobil Upstream President, Liam Mallon, following the Formal Investment Decision for that project had said, “Yellowtail’s development further demonstrates the successful partnership between ExxonMobil and Guyana, and helps provide the world with another reliable source of energy to meet future demand and ensure a secure energy transition.”

He added, “We are working to maximise benefits for the people of Guyana and increase global supplies through safe and responsible development on an accelerated schedule.”

Kaieteur News understands that Yellowtail’s production from the ONE GUYANA FPSO will develop an estimated resource of more than 900 million barrels of oil. The US$10 billion project will include six drill centres and up to 26 production and 25 injection wells.

ExxonMobil’s ongoing offshore exploration in Guyana has discovered a recoverable resource of more than 11 billion oil-equivalent barrels. The company anticipates up to 10 projects on the Stabroek Block to develop this resource.

The Liza Phase One development, utilising the Liza Destiny FPSO, began production in December 2019; its production capacity is expected to increase to more than 140,000 gross barrels of oil per day following production optimization work currently under way.
The Liza Phase Two development, utilising the Liza Unity FPSO, began production in February 2022 and is expected to reach its production capacity of 220,000 gross barrels of oil per day later this year as operations are safely brought online. The third development on the block at Payara is on track for production startup in 2024, utilising the Prosperity FPSO with a production capacity of approximately 220,000 gross barrels of oil per day.
At least six FPSOs with a production capacity of more than one million gross barrels of oil per day are expected to be online on the Stabroek Block in 2027, with the potential for up to 10 FPSOs to develop gross discovered recoverable resources of more than 10 billion barrels of oil equivalent.