World banking on Guyana to help keep oil supply stable this year – IEA Director 

Jan 18, 2024 ExxonMobil, News, Oil & Gas

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Kaieteur News – Guyana is listed as one of the countries that will help keep oil output stable this year despite tension in the Middle East and a slowing demand growth outlook.

This is according to Director of the International Energy Agency (IEA), Fatih Birol. “If we don’t see any major geopolitical surprises, I expect this year a comfortable oil market, a more balanced oil market,” Birol said on the sidelines of the WEF’s annual meeting in Davos, according to a Reuters report. Birol added that the Paris-based IEA expects a significant increase in oil output from the United States, Canada, Brazil, and Guyana this year, just as global demand growth slows.

It must be noted that the extremely generous fiscal terms in the lopsided Stabroek Block Production Sharing Agreement (PSA) have been attributed to ExxonMobil and its partners unlocking what is now the most low-cost, high-return resource base of the decade. Speaking at the Bank of America Securities 2022 Global Energy Conference, Chief Executive Officer of Hess Corporation, John Hess had indicated that the economics of the contract allows for the recovery of exploration costs before the corresponding production phase kicks in.

The Stabroek Block PSA has faced significant criticism from various stakeholders. Major concerns raised include the paltry two percent royalty which many argue does not fairly compensate Guyana for exploitation of a non-renewable resource; the costly absence of ring-fencing provisions which allows costs from one oil field to be deducted against the revenues of another; and the permanent stability clause which forbids Guyana from introducing new laws adverse to the oil companies until 2056, barring any extensions.

Minister with responsibility for Finance, Dr. Ashni Singh on Monday during the reading of the $1.146 trillion budget said encouraging accelerated production is integral to government’s plan to, among other things, secure more revenue from the sector to accelerate its development agenda. Towards this end, he said 2023 saw a ramp-up in volumes from the Destiny and Unity production platforms, while the Prosperity FPSO achieved first oil in November 2023. These three facilities are expected to continue their momentum in 2024.

Moreover, Minister Singh said advancements at Exxon’s fourth project in the Stabroek Block called Yellowtail Project is on track for start-up in 2025. With another oil project on stream for 2027 and a sixth in train for 2027, pending regulatory approval, Minister Singh said production could climb well above 1.3 million barrels per day (bpd) beyond 2027. This he said would make Guyana the single largest non-OPEC contributor to global supplies.

Meanwhile, according to the Reuters report, attacks by the Houthis on ships in the Red Sea have forced many companies to divert cargoes around Africa, adding to journey times and costs. The Iran-aligned Houthis say they are acting in solidarity with Palestinians during Israel’s ongoing war with Gaza. Birol noted that so far production has not been impacted by these disruptions. He said that he did not expect a major impact on oil prices, unless one or more major oil producing countries were to get directly embroiled in the conflict.

“I don’t expect a major change in the oil price because we have an ample amount of oil coming in the market,” he said. Brent crude futures /LCOc1 were trading 1.4% lower on Wednesday at $77.21 per barrel, and U.S. West Texas Intermediate crude futures (WTI) CLc1 were down 1.0% at $71.69. O/R.  The IEA expects world oil demand to grow by 1.1 million barrels per day (bpd) in 2024. It expects non-OPEC supply growth to reach 1.2 million bpd next year. The Organization of the Petroleum Exporting Countries (OPEC), forecasts demand growth of 2.25 million bpd in 2024. “Moderate oil prices” would be good for economic growth in the context of high inflation rates, he said. Birol highlighted elections in the United States and India, Middle East tensions, and climate and the clean energy transition as some of the key risks in the year ahead.

Dr. Singh also on Monday revealed that there were 142 lifts of crude oil from Guyana’s three producing oil ships, which amounted to 142 million barrels of oil produced from the Liza Destiny, Liza Unity and Prosperity floating, production, storage and offloading (FPSO) vessels being operated by the ExxonMobil-led consortium in the Stabroek Block. Minister Singh said Guyana received 17 lifts or 17 million barrels. Minister Singh said six lifts were from the Liza Destiny while 11 were from the Liza Unity. Speaking to the revenues for 2023, Minister Singh said the Natural Resource Fund (NRF) received US$1.4B from the sale of Guyana’s 17 lifts. In providing a breakdown, he said US$576.6 million was from the Liza Destiny while US$822.3 million was made from Liza Unity. With respect to royalty payments from ExxonMobil and its partners, he said US$218.1 million was received.

Overall, he said US$1.6 billion in petroleum revenue was deposited into the Fund. At the end of the year, Minister Singh said the overall balance, inclusive of interest income, stood at US$2 Billion. With three oil ships in operation, Minister Singh said it is projected that there will be 202 lifts of crude oil from the Stabroek Block, 25 of which are estimated for government. Consequently, Minister Singh said earnings from the government’s share of profit oil are estimated at US$2.1 billion in 2024, while royalty payments for the year are projected at US$319.9 million. Guyana is therefore expected to earn a total of US$2.4 Billion in oil revenue for 2024. Additionally, based on 2023 deposits, Minister Singh said an estimated US$1.1 billion or $240.1 billion can be withdrawn from the NRF in 2024 and transferred to the Consolidated Fund to support the country’s development agenda.

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• Director of the International Energy Agency, Fatih Birol, geopolitical, major, Market

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