Cost to produce oil in Guyana second cheapest in the world – new int’l oil report

Jun 10, 2024 News

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Kaieteur News – The cost to produce a barrel of oil in Guyana is among the lowest, said the International Energy Forum (IEF) and S&P Commodity Insights in a June 2024 report.

The report titled, “Upstream Oil and Gas Investment Outlook” sheds light on the changing dynamics of global oil production costs, with particular emphasis on Guyana’s position as a cost-effective producer in the industry. According to the findings of the report, the cost of oil production worldwide has experienced an increase. The report highlights that the majority of new oil supplies can be extracted at an average cost of US$60 per barrel Brent or less, marking a US$10 rise from assessments made in 2021.

Among the regions identified for their competitive production costs are Guyana, the Middle East, and West Africa. The report reveals that the Middle East boasts the lowest average breakeven price at approximately US$30 per barrel Brent, followed closely by Guyana with a breakeven price of US$36 per barrel Brent. In contrast, the average new well in the United States requires around US$57 per barrel Brent. “The highest end of the cost curve includes heavy crudes in Canada and Venezuela,” it was stated.

Despite the varying cost structures across regions, the global supply stack remains relatively flat, with a significant portion of the supply expected to break even between $50 and $60 per barrel of Brent crude. This delicate balance underscores the importance of strategic planning and investment in oil extraction and exploration projects.

“The overall global supply stack is relatively flat, with the majority of supply expected to break even between US$50/bbl and US$60/bbl. Both conventional and tight oil projects, including some of those at the higher end of the cost curve, will be needed to meet demand and offset base declines in the upcoming 10-15 years,” it was explained.

Moreover, the report also states that more than 60% of the increase in upstream capex spent between now and 2030 will come from the Americas. North America is expected to be the largest driver of capex growth during this period, while Latin America will play an increasingly significant role in non- Oil Producing and Exporting Countries (OPEC) supply growth, particularly for conventional crude with expansions planned for Brazil and Guyana.

Kaieteur News recently reported that with production now at some 645,000 barrels per day (bpd) up from 98,000 bpd from its first full year of production, Guyana is now ranked as the third highest global supplier of crude outside of the established OPEC. This is according to a published report by the US’ Energy Information Administration which said that “Guyana increased crude oil production by an annual average of 98,000 b/d from 2020 to 2023, making it the third-fastest growing non-OPEC producing country during this period.”

The United States and Brazil take the top spots respectively, while Guyana’s present production surpasses that of Norway, China, Mexico, Canada, Argentina and Qatar, among others. Crude oil production has been the largest contributor to Guyana’s economic growth in recent years. The most recent estimate of recoverable oil and natural gas resources is more than 11 billion oil-equivalent barrels, and developers are still exploring the country’s offshore waters, the report re-iterated.

The first significant oil discovery in offshore Guyana was made by ExxonMobil in 2015 at what is now the Liza project in the Stabroek block. Since then, ExxonMobil and its partners, Hess and the China National Offshore Oil Corporation (CNOOC), have made more than 30 additional offshore oil and natural gas discoveries within the Stabroek block. Guyana’s oil production comes from three floating production, storage, and offloading (FPSO) vessels: Liza Destiny, Liza Unity, and Prosperity. These vessels produce oil and natural gas from the Liza and Payara projects. All associated natural gas is reinjected into wells to support its production and used as on-site fuel. A proposed project would bring associated natural gas onshore to processing facilities via pipeline.

Currently, the block’s partners plan for the combined production capacity to reach approximately 1.3 million b/d by the end of 2027, with plans to develop three additional projects: Yellowtail, Uaru, and Whiptail. Once realized, the increased production would make Guyana the second-largest crude oil producer in Central America and South America behind Brazil, according to EIA. Additionally, it was noted that the future of the corporate partnership at the Stabroek block is uncertain, since Chevron’s acquisition of Hess, which holds a 30 percent stake in the Stabroek block, may face delays due to arbitration filings by existing block partners ExxonMobil and CNOOC, which claim preemption rights over Hess’s stake in the block. ExxonMobil holds a 45 percent interest in the Stabroek block, and CNOOC holds a 25 percent stake.

 

 

 

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• Argentina and Qatar, barrel Brent, Canada, China, Energy Forum, Guyana, Mexico, Norway

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