Latest update September 10th, 2024 12:59 AM
Aug 12, 2024 News
…Cost to produce in Guyana among the cheapest in the world
Kaieteur News – With the cost to produce oil in Guyana being among the cheapest in the world, ExxonMobil Guyana Limited (EMGL) and its Stabroek Block partners are guaranteed to make a profit even if oil prices drop by half.
ExxonMobil Guyana is the operator of the Stabroek Block with a 45% interest, while Hess Guyana Exploration Ltd. holds 30% interest and China National Offshore Oil Corporation (CNOOC) Petroleum Guyana Limited holds 25% interest. Guyana has emerged as one of the fastest growing economies in the world owed to the oil production offshore.
Bloomberg’s Kevin Crowley in a recent article stated that Guyana has become the bedrock of Exxon’s post-Covid corporate revival. It was stated too, “… (The Stabroek Block) costs less than US$35 a barrel to produce, making it one of the most profitable outside of OPEC. With crude currently trading at US$85 a barrel, the oil field would make money even if the transition from fossil fuels caused demand to collapse and prices dropped by half.
Kaieteur News had reported that 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.
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.
Last month, this publication reported that according to Phillip Rietema, Vice President and Business Service Manager at EMGL, the company’s Guyana projects compete internationally and are some of the bests in the world. During an episode of the local Energy Perspectives podcast, Rietema addressed price fluctuations in the industry, and pointed out that these projects are designed to withstand market volatility. He said, “So these projects, they all have costs of supply under US$40 a barrel…”
According to an August 2024 SEC filing by Hess, the average selling price for the Guyana crude is around US$82. Exxon is currently producing over 600,000 barrels per day (bpd) from just three projects in the Stabroek Block (Liza Phase 1, Liza Phase 2 and Payara). 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.
The first significant oil discovery in offshore Guyana was made by in 2015 at what is now the Liza project in the Stabroek block. Since then, ExxonMobil and its partners, have made more than 30 additional offshore oil and natural gas discoveries within the Stabroek block.
In addition to Exxon’s low breakeven price for its Guyana operations, the company secured a ‘sweetheart’ deal back in 2016 for the oil block. The Production Sharing Agreement (PSA) for the Stabroek Block gives Guyana an industry-low 2% royalty. Also, Guyana shares revenue with ExxonMobil after the company deducts 75 percent towards the costs incurred to develop the resources in the Stabroek Block. After the 75 percent is deducted to pay back the oil company, Guyana then shares 50/50 of the 25 percent remaining with Exxon as profits. This amounts to 12.5 percent of profits from the operations.
Moreover, ExxonMobil Corporation and fellow U.S. oil giant Chevron Corporation are currently embroiled in a legal battle over Guyana’s lucrative Stabroek Block. Chevron has agreed to acquire Hess Corporation in a deal valued at US$53 billion. This acquisition would grant Chevron access to Hess’s 30% stake in the Stabroek Block, a prospect that has sparked tension with ExxonMobil. Exxon asserts that it holds the right of first refusal on Hess’s share in the Guyana oil block, a claim that has led to the ongoing court dispute. The case is scheduled to continue next year.
Mineral and oil rich country borrowing to feed, clothe and house its citizens.
Sep 10, 2024
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