Partners fast-tracking second Liza FPSO

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A model of the FPSO to be used in Guyana - Liza Destiny

ExxonMobil is fast-tracking a second floater project for Guyana’s Liza area development amid suggestions that the next unit will be significantly larger than the 120,000-barrels-per-day Liza-1 unit.

According to an Upstream report, plans for a second floating production, storage and offloading unit on Liza have not been sanctioned yet, but ExxonMobil is moving swiftly with second phase studies, the company’s Guyana country manager Rod Henson told Upstream during a recent industry event in Georgetown.

ExxonMobil is expected to begin front-end engineering and design work on the new project early in 2018, other sources said.

The Liza-1 FPSO will have the capacity to produce up to 120,000 bpd when production begins in 2020, but pre-FEED studies for Liza-2 are pointing to a unit that could be up to twice the size of its predecessor, the same sources said.

ExxonMobil discovered Liza on the huge Stabroek block in 2015 and followed this up with four more successful wells — Liza Deep, Payara, Snoek and Turbot.

US independent Hess, a 30% partner on the block, offered insight into the project when chief executive John Hess made a presentation to a Bank of America Merril Lynch energy forum last week.

Hess lauded the Liza project as “transformational” due to the high quality of the reservoir and low-cost production scenario.

He said Liza-Payara’s recoverable resources are currently estimated at between 2.5 billion and 2.8 billion barrels of oil equivalent and described multi-billion barrels of unrisked exploration upside.

ExxonMobil, Hess and the other 25% block partner, CNOOC Ltd-owned Nexen Energy, sanctioned Liza’s phase one development in June, awarding SBM Offshore the charter for an FPSO, dubbed Liza-1.

The project took a step forward last week when the Bahamas-flagged Tina VLCC tanker arrived for conversion at Keppel Shipyard in Singapore.

The spread-moored FPSO will be served by eight production wells and six water injectors and will also have the capacity to process 170 million cubic feet of gas and 200,000 bpd of water.

ExxonMobil expects to recover 450 million barrels of oil from Liza-1 during its lifespan for capital expenditure of $3.2 billion.

Recent price deflation in the offshore sector means the project enjoys a development cost of just $7 per barrel, with break-even estimated at $35 per barrel.

These statistics are spurring the Stabroek partners forward and have persuaded Hess to put a clutch of assets up for sale to help pre-fund Liza.

John Hess predicted “at least a decade of uninterrupted growth, attractive returns and a rapid cash payback” on the projects.

Hess said the rapid cash paybacks and attractive financial returns” offered by the Liza development are encouraging partners to move swiftly with planning for a second and third phase of development.

He said studies are pointing to a “much bigger ship” and higher estimated ultimate recovery on Liza-2.

Other sources told Upstream that the FPSO is likely to be close to double the size of Liza-1, where topsides will weigh about 12,000 tonnes.

ExxonMobil is understood to be treading a line between following a known route with SBM Offshore — its preferred partner on repeat orders underpinning Angola’s Kizomba development, as well as supplier for Liza-1 — or promoting competition.

SBM wants to find a home for its Fast4Ward-class floater, a newbuild FPSO hull under construction at Shanghai Waigaoqiao Shipbuilding (SWS) shipyard in China.

China’s Offshore Oil Engineering Corporation has been seen as a potential supplier of topsides modules.

The Fast4Ward FPSO was conceived with Brazil’s big pre-salt projects in mind, with a projected topsides weight running to between 30,000 and 35,000 tonnes, but it could equally be used in West African projects or in the conditions presented in Guyana and Suriname, SBM has said.

Upstream has reported that the unit could have oil production capacity of between 100,000 and 250,000 bpd, and storage of 2 million barrels, which compares with the 1.6 million barrels of storage capacity offered by Liza-1.

There were suggestions that ExxonMobil officials may be set to visit China in connection with Liza work before too long.

However, SBM is by no means seen as assured of coasting to another contract at this point, as ExxonMobil has been talking to other potential suppliers during the pre-FEED stage.

Sources suggested SBM’s arch-rival Modec International, for example, has also been approached. One floater source said an FPSO with a capacity of about 200,000 bpd will limit ExxonMobil’s options.

“It must be either a newbuild or you’ll have to pick up one of the last ultra-large crude carriers,” he said.

At this stage, it is unclear if the supermajor has touched base with any Korean shipyards who have experience in building very large FPSOs. The Stabroek partners are also weighing up the relative advantages and disadvantages of opting for a leased or a purchased FPSO unit for the second and third phases of development, according to Hess.

“We are hopeful that we will be able to get a full definition of the second FPSO by the first quarter of 2018… We think this will be coming up for authorisation sooner than most people think,” he said.

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