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Monday, June 14, 2021

Basins with high-quality, low-cost discoveries will reign supreme

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Analysts around the world have been crunching numbers and closely examining scenarios that provide insight into the future of oil and gas in a world that is moving towards renewable energy sources. The predictions vary, often considerably, for peak oil and price scenarios over the next three decades. However, one thing most analysts agree on is that basins with high-quality low-cost hydrocarbon resources will outcompete those with resources that have higher carbon intensity and cost more to develop.

“Projects with lower carbon footprints are increasingly attractive, as are investments that decarbonise existing assets,” says consultancy group Wood Mackenzie.

New oil producer Guyana has high-quality, light sweet crude with low sulphur content, and this is in high demand. The country is said to be in an ‘advantaged position’ since the breakeven prices to develop its vast oil fields are relatively low.

Demand for Guyana’s low-sulphur crude will grow in 2021, expert says

“Guyana’s reservoirs rank among the highest quality in the world,” says John Hess, CEO of Hess Corporation, a 30% stakeholder in the Stabroek block, along with operator ExxonMobil (45%) and China’s CNOOC (25%). “The reservoirs are relatively shallow with no salt, so wells can be drilled faster than other deepwater basins in the world.”

The Liza Phase 1, 2 and the Payara Developments have a Brent breakeven oil price of between $25 to $35 per barrel. This is well below the average breakeven price of $50 per barrel for all unsanctioned projects, according to a comprehensive analysis done by Rystad Energy last year.

“Exploration budgets may be smaller and practiced by fewer companies, but high-quality, low-cost discoveries can outcompete higher-cost, more carbon-intensive discovered resources,” WoodMac said. “This means more focused exploration than in the past and, by extension, probably fewer exploration wells.”

Suriname offshore breakeven expected to go down with more discoveries

Exploration offshore Guyana has intensified this year as ExxonMobil probes new wells and further investigate existing discoveries where additional hydrocarbon resources could potentially be found.

“Besides Uaru-2, three other discoveries – Liza Deep, Tripletail and Yellowtail – have had deeper penetrations into the Santonian,” S&P Global Platts said in a report. That deeper interval is found not only at Stabroek Block, but also extends east into neighboring Suriname.

“In the middle of this booming exploration activity, Guyana is mulling over a new bidding round that could see the light of day in 2022,” Rystad Energy pointed out. “Drilling results will be eagerly watched by the services industry, as more exploration success off Guyana would translate into welcomed opportunities after the market slump of 2020.”

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