ExxonMobil, one of the world’s largest publicly traded oil and gas companies, and operator of the Stabroek Block in Guyana, has been aggressively pushing back on cost pressures for its projects offshore the South American country. Bringing this to the attention of investors at Barclays CEO Energy-Power Conference on Thursday was Hess Corporation’s Chief Executive Officer (CEO), John Hess.
Following his extensive presentation on his company’s performance to date, he was asked to comment on the effects of cost pressures on projects in the Stabroek Block where Hess holds a 30% working interest.
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Hess said, “First of all, ExxonMobil has been a world-class operator and has strategic relationships in the supply chain with SBM [Offshore] and also MODEC and other suppliers. So the first four ships were committed at the bottom of the cost cycle and those costs have been locked in. The fifth ship for the Uaru Project started to have some cost pressures but Exxon pushed back… and as a consequence, that ship still has a US$35 per barrel Brent breakeven.”
The CEO said Exxon, which operates the Stabroek Block, is staying ahead of the cost curve and working aggressively with the contractors to keep costs down.
“You got to remember, in the offshore deepwater industry, moving from discovery to first oil is about 10 years. Exxon’s strategic relationships reduced that to three years from the time of investment decision to first oil. So, while we are seeing some cost pressures, Exxon is doing a great job of pushing back on that,” the CEO stated.
In fact, he said it is because of Exxon’s top-tier negotiation skills that the fifth ship which was contracted in a higher inflationary environment has a breakeven of US$35 Brent. He said this speaks volumes of the financial opportunities the partners have ahead of them in Guyana irrespective of the market shocks.
In the Stabroek Block spanning 6.6 million acres, Exxon which leads a consortium that also consists of CNOOC Petroleum Guyana Limited, has made over 30 significant discoveries which hold more than 11 billion barrels of gross discoverable resource. The discoveries are some of the industry’s largest in the past decade. The reservoirs also rank among the highest quality in the world with high porosity and permeability that are expected to deliver very high recovery factors and production rates.
With such stellar characteristics, Hess believes Guyana will remain a transformational investment opportunity.
