Guyana delivering ‘best rocks for best returns’ as global oil supply set to tighten

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With the United States facing economic slowdown thereby fuelling recessionary fears and the Russia-Ukraine war in its sixth month, Hess Corporation’s Chief Executive Officer (CEO), John Hess, said the company expects the global oil market to get tighter.

During his company’s recent earnings call for the second quarter of 2022, Hess said the Board has observed that the price for Brent crude oil has gone from a peak of US$120 per barrel to a low of US$95 per barrel then slightly up to approximately US$105 per barrel on Wednesday. However, the physical oil market, he said, remains tight.

The CEO said, “To buy a physical Brent cargo, crude buyers today have to pay a cash premium of at least several dollars per barrel. We are therefore in unprecedented times for the financial markets and for the oil markets. In both markets, we have experienced a demand shock and a supply shock…”

In terms of global oil demand, Hess said there has been a V-shaped recovery due to various government financial stimulus programmes and accommodative monetary policies. He shared with listeners that global oil demand has returned to pre-COVID levels of approximately 100 million barrels per day.

Guyana low-cost, high-quality oil resources remain vital to Hess portfolio

On the other hand, global oil supply has seen more of a U-shaped recovery. He expounded that global oil supply has been struggling to keep up with demand, predominantly as a result of more than five years of industry under-investment.

“As a consequence, we have seen seven consecutive quarters of draws on global oil inventories so much so that global oil inventories today are approximately 400 million barrels less than pre-COVID levels,” expressed Hess.

As he looks to the second half of the year, the Hess Corporation CEO anticipates global oil demand will increase by 1 million to 1.5 million barrels per day as a result of China’s economy reopening after COVID lockdowns and increasing air travel.

In terms of global oil supply, while shale producers have enabled the US to grow oil production by approximately 1 million barrels per day in the last year, Hess said there is very little spare capacity left in the world.

As Guyana ramps up production, IEA warns of coming global oil supply shock

With demand growing, supply lagging and the potential for further sanctions on Russian oil exports, Hess said he, therefore, expects a tight global oil market to get even tighter over the balance of the year.

In a world that needs reliable, low-cost oil and gas resources now and for decades to come, Hess said his company remains in a very strong position offering a highly differentiated value proposition for investors.

Guyana low-cost, high-quality oil resources remain vital to Hess portfolio | OilNOW

By investing only in high-return low-cost opportunities, the best rocks for the best returns, the CEO said his company has built a balanced portfolio focused on Guyana, the Bakken, deepwater Gulf of Mexico and Southeast Asia with multiple phases of low-cost oil developments coming online in Guyana.

With this in mind, Hess said his company remains well positioned to deliver highly profitable production growth of more than 10% annually over the next five years.


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