Saturday, March 25, 2023

Guyana expected to remain in good position to drive future oil production – IHS Markit

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The South American country of Guyana, buoyed by consistent exploration success, is expected to remain in a good position to drive future hydrocarbon production while continuing to attract foreign investments.

Exploration activity in Guyana has been concentrated in the Stabroek block with ExxonMobil and its partners discovering more than 6 billion barrels of oil from 14 fields.

While ExxonMobil has had great exploration success in the region, another company along with its partners has recently been successful in their own, independent exploration activity as well.

Tullow Oil, along with its partners, Eco Atlantic, Total and Qatar Petroleum, made the Jethro-Lobe and Joe discoveries in the Orinduik block in August/September of 2019.

IHS Markit says these discoveries are important for Guyana as they are the first outside of the Stabroek block, proving that the resource potential stretches beyond one field with more potential discoveries on the horizon. The discoveries offer operators portfolio diversity and attractive returns in a challenged oil price environment.

Benchmarking the future fields across the Stabroek and Orinduik blocks

Upon comparing the Net Present Value (NPV) at 10% discount and base case oil price of US$65/bbl, of all the fields in the Stabroek and Orinduik blocks, the fields in Stabroek currently showcase a higher NPV. The NPV for the Liza and Turbot fields lead in this metric with an IHS Markit valuation of US$17 billion and US$5 billion respectively.

When fields within these two blocks are compared on an oil price breakeven metric, all the fields lie within a wide range of US$25/bbl to US$62.5/bbl. The breakeven price estimate using IHS Markit’s valuation for the Liza field is US$26.78/bbl and for the next best, the Snoek field, is US$29.92/bbl.

The total capital investments for the development of the fields in the two blocks is expected to be close to US$63 billion over the life of the field as per IHS Markit valuation analysis. The majority of this investment is directed towards the Liza field, followed by Turbot, Ranger and Pluma.

All the fields that are expected to be developed and brought online within the Stabroek and the Orinduik blocks showcase a positive internal rate of return (IRR). The IRR for the fields ranges from 10% to 52%, with the Liza field leading on this parameter.

The after tax cashflow for the fields within these two blocks is expected to be positive, with a range between US$1.9 billion to US$59 billion.

IHS Markit said this is another indicator that the investments made in Guyana will lead to positive returns for the operator and all the partners involved in the development of these assets.

Norway-based Rystad Energy estimates that the Guyana government will receive more than US$120 billion in revenue from development of the 14 discoveries made so far at Stabroek Block.

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