Despite the challenges of the COVID-19 pandemic and growing pains related to oil production in a new area, analysts say Guyana offshore activities will remain robust and continue to grow.
Speaking on a podcast focusing on upstream developments offshore Guyana and Suriname, analysts at IHS Markit said the current production size in the basin may not accurately indicate the future significant importance that these countries will have. At present, oil production is ongoing at just one development – Liza Phase 1 – at Guyana’s Stabroek Block. The 120,000 barrels per day project got underway in December 2019.
Just months later, COVID-19 began spreading globally leading to widespread lockdowns and a fall in oil prices, triggering shut-ins and a slew of bankruptcy filings in the oil and gas industry. But so far, the pandemic has not fundamentally changed the outlook for Guyana.
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“I would say from what I have heard that in general, COVID is not causing a lot of delays,” said Isaac Nuti, IHS Markit Senior Technical Researcher.
He said there are some other things that may come in and cause some delays at certain times or impact the economics, but in general, when looking at these assets with their breakevens in the $30 range, they are going to find success.
“Oil is going to find its way to the market one way or another,” Nuti stated.
Looking at the gas handling challenge the Liza 1 project has faced which has led to extra flaring, he said, “It’s just a new country. They’re going to have some growing pains that come on and they’re going to learn that it’s extremely promising.”
Issues with the gas compressor system on the Liza Destiny FPSO had seen production drop earlier this year, coming down to as low as 30,000 barrels of oil per day at one point, as Stabroek Block operator ExxonMobil scrambled to fix it. The system came back online in July with over 90% of the produced gas being injected.
Nevertheless, the analysts say the country has reached a development take-off with multiple projects coming online and around a dozen FPSOs targeted.
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“So far, the successes have been there and economically things are sound enough that they will continue on into the future,” said David Vaucher, Associate Director at IHS Markit.