The European market’s evolving preference for crude oil, amidst changing global dynamics, has led to distinctions in the valuation of Guyana’s crude exports, particularly between Liza, Unity Gold, and Payara crude. Felipe Perez, Head of Latin America Fuels and Refining at S&P Global, and Pat Harrington, Latin America Crude Mortgage Editor at S&P Global, shed light on this emerging trend during a Jan. 11 podcast, Guyana oil: The new crude on the block.
Europe is the primary destination for Guyana crude exports. “Europe, with the sanctions on Russian crude and refined products, had to scramble to replace those barrels at any cost and looking for alternatives that sometimes maybe not necessarily fit very well their refineries,” Perez explained.
Perez noted that Europe has had to make do with various crudes, including Guyana’s Liza, though they ideally seek crudes yielding higher distillates, in line with diesel-driven market demands.
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In this regard, Harrington explained how this preference has influenced the valuation of these crudes. Initially, Liza and Unity Gold, another variant of Liza crude produced from Liza 2, were similarly priced. The divergence in pricing became apparent when European refiners demonstrated a preference, leading to Unity Gold pricing above Liza.
“One of the reasons that we did not launch an assessment of Unity Gold until August 1 of 2023 is that Liza and Unity Gold were the same price until the flows started primarily going to Europe and European refiners really started showing their preferences. And that’s when you saw Unity Gold starting to price above Liza, and it made sense for us to do an assessment,” Harrington said.
The introduction of Payara crude, with an API gravity of 28 and sulphur content of 0.58, marked a further distinction. Despite its heavier nature compared to Liza’s 32 API, Payara crude is gaining a reputation for having a greater distillate yield, a feature highly coveted by European refiners.
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“When we first started assessing it, that didn’t happen because it was a new crude, it was unknown, and it started trading at a very deep discount to the other grades. But it has recently really shot up and is now on par with Liza. And, you know, it looks like some of those initial projections might come to fruition and Payara may be the most expensive of those crudes precisely for that distillate yield,” Harrington stated.
While some of the Guyana crude still heads to the U.S. West Coast, Europe remains a dominant buyer and, therefore, a significant influencer in the valuation of Guyana’s crude.
ExxonMobil is the operator of the Stabroek block, where the Liza 1 and 2, and Payara projects are operating. Payara, the most recent project, started up in November 2023. Total production is approximately 550,000 barrels per day.
