Political turmoil in South America’s newest oil producing nation Guyana, coupled with falling oil prices and the COVID-19 pandemic will delay Final Investment Decisions (FIDs) for offshore projects by several months, according to Norway-based energy research and business intelligence company, Rystad Energy.
“In a coronavirus-free world the current political turmoil would have resulted in a 3 to 6-month delay in Final Investment Decision. However, now we believe that FID would mostly slip into Q3, Q4 given price uncertainty,” Schreiner Parker, Rystad Energy’s Vice President for Latin America and the Caribbean, told OilNOW on Tuesday.
Guyana’s Department of Energy said in February that review of the Field Development Plan for the 220,000 barrels per day Payara Development Project at the Stabroek Block was progressing well with approval likely to come after the country’s March 2 elections.
“The Department of Energy is aiming to be able to recommend a position to its minister on the FDP by March 2020,” Dr. Mark Bynoe, Director of the Department of Energy had told reporters.
Payara would be the third development at the Stabroek Block where US oil major ExxonMobil is operator. The company is also looking to move ahead with its fourth development on the block at Hammerhead. These projects will follow the already operational Liza Phase 1 development, and the already approved Liza Phase 2 for which production start-up is expected in 2022.
A closely contested elections that took place on March 2 in Guyana still has no winner. Allegations of electoral fraud have pushed the international community to denounce a tabulation process which it says cannot provide a credible result and the United States has threatened sanctions if a government is put in place under these circumstances.
Parker said thinking about any FID happening in the first two quarters in Guyana “is probably not very realistic because of (a) the political turmoil and (b) the price uncertainty that is existing.”
“So not necessarily one project specifically, but we are just saying any FID is probably going to be pushed to the second half of the year,” he reiterated.
Oil production got underway in Guyana last December at the 120,000 barrels per day Liza Phase 1 development and is the first of multiple projects offshore that will see production ramping up to more than 750,000 bpd by 2025.