Former Trinidad and Tobago Minister of Energy and Energy Affairs, Kevin Ramnarine, says predicting how oil reservoirs will behave is often difficult and this along with other factors can impact projected daily output. As such, he believes that it is prudent to base forecasts on best and worst case scenarios which may be more in keeping with what is likely to occur when production is underway.
In a recent interview with OilNOW in Guyana’s capital, Georgetown, Ramnarine said both the South American country and its neighbor Trinidad and Tobago should exercise caution in predicting production figures.
“We have to be cautious as a country; as Guyana and Trinidad about optimism because we had a situation in Ghana, for example, where when the Jubilee field was being developed there were many predictions about volume. At that time…when Jubilee came online the prices were high, then prices fell and Ghana also never realized the volumes that they were told would be realized,” he said.
Ghana joined the roster of African oil producing countries when it began production from the Jubilee field in December 2010, with reserve estimates ranging from 400 million to 1.8 billion barrels. Tullow Oil, the operator, set plateau production of 120,000 barrels for 2011 and later to mid-2012, but missed both targets because of underperformance at the wells.
“It has also happened in Trinidad. When the Angostura field was discovered a lot of numbers were being put out about reserves and production and those numbers never materialized because it is very difficult to predict with certainty what is in the sub-surface and it’s difficult to predict how the sub-surface will behave; the reservoir characteristics and so on, will behave over time,” he stated.
The former Energy Minister said he has done his own study based on the Production Sharing Agreement (PSA) between Guyana and ExxonMobil and his numbers fall within the range of what is being estimated when oil production begins in 2020.
“My numbers tend to fall pretty close to what I heard from the government and what we hear from Rystad Energy…It looks like in the first four years Exxon is going to be in capital recovery mode and then in the fifth year this is when you are going to see the sudden jump in government revenue as a result of Exxon having recovered the bulk of the CAPEX,” he said.
At the average market price of US$50 per barrel, Guyana will earn around 855,000 US dollars from the first day of oil production. This tabulation is based on a 120,000 barrels per day production rate, and the 2% royalty and 50% profit oil set out in the terms of the PSA. Guyana’s share of oil, including royalty, will amount to 17,100 barrels per day for about the first 5 years of production. This is expected to increase after ExxonMobil and its partners recover their initial investment, which would see the daily revenue of 855,000 US dollars climbing considerably.
With multiple developments set to come on stream towards the end of the next decade, estimated daily production by 2026-2027 stands at 500,000 bpd (ExxonMobil), 600,000 bpd (Rystad) and 700,000 bpd (Wood Mackenzie). At the most conservative estimate, Guyana is set to earn significant revenue as it positions itself as the next global oil and gas hotspot.