At least half a dozen traders from Houston, Geneva and London are set to arrive in Guyana this weekend to bid on some of the first oil cargoes to be produced by the tiny South American nation.
“After careful consideration, the Department of Energy (DE) has decided to initiate a conversation with very few selected companies for a potential placement of the first 3 cargoes of its entitlement,” DE Director, Dr. Mark Bynoe told OilNOW.
He said this is not inconsistent with the Petroleum Agreement that allows the Guyana Government to sell its entitlement, if it so wishes, to the Operator. “The DE has taken the decision to go wider than this in the short-term,” Dr. Bynoe stated.
Bloomberg reported on Friday that the Guyanese government last week sent a letter to refiners around the globe inviting them to bid for 3 million barrels of Liza Blend crude, the light-sweet oil it will start exporting next year.
Bloomberg said the catch is that the buyer must take the unusual role of handling “all operating and back office responsibilities” related to exporting the crude, according to a document seen by the news service.
On top of that, the bids must be offered “face to face” — in the country’s capital of Georgetown — starting Monday. Bloomberg said such a voyage is rare for traders, who do most of their business on instant-message platforms and by phone.
Bloomberg said the three cargoes being offered are an appetizer for a bigger prize. After this sale, part of an “incubation and launching” phase, Guyana plans to sell its crude via long-term contracts.
At a press conference in November, Dr. Bynoe said Guyana’s crude is expected to be sold FOB – to the buyer at the point of the FPSO with the buyer being responsible for the shipping, insurance and other requirements. “The Government through a marketing agent is projected to sell its share of exported crude on a fee for barrel basis,” he had said.
The Liza field is scheduled to start production this month and will reach 120,000 barrels a day at peak next year. Guyana’s first lift is expected around February/March 2020.
By 2025, production is expected to ramp up to 750,000 barrels daily. The country, a third of the size of Texas, is poised to produce as much oil as Venezuela in five years. Oil exploration takes place off the coast, in the blue waters of the Atlantic Ocean, in ships turned into oil platforms.
Guyana’s output boom comes at a trying time for global oil markets. The U.S., Brazil and Norway are all growing production even as the Organization of the Petroleum Exporting Countries and its allies cut their own output in a bid to curb a global supply surplus. Guyana’s Liza blend has similar characteristics to grades produced by Nigeria and Angola and is also seen as an alternative to U.S. oil.
