The Crude Report: Guyana sweet on Liza

Author Argus

Earlier in August, the third lift of Guyana’s Liza crude was loaded from the ExxonMobil-operated Stabroek block.

Guyana received $46/bl for its share, $11/bl more than the second lift back in May. This episode of The Crude Report, featuring reporter Monica Rojas Hidalgo, takes a look at Guyana’s promising future as an oil exporting country and expectations from its recently-elected government.

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Transcript

Alex: Hello, and welcome to the Argus Crude Report, a podcast series on global crude oil markets. This is Alex Endress for Argus Media. I cover the US Gulf coast crude market for Argus, but today, we're chatting about Guyana, an up and comer in the Latin American oil world.

After several large discoveries by ExxonMobil, the company has estimated Guyana's recoverable resources to be more than 8bn boe. A US independent producer has also touted the country's Liza field with breakeven cost around $35/bl. While the fundamentals point to a bright future, the country's latest challenge has been political with two parties contesting the most recent election and claiming victory for themselves. But the dispute was recently resolved in favor of the People's Progressive Party shaking up the country's burgeoning oil market. So, here with me is Monica Rojas Hidalgo – she's the Argus crude reporter covering Latin American crude oil markets. Welcome, Monica.

Monica: Hi, Alex. Thanks for having me.

Alex: Yeah. So, Monica, introduce us to Guyana. When did the country begin its crude oil production and what are its current levels?

Monica: So, Guyana starts oil production in the offshore Stabroek field in December of last year, which was ahead of schedule. The field is operated by ExxonMobil in consortium with Hess and Chinese state-owned CNOOC unit Nexen, which in late August were producing about 85,000 b/d, which is falling from 100,000 b/d a month earlier, and it's still shy from the 120,000 b/d capacity of the FPSO Liza Destiny. So, peak production was actually supposed to have been reached in March and then it was targeted for August, but continued technical problems with gas compression that started in late May have forced the timeline to move again.

Alex: What type of crude are we expecting from you know, this Liza field in Guyana? How does it compare to what we see in the rest of the world?

Monica: So, the crude production is medium sweet Liza crude. It sits at about a 32.1° API and 0.51pc sulfur, so it's very similar to like a Brazilian Lula or Trinidad's Calypso crude. But there have been other discoveries of crude in Guyana that aren't in production yet. Tullow and its consortium found heavy sour crude last year in the Orinduik Block, so there could be more different qualities coming out of Guyana. We just don't know yet.

Alex: And where does this Guyanese Liza crude go? You know, who's interested in buying this medium sweet crude?

Monica: So the inaugural cargo landed on the US Gulf coast actually for processing at an ExxonMobil facility. Since then, the crude has also gone to the US West coast, to China, the Bahamas, France, and most recently Italy. The crude often goes to the Panama Canal, which facilitates travel to either Asia or the US West Coast.

Alex: And you know, as we kind of talk about Guyana and its changing government, how do we think that could affect its current levels and future oil production?

Monica: So current production shouldn't be too affected by the changing government, but the same can't be said for future production or future investment in Guyana in general. The new government has said in the past that it plans to increase royalties of production sharing contracts because it thinks that those agreed upon by the previous government were unfair and that Guyana...the government and its people weren't getting a big enough slice of the pie. The new government already shook the market a bit when in August it scrapped its tender seeking a crude marketer for its share of the Liza production, which it gets as part of the production sharing agreement with Exxon, but they never renewed it the same month. So Guyana is now saying that they'll have a marketer picked out by October, which is in time...and gives the marketer time to market its next oil lift, which is going to happen in November. So, this will be the fourth oil lift by the Guyanese government from their production sharing. The previous government had actually awarded the first three of its entitlements to Shell in a restricted tender. All those parcels have loaded, so this is going to be the first cargo since then that's going to be offered into the market and that's why they need a marketer pretty soon.

Alex: Wow. Well, you know, it'll be really interesting to see how this crude competes with the rest of the world and how the Guyanese Liza crude market share grows. But we really appreciate your time, Monica, thanks for your insight.

Monica: Thank you for having me.

Alex: The Argus Crude service is your must-have source for daily news, prices, and analysis for more than 80 different internationally traded crude streams, and the Argus Latin Markets service also provides an insightful source of news, data, and analysis on the Latin American crude oil market and the refined product sectors. You can find more information on this service at www.argusmedia.com. Thanks for tuning in, and we look forward to you joining us on the next episode of The Crude Report.

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