Exxon’s Oil Boom Could Keep Guyana’s Gas At Home |

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Irina Slav has been writing about global energy markets since 2007, covering the oil and gas industry, energy security, commodities, and the…

Guyana has turned into something of an oil celebrity with billions of barrels discovered by Exxon off the coast of the tiny South American country. With the oil riches came gas, too, and there were plans to add LNG to Guyana’s export goods. Yet now the government is considering keeping the gas for the domestic market.

Guyana’s crude oil exports are about to end the year on a high note and a daily rate of over 1 million barrels, according to a recent report by Bloomberg. It only took the country 10 years to go from no oil production to that rate of exports, after Exxon and its partners in the Stabroek Block—Hess Corp and CNOOC—made a string of discoveries with reserves estimated at over 11 billion barrels.

Production ramped up fast, with Exxon and partners bringing in a total of four floating production, storage, and offloading vessels to the Stabroek Block. As a result of this fast development, by September this year, wells in the block had yielded a cumulative 1 billion barrels of oil. Exxon and CNOOC, plus new partner Chevron, are not stopping, either. By 2030, Exxon eyes production capacity of 1.7 million barrels daily from eight offshore projects. This is what is interfering with natural gas plans.

Two years ago, the government of Guyana launched a tender for companies interested in developing its gas reserves. It would have been faster and probably easier to just bet on the Exxon-led consortium again, but the authorities in Georgetown made it clear at the time they would like some diversification. The tender, however, ended in a somewhat odd way. Of the 17 companies that submitted proposals, Guyana’s government picked one called Fulcrum LNG—set up by a former Exxon executive just a year earlier.

Fulcrum was selected by the government of Guyana to develop an LNG export project, whose price tag was at the time calculated at up to $30 billion. The choice of LNG developer was considered odd, as Fulcrum competed with established LNG market players. Since that tender, Guyana’s LNG plans have not exactly advanced much—and one big reason for this is the availability of natural gas for liquefaction.

Exxon needs some 2 billion cu ft of natural gas daily to inject into its wells to stimulate production, Reuters reported this week, citing unnamed sources, who also said the company had informed the Guyanese government about this. The gas injection is necessary so Exxon can meet oil production targets set for its existing projects in Guyana. In other words, there does not seem to be enough natural gas getting produced in Guyana at this point to make an LNG export project feasible.

One option for the government is to keep the gas that Exxon, Chevron, and CNOOC produce in the Stabroek Block for domestic consumption, including power generation and petrochemicals production. The other is to cut the annual capacity of the planned LNG facility from 6 million tons to 3 million tons, according to Reuters sources.

Yet at this point it is not even clear how much gas the fields in the Exxon consortium bloc can yield. The supermajor is reportedly working on this right now, along with estimates on the cost of extracting that gas, and how soon it can start. The current production of gas from Guyana is associated gas from the Exxon fields in Stabroek.

“We're working with the government of Guyana on development plans that maximize resource recovery and value to the country,” an Exxon spokesperson told Reuters earlier this week, adding that gas supply in Guyana must develop alongside demand.

By Irina Slav for Oilprice.com

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