AS the beginning of a new chapter for Guyana as a major energy producer is here, 2020 is likely to be a year of major developments in our energy industry.
Sweeping changes are already underway when it comes to local content and this year should bring final approval for the Payara project and new exploration efforts that could yield new finds.
The third and latest draft of Guyana’s local content policy was completed in late November and is currently under review. The Department of Energy (DE) spent December editing the document after it was produced by British local content consultant Dr. Michael Warner. The policy sets out the standards on what will be considered “local” and how companies will be judged on their commitment and contributions to local content.
With these standards, Guyana can measure how foreign oil companies are performing in terms of local content, which includes hiring Guyanese, working with local firms, and buying from local suppliers. The DE has worked with operators like Exxon’s local branch, EEPGL, to support local involvement in the energy sector even before a formal policy. The Exxon-funded Centre for Local Business Development has already provided training, information and help with technical certifications to many of the 600 local companies already working to support the local oil industry.
While Liza Phase 1 has already led to a surge in hiring and will soon provide an influx of revenue, it’s just the first phase of overall development.
Liza Phase 2 is already well underway and is expected to begin producing in early 2022. Within the next few months of 2020, we should also get news about the third major project on the Stabroek Block, Payara. Itis expected to be thoroughly reviewed and receive final approval from the government sometime early this year. The companies operating on the Stabroek have already begun lining up advance contracts and materials to ensure that they are prepared to begin work on the project once approvals are given.
Payara’s FPSO will be of similar size to Liza Phase 2’s Unity FPSO on the Stabroek block, enabling production of up to 220,000 barrels per day. If approvals are granted, it could start producing as soon as 2023.
As many as five FPSOs are planned for the Stabroek Block by 2025, which could make Guyana one of the largest producers in Latin America. A recent report from the International Monetary Fund (IMF) to the Government of Guyana noted that bringing five projects of this size online in as many years is nearly unprecedented. Trinidadian economist Dr. Roger Hosein recently applauded the pace of development, explaining that it is best for Guyana to monetise the asset quickly. Hitting the target of five projects would make Guyana’s per capita daily production rate one of the highest in the world.
The recent success of ExxonMobil’s Mako-1 well, the 15th discovery in the Stabroek block to date, bode well for further exploration activities. However, last week Tullow and Repsol announced that the results from their Carapa-1 well in the Kanuku block were poor and that they will abandon the well.
Guyanese should look out for the results from new exploration drilling projects in the next few months. The drillship Noble Tom Madden will drill the Uaru-1 prospect, 10 miles east of Liza-1 after operations are complete at the Tripletail site. Exploration there recently led to Guyana’s 14th successful find in mid-September. Tullow and Repsol will reevaluate their plans and begin new exploration work soon as well.
While exploration has been the focus to date, the oil sector in Guyana is set to take on a whole new tone in 2020.
Government revenues from oil will begin to flow this year and will rise in the coming years as costs are paid down and more projects come online. Putting the right systems into place now to responsibly manage wealth, implement smart regulations and encourage future development will position us better for the future.
Progress on local content is a promising sign. But work remains to be done to make sure Guyana gets the most out of its oil wealth, not just this year but over the next few decades.