LAST week, we kicked off our new weekly energy column with a look at global oil reserves. The combination of our nation’s 3.2 billion barrels and a speedy timeline for production means that we have a chance to make a real impact on the global market in just a few short years when it comes to barrels of oil produced.

But the amount of oil in the ground is only part of the story. And for most of us, the part of the story we really care about is what happens once that oil leaves the ground. As the oil is extracted, those projected barrels make their way into the global market and are transformed into revenues for owners and producers. In short, that’s where barrels turn into those badly needed dollars for Guyana.

Let’s start by quantifying the reserves we looked at last week. The value of Guyana’s 3.2 billion barrels of oil is determined by the price of crude oil on any given day. Obviously, prices fluctuate, but this year that figure has been about $65 per barrel. That means that Guyana’s reserves are currently worth US$208B. Not a bad haul!
As we saw last week, there are plenty countries with larger reserves than ours. But the resources we have offshore are even more impressive when you take our small population into account. With only about 781,000 Guyanese, we’re looking at roughly 4,100 barrels of oil per capita – one of the highest in the world! And, of course, there have been recent discoveries that will only add to this total.

Of course, that oil doesn’t come out of the ground all at once – nor would we want it to. The amount being taken from our offshore reserves on a daily basis will be determined by technical limitations in the extraction process. For that reason, it is far more useful to calculate revenues, based on production rates rather than total reserves.

Early projections for 2020 estimate that oil will be in the low $60s (we’ll use $60 to be conservative). For 2020, ExxonMobil has already set a production target of around 100,000 barrels per day, with a maximum capability of 120,000 barrels per day. That means that our offshore resources will be pumping out a total of $6,000,000 a day. And that’s just from Liza Phase 1. Liza Phase 2, set for 2022, would see production as high as 340,000 barrels per day, or $20,400,000.

By 2025 we could see average production of 500,000 barrels per day. Ultimately, Guyana could end up having the world’s highest rate of daily oil production per person. That would be an impressive achievement for our nation.

Since we are looking at daily production rates, one crucial thing to keep in mind is the lifetime of our resources. The production targets listed above help give some insight into just how long we can expect to reap the benefits our energy resources.
If we ballpark long-term production at 250,000 a day (being conservative once again), we’re looking at 10,000 days of production … almost 28 years. Therefore, we have to remember that our oil reserves are long-term sources of revenue for the people, managed by the government.

To that point, the next step in the process of Understanding Energy is learning how those big dollar amounts are shared across the production chain. The amount that goes to the Guyanese government and citizens, the operator ExxonMobil and its partners, subcontractors and other operators is determined by a number of mechanisms, such as the contract governing production, tax rates, revenue management structures … the list goes on.

Next week, we’ll take a look at some of the specifics of Guyana’s contract and wealth management plans.