MORE than 30 possible sites for future drilling have been identified on the offshore Stabroek oil block where 13 discoveries have already been made. That is driving demand for more drilling rigs, according to ExxonMobil, operator of the block and leader of the oil-drilling consortium operating in deep waters offshore.
Four drilling rigs will be operating in the area by the end of the year, including two designated for new exploration and two for developing current finds. Since 2015, the consortium has found an estimated 5.5 billion barrels of oil-equivalent in the area.
All of these are “ultra-deep water” finds, meaning drilling has to occur in more than 1500 metres of water. The most recent find, Yellowtail-1, is the fifth in a small cluster of five large discoveries called the Turbot area.
It is also important to note that until this year, there were only two drillships operating on the block—one devoted to drilling new exploration wells and one working on preparing existing discoveries for production. Now, with four total drillships, the rate of discoveries could accelerate.
Drillships are a major cost factor in the early stages of oil development. They often cost hundreds of thousands of U.S. dollars per day to rent. Oil exploration and production companies do not normally own their own drillships—they contract specialised companies such as Stena and Noble to bring their own ships in and drill the wells. Reports have also highlighted that the heavy use of automation technology on the latest deep-sea wells, which makes it both cheaper and safer to drill.
Four drillships are also a strong vote of confidence for any region and likely shows that the oil-producing consortium is investing in developing Guyana’s offshore territory for the long term. But Guyana’s potential as an oil region is just beginning.
Development is proceeding on the Liza Phase 1 project and is slated to begin soon on the Liza phase 2 and Payara developments. Exxon has already committed to funding Liza Phase 2 and a final investment decision on Payara is expected later this year, according to Reuters. The floating production storage and offloading vessel (FPSO) Liza Destiny is currently en route to Guyana from Singapore and should arrive by September to begin production in 2020.
By the mid-2020s, there could be as many as five of these ships producing oil on the Stabroek Block—pushing Guyana ahead of Mexico and potentially even Venezuela in terms of daily production.
These discoveries, as we’ve noted in previous Understanding Energy columns, form a nearly unprecedented series of wins that surprised many in the industry, since they took place on a block that was considered extremely high risk up until very recently. Shell Oil actually sold their offshore stake in 2014 after years of unsuccessful exploration in Guyana. The company sold it for a token $1 and wrote it off as a lost cause.
Thirteen discoveries later, our offshore region is one of the hottest prospects in the oil industry.
However, Guyana is still considered a “frontier” region—a regularly misunderstood industry term that refers specifically to a country that has never commercially produced oil. “Frontier,” despite the claims of some commenters here, is not about a country’s level of development and has nothing to do with physical geography.
Frontier status is a standard explanation of risk in the industry. A country or region does not even need to be new to production to be considered frontier. Suriname, for example, has a history of oil production onshore. Yet Suriname’s deep-water region still represents frontier exploration and, despite recent activity and proximity to Guyana, has not yet been successful.
Discoveries to date have been enough to convince other companies that Guyana has enormous potential. Companies from the UK and Canada are also launching exploration programmes on other blocks adjacent to the Stabroek Block. Tullow Oil started a drilling programme on the Orinduik Block in June with one drillship, the Stena Forth, which drilled a test well at the Jethro-1 site and is expected to drill another prospect within weeks.