2020 is quickly approaching and the Government of the Cooperative Republic of Guyana is looking forward to the New Year and the beginning of the Decade of Development.
As the oil and gas sector is highly technical and often utilises terminology for specialists in the field, it’s easy for Guyanese to get lost in, misinterpret and misunderstand some of the specialised terms used. The Department of Energy (DE) values transparency and believes that all Guyanese should be as informed as possible about this new national endeavour that has the potential to transform the nation.
This edition of Government in Action will define key technical terms used often in reference to this sector.
Oil blocks and exploration
An oil block is an area of land, or in Guyana’s case, ocean floor, that can have significant petroleum potential. All of Guyana’s oil blocks are held within the Guyana-Suriname Basin, the petroleum potential of which baffles industry professionals today. Petroleum potential is exhibited through the presence of a source rock within which the petroleum is made; a reservoir rock to hold the petroleum; and sufficient features to trap the oil.
Guyana currently has nine oil blocks namely Roraima, Kaieteur, Canje, Demerara, Berbice, Stabroek, Orinduik, Kanuku, and Corentyne. Each block has the potential to hold a number of petroleum fields. During exploration, fields of interest are given names which are typically within a common theme. For instance, fields in the Stabroek Block are named after fishes.
Director, Department of Energy, Dr. Mark Bynoe, at the Department’s November 6, 2019 press conference gave an update on offshore activity.
“Within the Stabroek Block, the Stena Carron continues drilling and, in fact, it is drilling at Ranger-2. The Noble Tom Madden is currently drilling Tripletail-1. The executed contract for the Don Taylor has gone through, as I mentioned earlier, and there is expanded southeast area, high resolution 4D [seismic] baseline acquisition that is ongoing… In the Orinduik Block, Tullow [Oil] is working toward a drilling programme starting in the first half of 2020… In the Kanuku Block, spudding occurred at the Carapa-1 well on October 25 and they are using a jack-up rig for this particular effort,” he said.
The DE is working closely alongside the Guyana Geology and Mines Commission (GGMC), and with external assistance will soon be reviewing the Field Development Plan (FDP) for the Payara field, located within the Stabroek Block. This document lays out all the steps required to develop a field and includes geological and fluid behaviour models, subsea equipment designs, production facility designs, environmental considerations, risk assessments, well design, structure, and placement information, and economic models.
Machinery and Equipment
The Liza Destiny is the first Floating, Production, Storage and Offloading (FPSO) vessel that will lift crude from the Liza field. It is contracted on a lease basis. The FPSO arrived in Guyana’s waters on August 29, indicating a major milestone in the country’s journey to first oil.
A mixture of crude oil, gas and water will be produced into the vessel where the fluids will then be separated into its three components’ parts. The oil is processed and stored in storage tanks on the FPSO until it is ready for shipment.
To put the magnitude of this vessel into context, Dr. Bynoe has said that the FPSO is powered by 140 megawatts (MW) of power, which is more than the 132 MW base load consumed in Guyana as of 2017 (Guyana Energy Score Card 2018). It is important to note that this is just the first FPSO that will be operational in Guyana. A second vessel, the Liza Unity, is under construction and this FPSO is almost twice the size of the Liza Destiny.
“The hull for the Liza Unity is about 85 per cent completed, and is being built in Shanghai. Topside fabrication [is] continuing at Dynamac and Keppel in Singapore. Several trees/tubing heads have been completed and are awaiting shipment to Trinidad from Brazil, and then into Guyana. Production manifolds are being completed in the US, and the line pipe fabrication are about 99 per cent completed, which are being carried out in Japan. Pipe insulation [is] ongoing in Mexico; buoyancy modules about 57 per cent completed in the UK and risers, flowlines and jumper detail design are completed in the US. The Operator is working with the DE to include Guyanese expertise in various stages of the Unity’s completion as per the FDP approval which was issued earlier this year,” he said.
The early arrival of the Liza Destiny brought forward the original timeline for first oil. This was, of course, hinged on the installation of production flowlines and umbilicals and prevailing weather conditions. Production umbilicals are encased cables that connect the FPSO with subsea equipment and machinery and provide hydraulic or electrical control.
“The Liza Destiny arrived on August 29th, 2019, three weeks ahead of its planned arrival, with the formal Commissioning Ceremony held on September 9th, 2019 at the Marriott Hotel. With the arrival of the Liza Destiny there has been an acceleration of first oil target into 2019, but significant work remains to be completed to make this a reality. These would include water injection lines to be installed, production umbilicals and commissioning. Should first oil be realised in 2019, the first lift is not expected until about one month after, all other things being equal,” Dr. Bynoe said.
Guyana’s crude will be sold ‘free on board’ (FOB). This means the buyer takes responsibility for the shipping, insurance, and other liabilities of the crude once it leaves the FPSO.
This is one aspect of the measures taken at policy level to safeguard Guyana and safeguard the industry. These and other measures are outlined in a document called the Crude Lifting Agreement (CLA), which is currently in its final stages of development.
“A crude lifting agreement sets up… a mechanism for allocating the schedule of crude cargo liftings based upon volume entitlements which are calculated taking into account the cost recovery rules for the petroleum agreement. It lays out the strict procedures for efficient crude lifting. Delays for example, will cause value loss and could risk shutting in production in the FPSO. The Department has been working along with its sister agencies and the operator to ensure the process runs efficiently from day one, and have completed a number of workshops training, dry runs and inspections of the FPSO,” Dr. Bynoe said.
The CLA goes hand-in-hand with the Production Sharing Agreement (PSA). The PSA is a contractual agreement between the Government of Guyana and an oil exploration company and governs the amount of extracted oil Guyana will receive from each exploration company.
Procedures like these are put in place to ensure Guyana and Guyanese benefit from an industry that is dominated by foreign companies. A robust Local Content Policy, however, ensures that the industry does not stay that way. Rather, the Local Content Policy ensures that capacity is built among Guyanese to see the emergence of a local workforce that has the skill, education, and training to function confidently within the oil and gas sector. The Department of Energy has been working closely with the Council for Technical, Vocational Education and Training (CTVET) to meet this goal.
“The Local Content Policy final draft was completed and circulated. We received feedback from a number of stakeholders and we’re moving towards finalisation of said policy. The Esso Exploration and Production Guyana Limited (EEPGL) is working with the Council for Technical Vocational Education and Training on implementing two pilots to build capacity within the technical institutions. These are expected to be in New Amsterdam and Linden. These pilots are projected to commence in Q1 [first quarter] of 2020, and emphasis will be placed on slinging and rigging, scaffolding, welding and fabrication, flange and bore hole expertise, static training, facility maintenance, etcetera,” Dr. Bynoe said.
The Director explained that Guyanese are already becoming active members within the sector.
“The last local content report indicated that over 1,300 Guyanese are currently employed in this sector. Additionally, since 2015 over US$300 million has been spent by the EEPGL and its co-contractors on Guyanese contractors and service providers. The Department of Energy is working with the Ministry of Finance and the Ministry of Education under an Islamic Bank loan on a possible reverse linkage project to enhance capacity within TVET institutions to service the oil and gas sector and the existing and emerging sectors in Guyana,” he said.
First oil is just around the corner. The Department of Energy continues to build out the framework for effective and efficient management of the sector. A good foundational knowledge of these terms will not only safeguard Guyanese against misinformation, but is the key to unlocking the oil and gas sector as a fully informed Guyanese.