AFTER 14 major discoveries on the offshore Stabroek Block and with first oil coming within a matter of weeks, Guyana is progressing rapidly towards its new status as a major oil producer. Yet even on the eve of first production, discussion surrounding future exploration and development is already underway.

Despite the success offshore Guyana, it is not a given that all subsequent wells drilled in the Guyana-Suriname Basin can be commercially developed. Guyanese will recall that prior to the recent run of successes, exploration in the deepwater offshore had been characterised by a series of failed wells. Since 2015, there have been exploration wells in blocks adjacent to the Stabroek but little success so far.

This has raised questions for investors and companies about whether the Guyana-Suriname Basin can be considered “de-risked.” Even the Stabroek Block is only partially explored. Extensive programs of expensive seismic exploration have covered the full block but test drilling has mostly focused on a small section of the block far from the maritime border disputed by Venezuela.

Just last week, Apache Corp. announced another round of poor luck at their well off the coast of Suriname, called Maka-one. After announcing exploratory drilling efforts at three different depths so far, the company has not revealed a commercial discovery. That well is in a block just across the maritime border with Guyana and sits adjacent to the Stabroek. The sites share many geological similarities as well.

As a result, international analysts are skeptical, despite the field’s proximity to Exxon’s successful finds. In October, Devin McDermott of the firm Morgan Stanley puts the odds at less than 20 per cent that Maka-one will be a commercial deposit at this point. Bloomberg noted to investors in its analysis that Apache trying its luck at new, deeper drilling zones suggests that the company is struggling to find commercial deposits so far and is “cause for greater concern.”

In Guyana’s own offshore waters, exploration companies Tullow Oil and Eco Atlantic have had only mixed success in the Orinduik Block. The Orinduik lies along the western side of the Stabroek Block and hopes had been high that the same geological structures would result in similar successes.

So far Tullow Oil, which operates the block, has found only less valuable “sour” crude—meaning it has higher sulfur content that has to be extracted at refineries through a costly process. Tullow’s stock had the biggest drop in its history when the company announced it was reassessing the commercial potential of the block.
In addition to exploration success, fiscal terms also play a role in the valuation of oil resources. Brazil’s recent issues with its own deepwater Atlantic areas serves as a reminder that drawing investors for capital intensive ultra-deepwater deposits like Guyana’s is a delicate balancing act.

Despite numerous finds and significant production, a recent auction of new offshore blocks failed to attract any bids from major global oil companies.

The auction was set to be the largest ever for Brazil’s prolific offshore production areas but analysts speculated that harsh contract terms kept away most bidders. In the end, state company Petrobras was the sole bidder for most of the blocks sold. Guyana will have to navigate similar challenges as it considers how to manage future exploration and production. While the 14 discoveries in the Stabroek certainly increase attractiveness, the discoveries are relatively concentrated and can be contrasted against recent failures nearby despite similar geologic traits. These are all factors to be considered as Guyana turns increasingly to the future.