– API says key lesson to be learnt from COVID-19

OF the many lessons Guyana could learn from the detriments to the global oil industry due to the global pandemic, a key one is the importance of having a diverse range of refiners in various regional markets.

In an interview with the Guyana Chronicle, Chief Economist at the American Petroleum Institute (API), Dr. Dean Foreman, said that while much of what had happened in the global crisis was unforeseen and unknowable, there are still lessons to be learnt.

“If there’s a key lesson, it is that strong customer relationships ultimately are critical in times like this. It would therefore benefit Guyana the most to solidify the market for its Liza crude oil and build a diverse and enduring customer base among refiners in different regional markets,” he said.

Last month, the Chief Economist had advised the country to set out early to establish its niche in the global market, specifically for the country’s Liza crude.

He had explained that the new grade is medium in its viscosity (as measured by API gravity) and sweet (low in sulfur) and should be suited for refineries in the US Gulf Coast, Europe and Asia Pacific that need such crude oil match for their catalytic cracking units.

Although the demand for oil is currently low, Dr. Foreman said that this will eventually change as the virus subsides and persons within specific regions and countries begin to travel again.

If the country were to build a diverse and enduring customer base among refiners in different regional markets, it would ensure that, in the event of another crisis, the country has options to which it can sell its crude based on which regions are able to buy.

In the specific case, Dr. Foreman stated: “We remain confident that demand will be resilient as the effects of COVID-19 diminish. As this occurs, where and how fast crude oil trade picks back up would influence short-term movements.”

For now, he said that Guyana is not likely to suffer gravely economically as a result of falling oil prices as the country was not previously reliant on such revenues.

“As a newcomer to global oil production, Guyana is well suited in the sense that the immediate downturn may not present pervasive fiscal, employment and economic challenges as it has in many longstanding producers,” he said.

Added to that, other experts have stated that is unlikely that ExxonMobil will shut down its operations in Guyana as it is more feasible to remain even if operating at a loss.

The Economist said that shutting in wells is generally a last resort if there are no other economic options.

“If firms maintain a high degree of assured crude oil and product placement in their business, then scaling back production rather than shutting it in would likely best suit their operations,” he said.

Ultimately, he said, the future of oil trading ultimately will depend on the long-term competitiveness of oil supply in competing for market share globally.