PUTTING together the strategy to develop a massive deep-water offshore oil field on the scale of Guyana’s own Liza field is a bit like playing a (very) high-stake battle of chess while engaging in games of Monopoly and Ludo at the same time.

With billions of dollars in investment, and our nation’s economic future at stake, companies developing Guyana’s precious resources must make critical investment and operational decisions years before the oil and gas are produced. And they must balance a host of “above-ground” risks that go beyond geology, such as geopolitical uncertainties and volatile commodity markets.

According to Norwegian oil-and-gas consultants, Rystad Energy, Exxon and other companies invested more than US$8B in Guyana to develop offshore oil production between 2015 and 2019. That money went to massive seismic and underwater exploration campaigns, and the early stages of analysing possible finds, as well as the enormous logistics of drilling and establishing production facilities. With the current production-sharing agreement, the companies took on all the investment risk—if the wells had turned out to be dry or not suitable for commercial development, they would have had to absorb those losses completely, and Guyana would not be benefiting from the revenue or the economic development that has resulted.

That kind of investment being made in what was, at the time, a largely unproven frontier area is extremely rare. Considering that more than 40 wells were drilled in Guyana before Exxon found oil, much of Guyana’s success so far has been because of the unusually smooth and rapid transition from discovery to production that the companies have been able to achieve here. But that success did not happen by chance.

Once hydrocarbons are discovered, companies try to lessen some of the geological risk through appraisal and delineation drilling to determine how big the resource is, and whether it can be commercially developed. And if it can, many more decisions follow, including how many wells should be drilled, and where and what facilities should be constructed above and below the water’s surface to produce the oil and gas, and deliver it to market?

Deepwater offshore oil development, to be done safely and efficiently, requires significant time and preparation to put into place the necessary infrastructure. Careful, long-term coordination between multiple parties is essential.

During the review process, most companies begin to lock in key contractors, suppliers, technical, environmental and safety experts so that they are in place when approvals do come through. This preparation is critical to ensure that the development plan can be carried out, and within budget. The alternative could mean costly lulls in activity that could delay generating government revenue and creating new jobs and economic opportunities for local companies while stifling investment.

That is why Exxon and its co-venturers signed a “Front-End Engineering and Design” contract with SBM for the Prosperity, the FPSO that would be deployed to the Payara development, which is pending government approval. This process of design and engineering can take several years, with long gaps between preparation and actual production.

These early-stage contracts can include provisions restricting the contracted companies to “limited activities” in advance of final approvals, thus allowing them to prepare without racking up exorbitant costs, while locking in greater efficiencies from previous phases.
Throughout the process, the government and its expert technical consultants review the development plans and environmental impact assessments before it grants the permit to proceed.

While the biggest oil-price crash in history earlier this year has delayed and even cancelled many projects around the world, Guyana is well placed to see continued offshore development, the result of years of careful planning and contracting that make the projects resilient to weak markets. But we should take nothing for granted, given the inherent risks associated with finding and producing oil in the deep water off our shores. A transparent permitting and regulatory process is vital to attract continued investment.