THE events of this week are another reminder that time is not on the side of Guyana’s fledgling oil and gas industry. Political gridlock continues and with it a softening of investor confidence in Guyana’s ability to execute projects crucial to its national development.
Wood Mackenzie, a respected global consultancy on oil and gas, released a fiscal benchmarking study comparing Guyana’s oil agreements and economics to countries of similar characteristics around the world. The report highlights the promise of the world class discoveries in the Stabroek block, especially in the current price environment, but makes clear that continued delays could postpone first oil for phases 3 – 6. This would decrease the overall project and state’s share value by US$2.2 billion and $4.5 billion, respectively.
When compared to ten countries including Mexico and Argentina, Guyana’s fiscal terms scored better than half of the countries in key areas – most notably State share, payback period and price resilience. The discoveries made to date offshore Guyana have put us in an advantageous position, given that relatively low cost of production and breakeven point means the Stabroek block can still be profitable even at historically low oil prices.
At present, however, 75% of the resources of the Stabroek block are yet to be developed. The already sanctioned Liza Phase 1 and 2 accounts for 25% while phase 3 of the Payara Field, the Pacora Field and the Liza Deep Field account for 16%. The future phases of 4-6 account for 59%. The sooner Guyana achieves first oil in the phases 3-6, the sooner the country will be able to benefit. As the saying goes; a dollar in your pocket today is worth more than a dollar in your pocket a year from now.
A day in the world oil markets, in addition to the political stalemate, can change the fortunes of our country. Continued uncertainty increases the likelihood that other discoveries could eclipse Guyana’s finds and see investment go elsewhere. Just Tuesday of last week oil company Apache Corp and its joint venture partner Total SA announced an oil find at & Kwaskwasi-1 well drilled offshore Suriname in Block 58. Investors will go where political risk is lower and certainty in policy is found.
Halfway around the world, work continues feverishly on the FPSOs slated for the yet to be developed phases. These critical investments and many others represent billions of dollars that have been committed by partners, predicated on a smooth approvals process for the continued development of the Stabroek block. Despite the challenging global oil market and COVID-19, Guyana’s partners have forged ahead, securing crucial cargo lifts that have so far resulted in almost US$200 million to Guyana.
Continued delays could have ripple effects for hundreds of Guyanese suppliers and workers being trained for jobs within the industry. It cannot be over-emphasised that Guyana’s time is now, not 6, 12 or 18 months from now.