TWO years have passed since Guyana became an oil-producing nation in December 2019. Since then, there have been notable successes in the industry. The consecutive world-class record finds in the Stabroek Block totalling an estimated 10 billion oil-equivalent barrels increased with two new discoveries last week.
Production is also set to increase quickly with the arrival of the Liza Unity FPSO, designed to produce approximately 220,000 barrels of oil per day, and soon to be joined by the Prosperity FPSO. Guyana has also passed two significant and long-awaited pieces of legislation in the past month, namely the Natural Resources Fund Act 2021 and the Local Content Act 2021, which auger well for Guyana’s prospects in 2022.
Oil and gas consultancy Wood Mackenzie’s recently published 2022 outlook found that deepwater oil exploration is likely to account for half of all new volumes added to the world’s oil and gas reserves. This bodes well for Guyana, given that much of the exploration and drilling offshore has been focused on deepwater exploration in the Stabroek block. The outlook predicts the deepwater drilling will continue only where explorers expect highly productive reservoirs. Just last week ExxonMobil announced two new discoveries at Fangtooth-1 and Lau Lau-1 in the Stabroek block, contributing to an extremely strong success rate over the past five years. That success rate is even more remarkable considering a string of more than 40 dry wells offshore before the first find at Liza 1.
At the recent World Petroleum Congress, an executive from ExxonMobil, speaking on a panel, put Guyana’s good fortunes into context. “The numbers are incredible. We’ve discovered over 10 billion oil-equivalent barrels in six years. It’s an incredible basin with over 20 discoveries,” Senior Vice President of Exploration and New Ventures at ExxonMobil, Mike Cousins said. Coupled with the growing demand for energy across the world, Guyana is well placed to continue to attract investments and interest in the oil and gas industry.
Guyana has stayed the course and pursued its sovereign right to develop its oil and gas resources, allowing for millions of barrels of oil destined for markets worldwide to provide crucial energy needed for heating, transportation, and electricity generation. This comes at a time when areas of the world are experiencing acute and chronic energy shortages.
At peak production, estimated at 1.2 million barrels per day by 2030, Guyana’s total annual oil revenues could approach $30 billion within 10 years, according to research by analysts at Rystad Energy. Guyana has more than US$600 million (or about GY$125 billion) in oil revenue for the nine million barrels exported to date and royalties. The passage of the Natural Resources Fund Act will ensure that the proceeds from Guyana’s oil are managed to ensure long-term benefits.
Guyana has committed to managing its resources transparently and has signed on to the Santiago Principles which promote good governance, accountability, and sustainable investment practices, while fostering more open dialogue about the Natural Resources Fund.
Significant reforms in petroleum regulation are also underway. Last year, the government announced the formation of a legal committee to spearhead legislative changes for the oil and gas sector, including amendments to the Petroleum Act. The committee will work towards adopting and enforcing a competitive and transparent open bidding process for oil blocks that could be in place as early as the third quarter of 2022, a departure from an earlier awarding process that critics claimed lacked transparency.
Additionally, work is underway to have a fully functional Petroleum Commission, a body tasked with oversight and administration of various aspects of Guyana’s industry now managed by multiple agencies and departments. This will enable efficiency and accountability and send a signal to the international markets that Guyana’s regulatory and policy framework can support sustained investment.
As the oil and gas industry continues to drive new economic growth in the next few years, it’s important that the benefits are flowing to Guyanese. The recently passed local content law should see Guyanese companies at all levels participating in the oil and gas value chain, capturing a large slice of the billions in expected spending and investments over the next decades.
The government took extensive input from experts and analysts into account when finalizing the local content bill and targets now closely reflect what experts identified as feasible near-term goals. Additionally, the one year waiting period for implementation of the targets allows companies to structure their operations and plan with certainty. There is no doubt that, with training and capacity development, Guyanese can capitalise on all areas of the industry.
It is crucial to the national interest that the sector provides employment and catalyses industrial, educational, and societal transformation essential to meet the needs of a 21st-century economy. Though there are still numerous challenges to be addressed, Guyana stands in an enviable position.