In a mere four years, Guyana went from first discovery to first oil, a rapid timeframe in an industry where it can take years to bring major energy projects online.
The former British colony is now a major South American oil producer and global petroleum exporter. As a result, Guyana is benefiting from a tremendous economic windfall, with the country emerging as the world’s fastest-growing economy with 2022 gross domestic product (GDP) expanding by a stunning 62%. Industry consultancies and the government in Georgetown expect Guyana to be pumping 1.2 million barrels of crude oil per day by 2027, a figure greater than many OPEC members.
Exxon’s commitment to developing the offshore 6.6-million-acre Stabroek Block indicates oil output could soar even higher. This has the potential to alter global energy market dynamics and challenge the price-making power of the OPEC Plus consortium.
Data from Guyana’s Ministry of Natural Resources shows the country of less than one million was lifting 351,600 barrels of oil per day at the end of July 2023. That production volume pumped by the Liza Destiny and Unity floating production storage and offloading vessels (FPSOs) is greater than their combined nameplate capacity of 340,000 barrels per day. Exxon, which holds a 45% stake in the Stabroek Block and is the operator, prioritized development of the block in late-2020 due to the Liza oilfield’s low breakeven price of $25 per barrel to $35 per barrel and high-quality light sweet crude oil. That saw the global energy supermajor ramp up activity with a large exploration drilling campaign that eventually yielded over 30 discoveries and more than 11 billion barrels of oil resources in the Stabroek Block.
Since the first oil discovery in the Stabroek Block was made in 2015, the Exxon-led consortium comprised of Hess, with a 30% interest, and CNOOC, holding a 25% stake, have approved six projects with the initial Liza phase-1 and 2 developments complete. There are four more operations being developed, which, on start-up, will significantly lift oil production to at least 1.2 million barrels per day, and perhaps more. These include the 220,000 barrel per day Payara operation, with the first oil slated for late 2023 and the 250,000 barrels per day Yellowtail project, which will commence operations in 2025. Earlier this year, the consortium approved the $12.7 billion 250,000 barrel-per-day Uaru project, which is expected to start production during 2026. In the latest news, Exxon and its partners in the prolific Stabroek Block announced they will proceed with the sixth development, the nearly $13 billion Whiptail project. This facility will consist of 72 wells with a nameplate production capacity of 250,000 barrels per day and commence operations in late 2027.
Once all of those assets are operational, Exxon will have the capacity to lift just over 1.3 million barrels per day from the Stabroek Block. Each of those operations, like the functioning Liza Phase-1 and Phase-2 FPSOs, possesses the potential to pump more petroleum than the designated capacity. For this reason, oil output from the Stabroek Block could easily surpass the 1.3 million barrels expected. By 2027, Guyana’s petroleum output could very well surpass the forecast of 1.2 million barrels daily, which will see the country exceed the petroleum output of many OPEC members and become the world’s 16th largest oil producer.
The immense international interest in Guyana is being driven by a high exploration success rate and substantial offshore petroleum potential, which appears to exceed that estimated by the U.S. Geological Survey. The light sweet oil being discovered, with the Liza grade possessing an API gravity of 32 degrees and 0.58% sulfur content, is easier and cheaper for refineries to process into high-quality fuels further adding to offshore Guyana’s popularity. According to Rystad Energy, the carbon intensity of the oil being extracted is among some of the lowest globally. That is an extremely attractive attribute for foreign energy companies at a time when big oil is being pressured to sharply reduce emissions and become carbon neutral. Industry low breakeven prices, estimated by Rystad to average $28 per barrel, make operating in offshore Guyana highly profitable, especially with Brent selling for around $90 a barrel.
For those reasons, Guyana’s rising petroleum output will not stop at 1.2 million or 1.3 million barrels per day, nor will discovered oil resources remain at around 11 billion barrels, both will expand at a solid clip. Earlier this year, Guyana’s Environmental Protection Agency greenlighted Exxon’s 35-well drilling campaign for the Stabroek Block, which will lead to further oil discoveries based on the supermajor’s success rate. Other foreign energy companies are investing in exploration assets and drilling activities in offshore Guyana. Georgetown’s pending first-time oil auction, which has been delayed multiple times since December 2022, captured considerable interest. Reportedly, Brazil’s national oil company Petrobras is eyeing investing in Guyana while French supermajor TotalEnergies, which made five commercial discoveries in nearby Block 58 offshore Suriname, has interests in Guyana’s Canje and Kanuku Blocks.
Guyana’s growing production and discovered oil resources will boost global supply at a crucial time, which will diminish the influence of the OPEC Plus cartel. In recognition of this and Guyana’s tremendous petroleum potential, OPEC is attempting to woo the former British colony to join its ranks. The cartel has invited representatives from Guyana to participate in its meetings in Europe but has yet to officially invite the country to join the cartel. Regardless, Georgetown appears reticent to join OPEC, especially with membership requiring Guyana to comply with various rules and regulations. Indeed, such a move would place limitations on Guyana’s oil industry by requiring compliance with OPEC Plus production quotas, a key reason regional neighbor Ecuador exited the cartel in 2020.
Guyana’s explosive arrival as a serious global oil producer, going from first discovery to first oil in a mere four years, will challenge OPEC’s dominance. When coupled with Brazil’s plans to become the world’s fourth largest producer, South America will reemerge as a major petroleum-producing region with the capability to challenge OPEC Plus’s role as a global price maker. These are all significant developments for the world’s largest oil consumer, the U.S., where Gulf Coast refineries, since 2019 when President Donald Trump ratcheted up sanctions against Venezuelan oil have been seeking alternate sources of supply. It will also blunt the Kingdom of Saudi Arabia’s at times antagonistic attitude toward the U.S., which is responsible for higher oil prices.