Dear Editor,
The recent announcement by ExxonMobil that it has increased its estimate of Guyana’s petroleum reserves to four billion barrels of oil equivalent is good news for Guyana. I expect that this number will increase with further exploration of the Stabroek block, and quite possibly, the adjacent blocks. It should be noted that XOM has been punctilious about using the term “oil equivalent barrels” in its official news releases. The word “equivalent” is particularly important for Guyana.
Oil wells produce: crude oil; natural gas; brine; and natural gas condensates, in varying amounts.
Crude oil, natural gas and natural gas liquids are valuable commodities when there is a market for them. Brine contaminated with crude oil is an environmental hazard and has to be properly disposed of, usually by re-injecting it deep into the earth.
XOM has stated that it plans to use some of the natural gas produced at Liza Phase One to generate power for its on site operations and to re-inject the balance into the oil-producing formation to boost the well pressure and force more liquid oil into the production wells. Without a pipeline to transport the natural gas to an available market or a facility to liquefy the natural gas produced at the well, it is not a marketable or money-earning commodity. It is, in this scenario, a waste, a by product of oil production.
Since, in almost all Oil and Gas projects, the oil, condensates and natural gas are marketable and thus income producing commodities, Oil and Gas operators quantify their reserves by adding up the barrels of oil and the barrels of condensates to another number which represents the “equivalent” number of “barrels of oil” in the energy of the associated natural gas, in order to come up with a total reserve valuation. Hence the term “Barrels of Oil Equivalent” or BOE.
So, how much of Guyana’s reserves of four billion barrels of oil equivalent (BOE) is marketable, money-producing, crude oil and condensates and how much is unmarketable natural gas. This is of vital importance to Guyana.
I have not been able to find the breakdown of oil and condensates to natural gas in XOM news releases relating to Liza Phase One project. But we can make some informed inferences by using other published data.
Liza Phase One will have seventeen wells. Of these, eight will be for production of oil, natural gas, brine and natural gas liquids: six wells will be for re-injection of brine; and three wells will be for re-injection of natural gas left over, after some of it is used to power the floating platform, on-site hotel facilities, off-loading facilities and to power the injection pumps et cetera. The natural gas still left over, XOM implies, will require three injection wells for their disposal. I believe that we can infer that the Liza Phase One project will be producing a lot of natural gas.
We can get a better sense of the proportion by looking at the specifications of the Floating Production, Storage and Off-loading facility that XOM has under commission from SMB Corporation. The FPSO is being built to handle: 120,000 barrels of oil per day; 200,000 barrels of brine per day; and 170 million cubic feet of natural gas per day. That amount of natural gas is the equivalent of about 30,000 barrels of oil per day.
By inference only, I believe that at least twenty percent of Guyana’s current estimated reserves of four billion barrels of oil equivalent is not marketable. (For perspective, the liquid to gas content in the oil wells of the Permian Basin here in Texas is about 70 percent oil and thirty percent natural gas).
Perhaps, officials in the government of Guyana already know this and have made the mathematical discounts already. But I have not seen any such discourse in the public fora.
At any rate, discarding 170 million cubic feet of natural gas or twenty percent of Guyana’s O&G production seems to be a terrible waste. I know that undersea pipelines and natural gas liquefaction plants are extremely expensive undertakings and I hope that options are being evaluated.
My model of a well run off-shore O&G producer is Norway. Last year, 2017, Norway sold more natural gas than it did oil. What if their natural gas was unmarketable?
Yours faithfully,
Dr. Tulsi Dyal Singh
