Introduction
This week’s column considers Guidepost 5 in Guyana’s Road Map for its petroleum sector in the dimension: “getting petroleum resources.” Because the Government of Guyana (GoG) is building its petroleum sector on the foundation of Petroleum Agreements with International Oil Contractors (IOCs), their capability for exploiting deepwater/ultra-deepwater offshore plays (especially in the testing areas of capex, skills and technology) is of paramount importance. On the face of it, such capability seems assured for the present lead IOCs operating in Guyana.
While a significant number of companies, local and foreign, are currently positioning themselves for petroleum licences, two IOC groupings stand out, namely 1) ExxonMobil and partners; and 2) Eco Atlantic/Tullow/Total. These two sets of IOCs are described below.
ExxonMobil and partners
This IOC grouping consists of: Esso Exploration and Production Guyana Limited (EEPGL), (wholly-owned subsidiary of ExxonMobil, 45%); 2) Hess Guyana Exploration, (wholly-owned subsidiary of the Hess Corporation, 30%); and 3) Nexen Petroleum Guyana, (wholly owned subsidiary of China National Offshore Oil Corporation (CNOOC), 25%).
ExxonMobil is a direct descendant of Rockefeller’s Standard Oil, (1870). It devolved later from the 1999 merger of Exxon (New Jersey) and Mobil (New York). Now headquartered in Irving, Texas, ExxonMobil is an oil super-major. It is one of the world’s largest integrated petroleum and chemical producers. It is also the world’s largest publicly traded oil and gas company! Other key data include: crude oil and condensate reserves (20 billion barrels); crude oil production (5.3 million barrels daily); Revenue (2017) $268 billion. Through its subsidiary (EEPG), the Group’s lead operator, the Group offers ExxonMobil’s considerable expertise in deepwater and ultra-deepwater plays.
As a multinational, though, the interests of ExxonMobil’s shareholders, stakeholders and investors clearly take precedence, even though it must also acknowledge the great contribution of the Guyana “play” to its commercial success. Indeed, industry analysts have already observed that the Guyana “play” marks a turning point for Exxon Mobil’s fortunes, following “consecutive years of declining production and slowing reserves growth,” (Bloomberg 2015).
Hess Corporation
Hess Corporation (established 1969 and headquartered in New York) has described the Guyana “play” as containing “multiple prospects and play types.” While not a “super-major” like ExxonMobil, the corporation is a significant energy player in Europe, Africa, Latin America, Asia, Australia and the United States. From all appearances, the Guyana “play” appears to fit well with the Hess Corporation’s strategy of low-risk high-reward ventures that require strong commitment of up front capital expenditures to produce later profits.
CNOOC Nexen Petroleum Guyana
Finally, Nexen Guyana is a wholly owned subsidiary of the CNOOC Group, through its Nexen holdings. The parent Group, CNOOC, was incorporated in 1999. Based in Hong Kong, it is the largest producer of offshore crude oil and gas in China! It is also one of the world’s largest “independent” oil and gas exploration and development companies. It is state-owned.
With total assets of about RMB 700 billion and roughly 21 thousand employees, this company is undoubtedly another quality brand involved in the “consortium” exploring and developing oil and gas in Guyana. Nexen is a former Canadian petroleum company that started in 1969. It was acquired by CNOOC in 2013. It is a major subsidiary, which focuses on three areas, namely, conventional exploration and development of oil and gas, oil sands, and shale gas/oil. It operates globally, in Africa, the Americas, Asia and Europe.
Eco Atlantic/Tullow/Total
Eco (Atlantic) Guyana Inc. and Tullow Guyana B.V. jointly hold a Petroleum Agreement with the GoG, (January 2016). The Agreement/Licence holds for four years, with two renewals permitted for terms of three years. While ExxonMobil and partners have established a firm lead in the Guyana “play”, both in terms of petroleum “finds” and production schedules, Eco (Atlantic) and Eco (Atlantic/Tullow) are on course for comfortably keeping the second position.
Eco (Atlantic) holds a 15% working interest in the Orinduik Block, the second likely production start-up block. Tullow Oil is the Operator and holds 60% of the shares. Total E&P Activitiés Pétrolières (Total) the French multinational holds 25%, after exercising an option to acquire part of the Eco (Atlantic) interest in September 2018.
The Orinduik Block is 1,800km² and is situated in relatively shallow water (70 – 1,400m), 170 km offshore of Guyana, in the Guyana- Suriname basin. This is located 11km “up-dip” from ExxonMobil’s recent Liza discovery and 6km “up-dip” from its Hammerhead discovery. Of great significance, on March 2019, Gustavson and Associates, in a 2019 Competent Persons Report, for the Contractor grouping has projected a ‘low case’ estimate of 2.01 billion barrels of oil reserves from prospective research, and a ‘high case’ of 7.2 billion. Their ‘best’ estimate is 3.98 billion.
This is a new and more recent assessment than the one I had quoted earlier of 2.98 billion barrels “best case.” This follows on the completion of 3D processing undertaken by Tullow, and an additional six months of interpretation work. It included processed data from a 2,550km² 3D seismic programme, and, insights gleaned from nearby discoveries (such as Hammerhead) made by ExxonMobil and partners.
Capability Assessment
A detailed comprehensive assessment of these two IOC groupings cannot be efficiently done, without access to their confidential data. I do not have such access. However, two broad observations are warranted. First, both leading IOC groups include one of the top 10 oil super-majors. ExxonMobil over recent years has ranked in the “top-half” of that list, while, Total has ranked in the “bottom-half”. ExxonMobil is a private sector company while Total is largely a public sector company.
Second, the mixture of nationalities comprising both groups, preempts risks of national geopolitical considerations consistently over-riding commercial benefits.
Conclusion
Global financial reporting for 2018 indicates that, “ExxonMobil is the leader of the pack among oil and gas explorers for 2018.” Further, reports declare ExxonMobil “was exceptional in 2018, both in terms of discovered volumes and value creation.” Close to two billion barrels in additional gross resources were discovered in 2018. In terms of 2018 value creation, its partners Hess and CNOOC came in second and third place, respectively. Finally, Total ranks just behind the Exxon groupings, having created about $2.2 billion valuation (see Oil Price, 2019 releases).
Next week, I turn to address Guidepost 6. That is the last in Guyana’s Petroleum Road Map in the dimension of “getting petroleum revenues.”
