HOUSTON—The oil and gas success story unfolding offshore Guyana has the potential to transform the small South American country, while boosting production and revenues for energy companies developing the massive finds.

But Guyanese officials want to make sure the country manages the sector responsibly as oil discoveries made by Exxon Mobil Corp. and partners keep the spotlight on Guyana and its frontier exploration opportunities.

“Until the discovery of that oil in 2015, we were arguably one of the most ignored countries in the world. Guyana is now receiving more attention than ever before especially from businesses interested in what is taking place on the offshore petroleum blocks and I believe this is a good thing for Guyana,” Dominic Gaskin, business minister for Guyana, told a full house gathered at Rice University’s Baker Institute on Feb. 26. “As a government, we see the recent discoveries of oil as a means of transforming our economy and fast-tracking development.”

The Guyanese envision oil revenue funding needed infrastructure projects, paving the way for improved health care services, education and housing, and creating more jobs with the government serving as a facilitator of long-term partnerships with a well-regulated oil and gas industry.

However, “While we recognize that there is a lot that our country can gain from this sudden exposure to international oil companies, we recognize also that there is a lot that we can lose if we do not manage this sector responsibly,” Gaskin said.

Gaskin added the country—which is a commodities exporter of products such as gold, rice, sugar and seafood—lacks experience in doing business in the oil industry’s big league. But he said it has a wealth of information to learn from based on experiences—good and bad—from other parts of the world.

While the Guyana-Suriname Basin has already attracted companies such as Anadarko Petroleum Corp., Repsol SA and Tullow Oil Plc among others, the country is working to improve its regulatory and fiscal regime. Guyana is in the process of finalizing its local content policy, and its energy department is also looking to improve contracts.

Plans are to address the sort of one-size-fits-all template for contracts, said Newell Maurice Dennison, commissioner of the Guyana Geology and Mines Commission. He said it’s uncertain whether the production-sharing format will exclusively remain, but the country will likely deploy bid rounds in the future.

Jamie McInerney, senior director for FTI Consulting Inc., said an easy narrative for some is that Guyana could easily fall into the so-called “resource curse,” failing to take advantage of its abundant resources.

“But that is a warning, not a prophecy,” McInerney said. “Guyana, from my view, is taking the steps to avoid that curse.” These include advancing legislation for a sovereign wealth fund and seeking help and support from organizations such as the World Bank and International Monetary Fund (IMF).

In 2018, the IMF recommended Guyana implement a tax regime that allows the government to receive a higher share of profits as projects bring in more earnings and strengthen its regulatory capability among other suggestions, according to a Bloomberg report.

Given Guyana’s small population of about 750,000 people and discoveries made so far, Gaskin said “this has all of the ingredients of a success story for both our country and the industry.”

Guyanese officials said its revenue could increase by $300 million to as much as $2 billion annually if oil prices and production rise.

Assessing Opportunity

The story is just starting, and more opportunities could await. Offshore blocks are still available, including in frontier areas closer to the coast.

Dennison spoke about the rock, calling some areas such as the unallocated Block C “very risky” but somewhat “mitigated by a working petroleum system in the Cretaceous fairway updip.”

His presentation pointed out the basin’s primarily stratigraphic traps with multiple stacked layers and the seasonal carbonates of the Pomeroon Formation that are recognized as a seal.

Exxon Mobil has already proven plays in sandstone reservoirs of Tertiary age and Cretaceous-aged reservoirs in the Liza sandstone play and Ranger carbonate plays.

But Tertiary-age reservoirs on the fringe of the coast—a frontier area—have not delivered yet, Dennison said. “There is now a greater appetite to pursue the Cretaceous even with the difficulties encountered at Jaguar,” he added. Jaguar-1, which was drilled by Repsol in the Georgetown Block, hit oil in 2012. But the HP/HT well was plugged and abandoned due to safety concerns.

Meanwhile, operators besides Exxon are gearing up for work offshore Guyana. These include CGX Energy Inc. on the Corentyne Block, Repsol and Tullow Oil on the Kanuku Block, and Tullow Oil on the Oreo Block to name a few.

Exxon Mobil announced two more discoveries offshore Guyana—at the Tilapia-1 and Haimar-1 wells—on Stabroek Block earlier this month, bringing the count to 12. The discoveries, which are respectively located in the Turbot and Pluma areas, build on estimated recoverable resources of more than 5 billion barrels of oil equivalent.

The 2015 play-opening Liza discovery made by Exxon Mobil subsidiary Esso Exploration & Production Guyana Ltd. set the company and partners Hess Corp. and China’s CNOOC Ltd. on its winning streak across the basin. Phase 1 of the Liza development is expected to mark first oil by early 2020, producing up to 120,000 barrels of oil per day (bbl/d) from the Liza Destiny FPSO. The larger Liza Phase 2 development, scheduled for startup by mid-2022, will use a second FPSO designed to produce up to 220,000 bbl/d.

Plentiful resources discovered on the block have also made way for a third development, Payara, which if sanctioned by 2020 could begin production in 2023.

Developers have said that the resources discovered so far on the block could be enough to put five FPSOs to use.

Addressing Challenges

The added activity has also brought challenges, which are being addressed.

Sean Herrera, managing director of the Caribbean for Schlumberger Ltd., said the company has been involved in Guyana’s oil and gas rejuvenation efforts since 2012 with wells drilled three years before the Liza discovery.

Speaking on the challenges faced in areas fairly new to the oil industry like Guyana, Herrera said the biggest one the company sees is access to educated and competent people. Having little exposure to the oil and gas industry, the Guyanese don’t have the precise skills being sought. However, “what they do have is a fantastic attitude and a keenness to learn and take on advice from companies like Schlumberger who have been doing this for a while,” Herrera said.

Recognizing its role in the need to fill learning gaps and the need to hire locals, Schlumberger works with universities and contributes to a program started by TotalTec Oilfield Services Ltd. The company offers an eight-week course that provides basic oilfield training, bringing workers to a state in which they can be hired, he explained.

“At that point, they just need to be trained on the specific role that they will play,” he said. “That’s been a tremendous resource for us.” Eighteen of the 41 Guyanese employees on Schlumberger’s payroll have gone through the program, he said.

Besides human resources, Guyana is also tackling an array of other challenges—many of which fall under the purview of Guyana’s public infrastructure ministry.

“I have been told and assured by my finance minister that I will have adequate resources to do what is needed, and what is needed in Guyana is a lot,” said David Patterson, minister of public infrastructure for Guyana. “I have almost a blank canvass to start creating a masterpiece, which we do hope Guyana will become in the future.”

The ministry aims to link communities to Guyana’s cost, bridging the region’s many rivers, and construct more than 1,200 km of newly paved roads. It also aims to create a port authority.

Substantial progress is already being made on improvements to Guyana’s international airport, where an upgrade that includes lengthening the runway to accommodate any commercial class airline is nearing completion, Patterson said. Upgrades are also being made at an airport bordering Brazil.

Patterson pointed out that Exxon Mobil is currently the only operator in the country. But more are expected, he added, so the country is preparing for that.

Even as Guyana prepares to begin producing oil next year, it is also moving toward renewables. The country has set an ambitious goal of achieving 100% renewable energy by 2025, he said. Potential exists in wind, solar and hydro.

“We want Guyana to be seen as a clean, green sustainable and secure investment destination,” Gaskin said, “and that image is going to depend heavily on the tone that we set in the early days as an oil producer.”

Velda Addison can be reached at vaddison@hartenergy.com.

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