Guyana’s new oil production may generate similar wealth per person as Qatar, Kuwait and Norway. But what should be done with the gas – and is the industry going to be well governed? Future Energy Partners discussed it in a webinar organised by their partner Finding Petroleum

The South American country of Guyana started producing oil in 2020 and production is expected to be 750 kbopd by 2025. With a population of just 800,000, this could mean a hydrocarbons income per person similar to that in Norway, Qatar or Kuwait.

The oil is deepwater, produced to FPSOs, and comes with associated gas.

While the oil can be discharged to a tanker, there are several options for gas: export via pipeline, floating liquid natural gas (LNG) facilities with tanker export, or re-injection in the reservoir.

We heard that Exxon has plans for a gas to electricity project which would send gas to shore for power generation via a 120 km $1.3 bn pipeline. This would provide a cleaner option for Guyana’s electricity generation, the majority of which uses fuel oil with a much greater carbon footprint than natural gas.

However, the estimated 50m cubic feet per day for electricity generation is a very small portion of the over 1 bn cubic feet per day rate at which the project is ultimately predicted to produce on plateau.

With no existing infrastructure for gas transport, the gas would have been flared in projects developed in the past, but today there are environmental concerns about flaring – from the CO2, methane from the 2 per cent unburned gas, and particulates, noise and heat.

The sole operator in Guyana, ExxonMobil, is currently reinjecting the majority of the gas back into the reservoir after using some for power generation. But there is still gas being flared while systems are in the ‘start-up’ phase. It also means that the proportion of gas in flows coming up through the production wells (technical term is gas oil ratio) will progressively rise.

A broader concern is quality of the hydrocarbon governance. Dr. Zainab Usman, a senior fellow, and director of the Africa Programme at the Carnegie Endowment for International Peace in Washington, D.C. is quoted as saying, "whether revenues remain hidden or aggravate socio-political problems will depend on Guyana's mechanisms for checks and balances."

Alison Redford, an advisor to governments (including Guyana) and former Premier of the Canadian Province of Alberta, speaking in the webinar, expressed confidence in the Guyanese government’s ability to manage the development.

She explained that a newly elected government is pushing for higher environmental performance, including an agreement for ‘carbon neutrality’, plans to take the gas to market, and introducing fines on the operator for flaring. Exxon has been fined US$4.5m so far for flaring.

Ms Redford emphasised the importance of making environmental plans right at the start of any project.

Patience

David Bamford, a former lead of BP’s global exploration program, speaking at the webinar, said he was impressed by the patience ExxonMobil had shown in developing the fields, since it first started exploring in the 1990s. This was under Mobil, a company which merged with Exxon in 1998.

Other companies had already tried an approach Dr Bamford call ‘trend ology’, expecting to find the same thing in Guyana as they find on the equivalent area of the West African coastline, and also in Suriname and French Guinea, but it didn’t work.

And the successful wells drilled in Suriname tended to more gas than deepwater oil discoveries in Guyana, so they would be much harder to commercialise.

Exxon seems to have developed “a profound understanding of petroleum systems,” he said, making maps of the source, reservoir and seal. This included analysing the depositional system, source rock maturation, hydrocarbon expulsion, migration, and where in geological time it all happened. This was supported by high quality 3D seismic and attribute anlaysis.

“I would say this is terrific hard work, there are no short cuts, you can admire Exxon's patience above all.”

Just 1000km away from the Guyana coastline is Barbados, whose prime minister, Mia Mottley, gave “maybe the best speech at the COP 26 climate change conference,” with Barbados under high risk from changes in climate and sea level, Dr Bamford said.

Dr Bamford was personally involved in BP’s work to develop oilfields in Angola and the Niger Delta, which were similar projects in that they were new deepwater developments. But they were developed in an era (1990s) when there was much less environmental concern, and decisions were made purely on whether they would make money.

Big deepwater oil projects can be extremely profitable. “If you have done enough appraisal to understand the reserve base well, and you have a good reservoir, then an FPSO based system gives you the opportunity for early development, early first oil.”

“When you start looking at the economics, you start understanding why companies like BP abandon places like the North Sea and say, ‘we want to spend our money in this sort of system,’” he said.

There are developments in West Africa at a similar stage, in Mauritania / Senegal, and in Namibia. For the ‘Tortue’ project in the border of Mauritania and Senegal, there are definite plans to liquefy gas and export to Europe. But in Namibia, so far there are only early-stage plans for oil production, he said.

One difference between Guyana and the African projects is that Guyana is considered a ‘middle income’ country by the World Bank, while many African countries are the poorest in the world, in particular with respect to energy poverty. This means there is more resistance in Africa to any environmental measures which may prevent a development project from proceeding, he said.

KeyFacts Energy Industry Directory: Future Energy Partners   l   KeyFacts Energy Industry Directory: Finding Petroleum

If you would like a complimentary 7-day trial to our Energy Country Review resource, free access to our daily news alert service, details of marketing opportunities or if you would like to contribute to KeyFacts Energy, click here. We can provide access, sign you up, send full details or set up a quick online meeting to review our services in more detail.