Guyana Growth Engine Revs Up at Right Time

Guyana’s star as the world’s newest petrostate keeps rising. Exports boomed last year, more than doubling to average 279,000 barrels per day in 2022, per Kpler data. Key fields including the Exxon Mobil-led flagship Liza field are performing better than expected and pushed well past nameplate capacity, with Liza output currently averaging some 380,000 b/d. A third phase — from the Prosperity floating production, storage and offloading (FPSO) unit, which arrived in Guyana this week — is poised to lift output to 600,000 b/d by 2024. The fourth 250,000 b/d unit, Yellowtail, is due on line in 2025, while plans for a fifth are being reviewed by environmental authorities, with first oil penciled in for 2026. The consortium recently estimated reserves at nearly 11 billion barrels, and partner Hess has teased the possibility for up to 10 total FPSOs. Projections of future output point to around 1.2 million b/d by 2027, making Guyana one of the most important sources of non-Opec production growth in the world in the medium term. An ambitious pace of exploration continues to pay dividends: nine discoveries were made last year, and 10 wells are planned for 2023. There is particular excitement over the Fangtooth find, which could underpin a seventh FPSO.

Guyana has played a key role in helping supply Europe in the aftermath of the Ukraine war, as buyers search for alternatives to Russian Urals crude. The country exported 49% of its crude to Europe in 2022, some 137,000 b/d. The Netherlands, Italy, the UK, Spain and Germany are the top five European buyers, according to Kpler data. Guyana’s Liza (32° API) is on the dividing line between sweet and sour and can stand in for Urals without the need for sulfur removal, while its Liza Unity Gold (35° API) is a close analog to the North Sea’s Brent blend. Beyond Europe, Guyana also exports a sizable share of its production to the US, some 76,000 b/d in 2022, most via the Trans-Panama pipeline. The top three US buyers have been Chevron’s El Segundo and Marathon Petroleum’s Wilmington refineries, both near Los Angeles, and PBF’s Martinez facilities near San Francisco.

The potential of Guyanese gas is also coming into view. Exxon expects to take a final investment decision (FID) by this quarter on a $900 million-plus gas-to-power project to bring electricity to Guyana; the 300 megawatt plant is designed to process some 50 million cubic feet of gas per day. Gas-fired power will lower emissions from current fuel oil feedstock. Given Guyana’s modest power needs, there is also optimism around potential LNG exports in the future. Exxon country manager Alistair Routledge said the primary Liza reservoir — given its high oil cut — does not have much associated gas. But reservoirs to the southeast near the border with Suriname possess a different mix of hydrocarbons including a higher gas-oil ratio. The company is now beginning to tackle the “puzzle” of development of the different resources across the block — and whether gas would be best sent to shore or exported.

The economic impacts have been profound. GDP ballooned by 62% last year — with 11.5% growth in non-oil real GDP, per the finance ministry. But Guyana still has unfinished business when it comes to building out frameworks and institutions to facilitate strong governance and avoid the dreaded “resource curse.” The government has taken a raft of actions, including a local content law, audits of cost-recovery provisions and various measures to improve accountability in oversight. But it is still working to firm up its petroleum law and production-sharing contract framework, the incompletion of which has delayed a bid round for 11 shallow-water and three deepwater blocks by three months to Jul. 15. Nor has it established a formal Petroleum Commission. Guyana was suspended last year from the Extractive Industries Transparency Initiative (EITI) after failing to submit a report on 2020 activities, although it is targeting a new July deadline to get back in. The EITI’s review of the country’s 2019 data gave it a "relatively low" score of 52, citing weaknesses in evaluations of outcomes, stakeholder engagement and transparency.