(Upstream, Gareth Chetwynd, 26.Sep.2019) — As development on Guyana’s Stabroek block continues apace, it is worth considering that the Liza development took form in an era when low oil prices demanded that offshore projects attain new levels of efficiency.
ExxonMobil adopted a strategy of achieving the most aggressive ramp-up ever attempted in a new deep-water frontier, helped by SBM Offshore’s Fast4Ward concept for standardised floaters.
Cynics might suspect that the dash for production was motivated by a desire to get ahead of any political moves to force a re-negotiation of a Stabroek contract claimed by some to be generous to the oil companies.
Yet, while attractive rates of return do indeed make the Stabroek field development projects a winner with shareholders, changing times mean the decision to opt for fast-track development seems well timed in a number of ways.
Guyana is hardly a bastion of political stability and has been embroiled in a long-running constitutional crisis since the administration of President David Granger lost a confidence vote late last year.
The political future may be uncertain, and complaints about the Stabroek contracts may rumble on, but the prospect of jobs and prosperity have clearly persuaded leading politicians that taking on the oil companies is not the vote-winner this time around.
Looking at it more globally, Guyana’s low-cost oil also starts to look like a welcome source of supply if tensions in the Persian Gulf stay high.
Similarly, ExxonMobil’s turbocharged ramp-up today looks like a clever move to squeeze the most value out of its traditional fossil fuel competence at a time when everyone in the oil industry is getting on board the energy transition train.
Brazil has woken up to this, and is in a hurry to produce as much pre-salt oil as possible while it is still attractive.
As for Venezuela, so-often caricatured as the oil El Dorado coveted by international oil companies, who would bet now on the Orinoco belt bitumen ever being produced past a tiny fraction of its recoverable resource base?
This is not to say that Guyana or ExxonMobil should sit back and expect an easy ride.
History endorses the concerns and the demands for good governance of new oil riches, while oil companies cannot ignore the dangers currently being posed to Guyana’s fragile democracy.
The Granger administration has arguably flouted Guyana’s own constitution by failing to hold elections in a timely fashion after a ruling by the Caribbean Court of Justice (CCJ) upheld the no-confidence vote.
Claudette Singh, the recently-appointed chairwoman of Guyana’s electoral commission (GECOM) agrees with the argument that political uncertainty undermines Guyanese institutions, compromises economic opportunities and delays development.
This argument is correct. By holding full and fair elections, Guyana will be able to consolidate its image as a country committed to modernity and governance by the rule of law.
The bad faith that tainted the no-confidence vote was not an edifying event for Guyana, but holding elections soon after Liza starts producing its oil could be a symbolic and energising moment for the country.
Industry consultancy Wood Mackenzie has predicted that oil revenues from Liza could triple Guyana’s gross domestic product by 2025.
These riches carry responsibilities, and any new government should continue the work of its predecessor in seeking to put in place modern instruments of good governance and — it is to be hoped — a regulatory framework that would encourage ExxonMobil and partners to monetise gas, bringing cheaper energy to the population.