Petrobras to Boost Oil Output in 2019, Cut Debt $10 Billion – CFO

(Reuters, Devika Krishna Kumar, Simon Webb, 17.Sep.2018) — Brazil’s state-run oil giant Petróleo Brasileiro SA aims to raise output as much as 10 percent to around 2.3 million barrels per day (bpd) in 2019 and cut net debt by $10 billion (7.62 billion pounds), Chief Financial Officer Rafael Grisolia told Reuters.

The world’s most indebted oil company is on course to reduce debt to $69 billion by the end of this year despite falling short of its $21 billion asset sales target, Grisolia told Reuters in an interview in New York late Friday.

The firm has significantly reduced its net debt from the $106 billion it had accumulated in 2014 to finance development of massive deepwater Atlantic oil fields. Then, Petrobras lost investor confidence as oil prices fell, a corruption scandal engulfed the company and losses from government fuel subsidies mounted.

Petrobras aims to cut net debt by a further $10 billion in 2019 to reach a ratio of 2 times net debt-to-EBITDA, he said. The firm will continue cutting debt until the ratio hits 1-1.5 times, he said, which would put it in line with global oil majors.

“If you look at our direct competitors and peers like Chevron, Exxon and BP, we need to look for a more light capital structure,” Grisolia said.

The firm should reach a ratio of 1.5 in 2020 as part of its next five-year business plan, he said, although that would depend on international oil prices and other variables such as foreign exchange rates.

Over the next 5-6 years, once the firm had achieved debt restructuring targets, Petrobras may consider foreign investments to facilitate exports of rising output from the development of the prolific deepwater pre-salt fields, he said.

The firm may invest in terminals abroad to receive liquefied natural gas (LNG), he said. That would help Brazil export more gas, he added.

Exxon Mobil, BP and Royal Dutch Shell RDSA.L are among firms that plan to invest billions of dollars in developing deepwater Brazilian energy reserves in coming years. Brazil is expected to account for a large share of the rise in global oil and gas output from non-OPEC countries.

OIL PRICES HELP

Oil production is expected to rise by about 8-10 percent next year from about 2.1 million barrels per day (bpd) in 2018, Grisolia said. That should contribute to increased revenue, he added.

Crude prices rallied to three-and-a-half year highs this summer as global supplies tightened, leading to higher fuel prices.

Higher oil prices than the company estimated in its 2018 budget have raised revenue and allowed Petrobras to hit its debt reduction target, he said. That compensated for the $7 billion from asset sales that Petrobras expected to receive this year, he added.

The company has already received $5 billion from sales and will receiving another $2 billion before the end of the year, he said.

“All the divestment and cash from divestment will help, but we don’t necessarily need them to achieve the target of $69 billion by the end of the year,” he said.

FUEL SUBSIDIES

Earlier this year, a nationwide truckers’ protest over rising diesel prices paralysed Latin America’s largest economy and forced the government to lower diesel prices through tax cuts and subsidies.

That hurt Petrobras’ share price as investors worried the firm would again lose cash to subsidize fuel sales.

The firm expected to receive 2 billion reais to 2.5 billion reais from the country’s oil regulator within two weeks to compensate for subsidies, Grisolia said.

Subsidies have made it less profitable for the private sector to import diesel, he said, but some imports continued and he did not foresee any fuel shortages.

“Although the volume of imports to Brazil is lower, they are not zero, they are happening.” he added. “We do recognise that margins are tighter.”

Petrobras is running refineries close to maximum capacity and importing some fuel, he said.

Petrobras has a gasoline hedge in place to cushion the impact of fuel price volatility and is considering a diesel hedge. The cost of the hedge was marginal, Grisolia said.

Banks that Petrobras typically works with for currency operations were executing the fuel hedge, he said, such as Goldman Sachs, Bank of America, Bank of Brazil and Citibank.

Petrobras has hosted meetings with economic advisors to presidential candidates ahead of wide-open elections next month. Grisolia said talks had been positive, but declined to say which teams he had met or comment on their strategies.

Candidates have different plans for the company and the role of the private sector in energy, bringing some uncertainty to investors.

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Guyana’s Jan Mangal Warns of Cash Payouts

(Stabroek News, 7.Sep.2018) — Former presidential advisor Jan Mangal has warned that while cash payouts from oil revenue may have an important role to play in the future, at this point it could be a distraction from the larger goal of clawing back wealth.

His reference in a Facebook post today to  clawing back of wealth will be seen as a reference to the widely criticised terms of the Production Sharing Agreement between Guyana and ExxonMobil subsidiary, Esso Exploration and Production Guyana Limited.

Potential cash payouts have taken centre stage following a recent proposal by Professor Clive Thomas at a forum in Buxton.

Mangal, who has become a vocal critic of aspects of the Exxon deal and the handling of the oil and gas sector here warned that oil companies have various stages in how to make countries forfeit their wealth.

He said:

“1. The oil company and their agents will first influence the politicians. They do this very well. They do it all the time all around the world (in the rich countries as well). This has already happened in Guyana.

“2. Then they will influence the private sector by giving them some contracts. This has already happened in Guyana, judging by the words/ actions of the private sector, judging by how some prominent Guyanese have suddenly gone quiet or changed their tune (lawyers, business people, board members, etc). CSR, grants and donations also are used by the oil companies to influence people and institutions. Please take the money, but it will not help Guyana if we take the money then go quiet and stop visibly speaking out for our country.

“3. Then the most challenging is the influence of the people. But this is doable in Guyana due to its small population, its divisions, its corruption, and its flawed “winner takes all” system of governance. One way to influence the people is by direct cash disbursements to the people. Give people a couple hundred US dollars a year and they may no longer care if the royalty is 2% or 15%. Hence, we have to be careful. Direct cash disbursements have an important role to play in the future (as some have been discussing recently), but not now as an election variable, and not now as a distraction for the people. We need to focus on the more important prize, which is clawing back more of our wealth for ourselves, and also securing that wealth. The wealth will come for everyone if we work hard, do not be intimidated, and do not repeat the mistakes from other countries.

“The odds are stacked against Guyana, but Guyana can succeed”.

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Let’s Use Guyana Oil Funds for Teachers

(Stabroek News, 6.Sep.2018) — Dear Editor: How could we have billions of barrels of oil in 2018 and not be able to pay our teachers a living wage? The value of having the requisite quality of well-paid and motivated teachers of the highest calibre will reverberate across this nation in positive ways that will lift Guyana out of its morass.

Let us for this occasion set aside the multiple ways that funds can be sourced from our treasury to give at least a 25% increase to our teachers for 2018 and a 5% increase for each of 2019 and 2020. Instead, let us source the needed funds from our oil resources now.

What is more important to the development of a nation than the education of our youths? We hear so much of the importance of Science, Technology, Engineering, Math, English and Artisan skills, yet we show great trepidation in taking the necessary actions to ensure that we empower our teachers with the benefits to get the job done and stem the increasing threat of violence, robbery, idleness, underdevelopment of our youth, marginalization of our youth, alarming levels of migration, poor communication skills, a subservient culture, inferiority complex, and contract subjugation.

The leveraging of our oil resources for the benefit of our teachers and support of the sugar industry, among others; will have an immediate and positive impact on the economic welfare of Guyana. What folly it is to create a wealth fund, while our teachers and sugar workers are thrown under the truck.

We often hear of providing for future generations. I beg to differ somewhat and state emphatically that the most important generations are those among us now. And the empowerment of current generations will benefit current and future generations.

Too often our political leaders are servile, complicit, compromised, weak-kneed and spineless to the global powers that we cannot engage with Exxon’s Esso, Hess, and Nexen – mano a mano and negotiate a contract that 1) Pays a realistic signing bonus exceeding US$500 Million, 2) Increases the royalty to at least 10%, and 3) Have the partners of the Government of Guyana that signed on to the 2016 Production Sharing Agreement, disgorge themselves of the foul pre-contract costs that are doubling every two years from US$460 Million at the end of 2015 to over US$900 Million in 2018.

How many billions of barrels of oil must be found before we find ways to monetize the oil discoveries to fund our teachers and sugar industry now?

In the midst of the Exxon’s Esso oilgreeopoly we have the aptly named “Wood” McKenzie agent releasing a report dated August 31, 2018 – noting that Guyana’s Liza complex located in the Stabroek block, accounts for 15% of all conventional crude oil found globally since 2015. “Wood” clusters over several key data points, such as amount of oil in the Liza complex, acreage of the Liza complex, location of the other 85% of crude oil found since 2015, and unsurprisingly, the amount of royalty for the owner of the oil: Guyana.

Wood McKenzie then gloats over the triple play for Esso, Hess, and Nexen, comprising of attractive fiscal terms, scale of resource, and oil reservoir quality.

How foolish it is that we have billions of barrels of oil in our backyard and we can’t pay respectable salaries for our teachers and support our sugar industry. Are our negotiating skills so hollow and inept that we can’t use monetary value leverage, with the billions of barrels of oil, to benefit Guyanese in need now; starting with our teachers, sugar workers and nurses.

More probably the failure to leverage the billions of barrels of oil has more to do with the despicable 2016 oil contract that Guyana signed away with Exxon’s Esso and its partners for a measly 2% and other superficial benefits.

With 123 Billion acres of land and water on earth – 29% land and 71% water; our beloved Guyana has been blessed by nature, providence and divinity to have Guyana’s Stabroek Block, comprising 0.005% of the earth surface and containing billions of barrels of oil offshore. Let us have the courage to demand that the resources in our 0.005% offshore, secures a contract that is best for Guyana’s ascendancy and provides a livelihood commensurate with our oil wealth: for our teachers, sugar workers, nurses, pensioners, youths and provide financial support for our industries and build infrastructure that will propel us to developed country status.

Yours faithfully,

Nigel Hinds

***

Tullow Oil to Drill First Guyana Well in 3Q:19

(Reuters, 5.Sep.2018) — Tullow Oil plans to drill its first well in the much-watched Guyana offshore basin in the third quarter of next year in its Orinduik licence bordering discoveries by Exxon, a spokesman said on Wednesday.

Exxon and U.S. partner Hess Corp have said that more than 4 billion barrels of oil equivalent could be recovered from the Stabroek block off Guyana, which is part of one of the world’s biggest oil discoveries in the past decade.

Tullow owns 60 percent and Eco Atlantic Oil and Gas 40 percent in Orinduik. Total has an option to buy 25 percent from Eco.

“Hammerhead-1 is located approximately 7 km from the Orinduik licence boundary … Hammerhead-1 found material oil in turbidite channel systems,” the Tullow spokesman said of a recent Exxon discovery in the Stabroek block.

“Our 3D seismic (data), which includes Hammerhead, shows that these channel systems extend up-dip (?) into the Orinduik licence. We will now pick the well location for our first well on this licence and remain on track for drilling that well in the third quarter of 2019.”

Tullow also has a 37.5 percent stake in the Kanuku licence offshore Guyana alongside Repsol and Total. It also owns stakes in two blocks off Guyana’s neighbour Suriname, where its partners are Ratio, Equinor and Noble.

(Reporting by Shadia Nasralla; Editing by David Goodman and Mark Potter)

***

How Will Guyana Deal With Its Oil Windfall?

(CNNMoney, Talib Visram, 4.Sep.2018) — The South American country with the smallest GDP is about to burst with oil.

ExxonMobil found oil off Guyana’s coast in 2015, and believes the reserves are big. Conservative estimates project to about 4 billion barrels. Some experts think there’s more to be found in the country’s 6.6 million-acre Stabroek Block.

But how Guyana prepares for the windfall from a newly discovered fossil fuel repository will have big ramifications for its future.

For a country with a population of fewer than 800,000 and a GDP of slightly more than $6 billion, the discovery is life changing.

“There’s a realistic chance of this transforming the economy,” said Pavel Molchanov, senior vice president and equity research associate at Raymond James. “It’s particularly impactful for a small country like Guyana.”

When the first oil starts to flow, which ExxonMobil hopes will be in 2020, Guyana could reap billions almost immediately.

By 2025, ExxonMobil wants to produce 750,000 barrels of oil per day.

History contains numerous cautionary tales about countries that have squandered a sudden surge of riches.

Venezuela struck oil centuries ago, but in 1998 the government of Hugo Chávez installed political loyalists into top jobs in the nationalized oil industry and began diverting the revenues into social programs. The country failed to reinvest into its oil infrastructure and when oil prices crashed, so did Venezuela’s economy. Now, even basic goods like food and medicine have to be imported. Hyperinflation is soaring and the IMF predicts it’ll hit a rate of 1,000,000% by the end of 2018.

Equatorial Guinea’s also squandered its oil windfall, but through wanton corruption. Between 2000 and 2013, the small West African nation brought in $45 billion of oil revenue. But it remained one of the poorest countries because the dictatorial government went on indulgent spending sprees in France.

Corruption, infrastructure and unexpected market forces could present challenges for Guyana, too.

The democratic republic comprises two political parties made up of descendants of African slaves on one side and descendants of Indian indentured servants on the other.

The fear is that the government in power could unfairly favor its ethnic constituents.

At the moment, the Afro-Guyanese party, the PNC, is running the government. But there’s an election in 2020, which could decide who controls the purse strings.

“I wouldn’t discount civil unrest, even for such a small country,” said Eileen Gavin, senior politics analyst at Verisk Maplecroft.

Guyana should also be aware of “Dutch disease,” a phenomenon in which existing industries are forgotten in favor of a new one. Guyana currently makes most of its revenue from exporting gold, bauxite, sugar and rice.

Some countries have handled windfalls well, and not spent everything at once. Notably, Norway set up an “oil fund” for investing surplus revenues to benefit future generations.

Most experts agree that Exxon’s contract with Guyana is favorable toward the oil giant. The IMF recently advised the Guyanese government to revise the contract for future deals, stating that its tax laws are “well below what is observed internationally.”

But some say that a contract in Exxon’s favor at this point is to be expected, given Guyana’s lack of experience and infrastructure for the extraction.

“Nothing had ever been found in Guyana before,” said Ruaraidh Montgomery, senior analyst at Wood Mackenzie. “So, it’s high risk in a frontier area. They needed to offer appealing fiscal terms to attract investors.”

And as the oil is tapped and more is found — and the investment risks disappear — Montgomery said Guyana, a “world-class hydrocarbon basin,” would probably tighten its future contracts.

For now, Guyana is doing everything right on paper in preparation, said Gavin. It’s due to establish a sovereign wealth fund this year, and has joined the EITI, an organization that helps countries “manage hydrocarbon reserves in a fiscally responsible manner.”

But it’s still too early to tell. “The proof of the pudding will be in 2020, when the revenue starts to flow,” Gavin said.

***

Kamla Floats Guyana Help for Trinidad Refinery

(Stabroek News, 2.Sep.2018) — Trinidad Opposition Leader Kamla Persad Bissessar has raised the prospect of Guyana oil being used to rescue the beleaguered Petrotrin refinery but Prime Minister Keith Rowley last evening said the aged facility had no reasonable prospect.

Defending the decision by his government to close the over 100- year-old refinery, Rowley yesterday said he had no choice as the climbing debt was too much to saddle his country’s taxpayers with.

“Petrotrin was overburdened with debt. The net debt at financial year-end 2015 amounted to TT$11.4 billion,” Rowley told the twin-island nation in an address which was live streamed.

According to the Trinidadian Prime Minister, “Left as it is, Petrotrin will require an immediate TT$25 billion cash injection just to stay alive” and “there is no way that the company can find this money” as “no financier will lend it because the company simply will not be able to repay such an additional loan.”

He believes that it would be more feasible for the country to focus on exploration and production and export the 40,000 barrels of oil equivalent per day it produces and import the 25,000 barrels it needs for consumption.

“Today with a refining capacity of 140,000 barrels per day, the local production available for refining is 40,000 barrels. We really depend, mostly, on a daily importation of 100,000 barrels per day, which we refine at a significant loss.”

He would later add, “We consume less than 25,000 (barrels) of refined products. It makes far more sense to export the 40,000 that we produce and import what we need. Each barrel will be sold externally on the open market.”

Last week Tuesday it was announced that Petrotrin’s refining and marketing operations would be shuttered. With TT$8 billion in losses in the past five years and a bullet payment of US$850 million due in 2019, Petrotrin chairman Wilfred Espinet had said that terminating its refining and marketing operations and retrenching 1,700 permanent and casual employees was the only way to save the company after 100 years of operations in the industry. Petrotrin also owes the Trinidad Government more than TT$3 billion in taxes and royalties.

Rowley’s position last evening came even as that country’s former Prime Minister, Persad Bissessar called on him to pursue negotiations with Guyana to refine its oil there in order to save the company.

“I understand Guyana has found another well … can we not group in some way and find a way to work together as a CARICOM where we can help them refine their oil,”  she told reporters on Saturday at her Legal Clinic Siparia Constituency Office and which was reported by the Trinidadian newspaper Newsday. Guyana won’t begin pumping oil before 2020.

“I am calling on him to let good sense prevail to be very cautious in making such a drastic and dangerous move, this will have a ripple effect throughout the economy and the country…of course they (Guyana) will build their own refinery but we have one and many of the units in the refinery at Petrotrin are new, so a lot of money has been invested on the refinery side and now they are shutting it down. It is total nonsense,” she added.

Currently, it is still unclear what the Guyana Government would do with its share – 12.5%  – of profit oil from 2020 onwards, from its agreement with ExxonMobil but one government official said that several options are being explored.

One Minister yesterday said that it “Is an ongoing discussion and several workshops and engagements have been held. The options are to ask Exxon or to market, do our own marketing or take our share in kind and send it for refining somewhere. Several proposals have been received and the final decision-making process will be guided by the Department of Energy.”

Stake

Sources have told this newspaper that it has been suggested to the government that Guyana “takes a stake in the Petrotrin refinery and in this way acquire a strategic asset.” In that way, according to one source, Guyana could have its share of oil from the agreement with ExxonMobil and affiliates refined closer to home and secure jobs for persons in both countries.

But while it is still too early to tell what the Guyana and Trinidad governments will decide, a source said, “Guyana may gain a controlling or sizeable share and develop refining capacity and meet many of the outcomes from having a refinery without having to pay as much. Additionally, we can ensure that a percentage of labour is Guyanese who will have to be trained and also we can address some CARICOM integration goals.”

Last evening, the Trinidad PM  made no mention of Guyana or even hinted at restarting the refinery although he said that Petrotrin’s refinery assets would be placed in a separate company.

“We largely operate a business that is largely dependent on foreign oil inputs. All the other refineries in the region that had this same business model, Aruba, Curacao and St Croix have long since closed because they saw it as not a viable business,” Rowley said.

“Our Pointe-à-Pierre refinery is 101 years old and has reached the end of its commercially viable days it is now at a state where it is haemorrhaging cash and the cost of rehabilitating it is way more than its potential to ever be potentially viable, competitive or sustainable. The only commercially sound and viable option is to close the refinery, export Petrotrin’s oil and to import products,” he also noted.

The government of the US Virgin Islands last month approved a proposed US$1.4-billion operating agreement between itself and Arclight Capital Partners LLC, Boston, to restart the former Hovensa Refinery at Limetree Bay, St Croix. The refinery is scheduled for opening by the end of 2019. With an initial crude processing capacity of about 200,000 barrels per day according to the USVI government, the investment is expected to create 1,200 local jobs during construction and as many as 700 permanent jobs upon restarting the facility. The Hovensa refinery was a joint venture between Hess Corporation and Petroleos de Venezuela until it closed in 2012.

Rowley said that the Petrotrin model has outlived its usefulness and it was now time to accept that and equip the company to stand the test of the ever changing global economy.

“Petrotrin’s model has become obsolete and uncompetitive and its operating practices are inefficient. The company was nowhere in line with global industry standards and best practices. In fact the company’s operations are identified as being among the most inefficient in the world. The company if left as it is would continue to operate at a loss at a rate of aboutTT$2B a year. It is not a viable option, to do so is to saddle future generations with a huge debt burden. If not dealt with now, the negative effects will get worst and it simply cannot work. To break even would cost TT$7B and would involve significant staff cuts and an ultra-low sulphur refinery,”

He believed that the “Gross mismanagement of the national patrimony within the last decade” such as many cost overruns and delays in projects for the company  was part of the reason government is now saddled with the large debt.

A committee, headed by TT’s former Energy Ministry Permanent Secretary, Selwyn Lashley, had reported on the dismal state of the company since 2016 and the report showed that in addition to receiving huge subsidies from the state, Petrotrin was not paying its fair share of taxes collected to government.

“Taxes and royalties owed to Government amounted to $3.1 billion as at February 28, 2017. The company was not complying with the tax laws and even when it collected taxes from companies that paid their taxes to Petrotrin for onward transmission to the Ministry of Finance, Petrotrin was huffing and utilizing those monies in its own operations.”

“Money that should be turned over to the Ministry of Finance is held within the company and that is illegal,” he added.

***

Energy MoU Soon Between Guyana, Trinidad

(Stabroek News, Marcelle Thomas, 2.Sep.2018) — A long-delayed Memorandum of Understanding (MoU) between Guyana and Trinidad on energy cooperation is expected to be signed in the coming weeks, according to Trinidad and Tobago’s Minister of Energy, Franklin Khan.

“The Government of Trinidad and Tobago is due to sign a memorandum of energy cooperation in the coming weeks, most likely there in Georgetown,” Khan told Sunday Stabroek via telephone.

The minister did not go into the details of the agreement and said that would be disclosed after the signing. He, however, emphasised that his government is willing to offer its assistance as this country prepares for first oil. “When the Government of Trinidad and Tobago is in Guyana, yes we will offer help and advice to the Government of Guyana on your emerging oil and gas sector and obviously seek their concurrence…,” Khan said.

No official from government was available for comment or to give details on what the agreement would contain. Minister of State Joseph Harmon, who is the minister responsible for oil and gas matters, was out of the country and would not be back until next week, his office said. Several calls to the recently-appointed Head of the Department of Energy, Dr Mark Bynoe, went unanswered.

Since 2016, discussions commenced between Guyana and Trinidad on an MoU under which the latter would provide various forms of support to the oil and gas sector in Guyana. Initiated during a visit here in 2016 by a Trinidad and Tobago delegation led by the then Energy Minister Nicole Olivierre, the MoU was expected to be signed at the end of that year but that did not happen. At the time, Minister of Natural Resources Raphael Trotman had said that the pact would see Guyana receiving support in a range of areas, including advanced technical training for local personnel in the industry.

News of the proposed energy cooperation agreement between Georgetown and Port-of-Spain comes days after the Trinidad and Tobago government inked an agreement with Venezuela to import natural gas from the Spanish-speaking country. That agreement would see the twin-island republic purchasing some 150 million standard cubic feet of natural gas per day from Venezuela’s prolific Dragon Field.

Meanwhile, sources told Sunday Stabroek that it has been suggested to government that Guyana “takes a stake in the Petrotrin refinery and in this way acquire a strategic asset.” In that way, according to one source, Guyana could have its share of oil from the agreement with ExxonMobil and affiliates refined closer to home and secure jobs for persons in both countries.

Last Tuesday, it was announced that Petrotrin’s refining and marketing operations would be shuttered. With TT$8 billion in losses in the past five years and a bullet payment of US$850 million due in 2019, Petrotrin chairman Wilfred Espinet had said that terminating its refining and marketing operations and retrenching 1,700 permanent and casual employees was the only way to save the company after 100 years of operations in the industry. Petrotrin also has a TT$12 billion debt and owes the Trinidad Government more than TT$3 billion in taxes and royalties.

According to the Trinidad Guardian newspaper, the Oilfield Workers’ Trade Union (OWTU) leader, Ancel Roget, had warned that the refinery will be sold to private investors, but Espinet had dismissed this, saying, “There is no likelihood of that refinery being sold.”

Khan told Stabroek News that Petrotrin’s closure does “not really” affect the opportunity for Guyana to still look to T&T to refine its oil or look elsewhere. “We have decided to close the refinery because of its present configuration and cost structure. It is losing money and it’s not sustainable in its current form,” he said. “However, other business models could be proposed,” he added.

‘Mindful’

But while it is still early to tell what the Guyana and Trinidad government will decide, a source said, “Guyana may gain a controlling or sizeable share and develop refining capacity and meet many of the outcomes from having a refinery without having to pay as much. Additionally, we can ensure that a percentage of labour is Guyanese who will have to be trained and also we can address some CARICOM integration goals.”

A government official believes that Guyana has to be mindful of such a move, given the recent agreement Trinidad inked with Venezuela and this country’s longstanding border controversy with Venezuela. “We have to be mindful of a growing relationship between Venezuela and Trinidad and Tobago and won’t want to compromise our energy security by having the asset in a nation where the government grows uncomfortably close with our main detractor…Venezuela may try to influence the [Trinidad and Tobago’s] relationship with Guyana,” the official said.

Khan was asked about possible perceptions and future implications of his country’s agreement with Venezuela but would only say, “We know of all the geopolitics and so on and will answer those questions then.” As to whether the government of Guyana ever discussed acquiring a stake in the now defunct Petrotrin refinery with Port-of-Spain, Khan said neither him nor his government has ever had that discussion.

Currently, it is still unclear what government would do with its share – about 14 percent – of profit oil from 2020 onwards, from its profit sharing agreement with ExxonMobil. As of last year, before the Department of Energy was formed, Trotman had ruled out this country investing in an oil refinery.

“We have done some studies on the feasibility of an oil refinery. We have opened that study for public debate and discussions…  Government has concluded that it, as a government, cannot spend US$5 billion dollars in an oil refinery,” he had said.

The US$5 billion sum he referred to was the figure that Director of Advisory Services at Hartree, Pedro Haas, had told government it would cost to build a refinery here. Haas was hired by the David Granger-led APNU+AFC government to carry out a feasibility study for an oil refinery in Guyana. From his analysis, the cost to construct such a facility would be some US$5 billion, with at least half the invested amount lost upon commissioning.

ExxonMobil was asked by this newspaper if it has decided on a refining company to whom it would sell its share of crude. Through its Public and Government Affairs Officer Deedra Moe, the company responded: “We sell crude oil on the open market. ExxonMobil has an equity crude oil marketing group – an integrated operations, logistics and trading team – that operates around the world and is responsible for marketing ExxonMobil’s global production of crude oil and condensates.”

And while Guyana prepares for first oil in 2020, the government of the US Virgin Islands last month approved a proposed US$1.4-billion operating agreement between itself and Arclight Capital Partners LLC, Boston, to restart the former Hovensa Refinery at Limetree Bay, St Croix. The refinery is scheduled for opening by the end of 2019. With an initial crude processing capacity of about 200,000 barrels per day according to the USVI government, the investment is expected to create 1,200 local jobs during construction and as many as 700 permanent jobs upon restarting the facility. The Hovensa refinery was a joint venture between Hess Corporation and Petroleos de Venezuela until it closed in 2012.

Hess is one of the partners in ExxonMobil’s 6.6 million acres Stabroek Block operations, which last week announced its ninth oil discovery.

Moe was asked if ExxonMobil was looking at refining in St. Croix and responded, “I am not aware of anything regarding St. Croix.”

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Guyana Leader Cringes with Each Oil Discovery

(Kaieteur News, Abena Rockcliffe-Campbell, 31.Aug.2018) — Ordinary Guyanese who do not fully understand the fiscal regime of Guyana’s deal with oil giant, ExxonMobil might get excited each time a new discovery is made. On the other hand, Opposition Leader Bharrat Jagdeo indicates that he cringes.

Yesterday, ExxonMobil announced another find offshore Guyana. The discovery of approximately 197 feet (60 metres) of high-quality, oil-bearing sandstone reservoir at the Hammerhead-1 is the ninth discovery of oil in the Stabroek Block offshore Guyana and the fifth within the last year.
There was a bit of silence from Jagdeo yesterday while speaking about the find. When he began speaking again, he said, “It drifts me off when I think about how much we are losing. It trips me a bit.”

Even though ExxonMobil is already at its ninth discovery, the company is far from exploring most of the Stabroek, which it has control of.
Jagdeo said that it is rather unfortunate that all these discoveries being made are falling under that same contract that most right thinking people have concluded is stacked in the interest of ExxonMobil.

“This ninth discovery will be processed through the same old contract…The thing is that the President has no clear position. When I told him of my concerns, he said that they are strengthening and so moving forward. No specific answers to my questions. I hope you have better luck.”
Jagdeo continued, “I did not get any clear answer but he said that they have just hired somebody to strengthen the department.”

Further, Jagdeo said that during his meeting with the President yesterday, “I raised the issue about the confusion that the government itself said no future contract would be negotiated on the same terms as ExxonMobil. But they are yet to define to the country what the new terms will be.”

Jagdeo told the media that the Opposition is very concerned that while the government declared that it will ensure better terms, “they are proceeding to give the exact same terms that ExxonMobil got through side approaches. You recall our position in the (National Assembly) when that proposal was made to give Mid-Atlantic some similar concessions.”

Jagdeo recalled that the PPP’s position was to defer the handing out of the concession until the framework for future negotiations was arrived at.
Jagdeo said he “asked the President directly, ‘are you going to be tendering future blocks’ but the President did not give any straight answer.

“He agrees that we now have more people who want blocks than we have available. This is the reverse of what we had in the past. I said to him, the only way we can avoid middle men creaming the benefits is to go to tender – auction, so the money will accrue directly to the people, the taxpayers.”
But, according to Jagdeo, the President still could not give perspective on the way forward.

The Guyana reserve is one of ExxonMobil’s biggest assets worldwide.
Discoveries of approximately four billion oil-equivalent barrels were made on the Stabroek Block prior to yesterday’s announcement. Discoveries were made at Liza, Liza Deep, Payara, Snoek, Turbot, Ranger, Pacora and Longtail with the potential for up to five floating production, storage and offloading (FPSO) vessels producing more than 750,000 barrels per day by 2025. Prior to Hammerhead-1, which is located approximately 13 miles (21 kilometres) southwest of the Liza-1.

A second exploration vessel, the Noble Tom Madden, is due to arrive in Guyana in October to accelerate exploration of high potential opportunities and will commence drilling at the Pluma prospect, approximately 17 miles (27 kilometres) from Turbot.

The Stabroek Block is 6.6 million acres (26,800 square kilometres). ExxonMobil affiliate, Esso Exploration and Production Guyana Limited, is the operator and holds 45 percent interest in the Stabroek Block.

Hess Guyana Exploration Limited holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.

***

ExxonMobil Adds Ninth Discovery Offshore Guyana

(ExxonMobil, 30.Aug.2018) — Irving, Texas-based ExxonMobil has made its ninth discovery offshore Guyana at the Hammerhead-1 well, marking its fifth discovery on the Stabroek Block in the past year and proving a new play concept for potential development.

Hammerhead-1 encountered approximately 197 feet (60 meters) of high-quality, oil-bearing sandstone reservoir. The well was safely drilled to 13,862 feet (4,225 meters) depth in 3,773 feet (1,150 meters) of water. The Stena Carron drillship began drilling on July 27, 2018.

“The Hammerhead-1 discovery reinforces the potential of the Guyana basin, where ExxonMobil is already maximizing value for all stakeholders through rapid phased developments and accelerated exploration plans,” said Steve Greenlee, president of ExxonMobil Exploration Company. “Development options for Hammerhead will take into account ongoing evaluation of reservoir data, including a well test.”

Hammerhead-1 is located approximately 13 miles (21 kilometers) southwest of the Liza-1 well and follows previous discoveries on the Stabroek Block at Liza, Liza Deep, Payara, Snoek, Turbot, Ranger, Pacora and Longtail. Those previous discoveries led to the announcement of an estimated recoverable resource of more than 4 billion oil-equivalent barrels discovered to date, and the potential for up to five floating production, storage and offloading (FPSO) vessels producing more than 750,000 barrels per day by 2025.

There is potential for additional production from significant undrilled targets and plans for rapid exploration and appraisal drilling. A second exploration vessel, the Noble Tom Madden, is due to arrive in Guyana in October to accelerate exploration of high potential opportunities and will commence drilling at the Pluma prospect approximately 17 miles (27 kilometers) from Turbot.

Liza Phase 1, which is expected to begin producing oil by early 2020, will use the Liza Destiny FPSO vessel to produce up to 120,000 barrels of oil per day. Construction of the FPSO and subsea equipment is well advanced. Pending government and regulatory approvals, Phase 2 is targeted for sanctioning by the end of this year. It will use a second FPSO designed to produce up to 220,000 barrels per day and is expected to be producing in 2022. A third development, Payara, will target sanctioning in 2019 and use an FPSO designed to produce approximately 180,000 barrels of oil per day as early as 2023.

The Stabroek Block is 6.6 million acres (26,800 square kilometers). ExxonMobil affiliate, Esso Exploration and Production Guyana Limited, is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.

***

Guyana Must Investigate ExxonMobil’s Waste Disposal Plan

(Kaieteur News, 29.Aug.2018) — The Open Society Institute (OSI) is appealing to Government to keep a watchful eye on how ExxonMobil plans to dispose of potentially hazardous waste while operating here.

The OSI is an international body that aims to shape public policy to promote democratic governance, human rights, and economic, legal, and social reform.

According to OSI, the environmental consequences of oil are substantial throughout the entire process of development. The Institute said that each stage of the process—exploration, onshore and offshore drilling, refining, pipelines and other forms of transportation—poses serious risks to the ecology and public health.

It said that every environmental medium—air, water, and land—is affected. The Institute said that the degree of environmental harm is determined by operator responsibility, government oversight, and conditions in particular ecosystems. Even in heavily regulated environments, some damage occurs it said.

Further to this, the Institute explained that the disposal of oil wastes from offshore drilling operations is another significant environmental concern. In this regard, the Institute said that an oil platform uses nearly 400,000 gallons of sea water daily as drilling fluids in the extraction process, and, following its use, this oil-tainted water is discharged back into the ocean.
The Institute said, “One of the apparent impacts of offshore discharges has been mercury pollution; eating contaminated fish is increasingly regarded as a substantial cause of human exposure to mercury.

A study found that mercury levels in the mud and sediments beneath oil platforms in the Gulf of Mexico were 12 times higher than acceptable levels under U.S. Environmental Protection Agency standards.”

The OSI said that the only way to solve the problems caused by offshore discharges is to capture the wastes and dispose of them in a properly lined waste disposal site on land. It said that Guyana’s Environmental Protection Agency needs to keep a close eye on this area.

(SEE LINK FOR FURTHER DETAILS)

***

Mexico’s New President To Deal Blow To Oil Industry

(Oilprice.com, Nick Cunningham, 26.Aug.2018) — Mexico will likely halt oil auctions for at least two years, dealing a blow to its oil industry.

Mexico’s president-elect Andres Manuel Lopez Obrador (AMLO) will reportedly suspend oil auctions for at least two years, according to the Wall Street Journal, with some experts believing that his administration won’t hold any new oil auctions at all during his six-year term. He has also vowed to review the 107 contracts already awarded to companies through auctions over the last few years to check for corruption, although he has said he would not try to invalidate them so long as they check out.

Also, AMLO wants to revise some of the energy laws that govern the oil and gas sector, which could dramatically alter the landscape for foreign oil and gas companies. He long opposed the historic reforms that ended seven decades of state control over the energy sector, although he moderated his position during this year’s presidential campaign. Rolling back the reforms would be exceedingly difficult, requiring a change to the country’s constitution.

Instead, AMLO wants more modest, though still significant, legislative changes. The WSJ reports that he will pursue legislative tweaks that bolster the power of state-owned Pemex, while weakening the regulatory body that has pursued a technocratic approach and presided over the oil auctions over the last three years.

AMLO’s desired changes include allowing Pemex to choose its own private-sector partners, without needing the approval from regulators. Current rules require Pemex to partner with the highest bidder for blocks put up for a farm-out. He wants the government to be able to award Pemex with oil blocks directly. And he wants to make Pemex the sole marketer of oil produced by private firms, the WSJ reports.

These changes would amount to a partial rollback of the energy reforms, re-empowering Pemex and government control over the oil sector. Moreover, as president, AMLO chooses the head of Pemex, granting him a lot of leverage over the company. “If licensing rounds are canceled and joint ventures are the only vehicle for entry to the country, it reflects a consolidation of power within” Pemex, Maria Cortez, Latin America Upstream Senior Research Manager at Wood Mackenzie, told Bloomberg in an email. ”That could be viewed negatively by outside investors.”

On top of that, the WSJ says AMLO will push to raise local content rules, which would require a higher percentage of domestic involvement in oil projects. That means that if a company like ExxonMobil or Chevron or some other outside entity wants to drill for oil in Mexico, it would need to source a certain percentage of equipment and services from within Mexico. The idea is to capture a greater portion of the benefits of oil and gas development for the country, while also building up expertise for local industries.

However, many of these changes will be loathsome to the international oil companies, who will view them as onerous burdens that inject higher levels of uncertainty into their investments. Oil companies have repeatedly blamed strict local content rules in Brazil for years of cost inflation and delays.

“If all of this is confirmed, it would send a signal that the continuity of the oil opening may be in doubt,” Pablo Medina, an analyst with Welligence Energy Analytics, a research firm based in Houston, told the WSJ in an interview.

Meanwhile, in addition to the legislative changes to the energy reforms, AMLO’s core energy plan consists of pouring billions of dollars back into Pemex for oil exploration, with a particular focus on revitalizing the downstream sector. He wants $2.6 billion to rehabilitate Mexico’s six aging oil refineries, plus more than $8 billion to build a new refinery from scratch. The idea is to cut down or even eliminate gasoline imports from the United States.

Mexico’s oil production has been declining for over a decade, falling to 1.9 million barrels per day recently, down from 3.4 mb/d in the mid-2000s. The IEA sees output falling by another 130,000 bpd this year, due to the aging offshore oil fields, although that is a narrower decline compared to the 235,000 bpd the country lost last year.

AMLO is aiming to boost production by 600,000 bpd over the next two years, which will be a monumental task. If he is to succeed, AMLO is betting that Pemex will lead the way.

***

Webinar Panelist Discuss All Things Guyana

(Energy Analytics Institute, Piero Stewart, 15.Aug.2018) – The three promised to return to discuss all things Guyana again in six months as the small South American country eyes first oil in 2020.

A three person panel — comprised of Guyana’s Minister of Finance, the Honourable Winston Jordan, Trinidad and Tobago’s Former Energy Minister Kevin Ramnarine, and hosted by Caribbean Economist Marla Dukharan — discussed issues related to Guyana included but not limited to oil, economics, finance, supply issues, infrastructure, and migration, among others (watch the full video below).

What follows are brief highlights as posted during the webinar under the Twitter hashtag #LatAmNRG:

From Kevin Ramnarine …

— “In Guyana, we have moved from 1 to 8 discoveries,” Ramnarine says. He continued: “With an 80% success rate, only 2 wells have been dry.”

— “The whole world is talking about Guyana,” Ramnarine says.

— “Oil production in Guyana is expected to come online at 120,000 barrels per day d in 2020 and peak at 750,000 barrels per day by 2025, according to Exxon,” Ramnarine says.

— “In the early years, Exxon will likely recover Capex. Then, by 2025 we could see an exponential rise in revenues [in Guyana],” Ramnarine says.

— “An infrastructure deficit in Guyana has slowed development in the interior of the country,” Ramnarine says.

— “You want a competitive oil and gas sector that supports that sector,” Ramnarine says.

— “The private sector should take the lead to develop [Guyana’s] infrastructure,” Ramnarine says.

From Winston Jordan …

— “ExxonMobil has put Guyana on the map,” Jordan says.

— “We see ourselves as the Dubai of the Caribbean,” Jordan says.

— “Guyana has infrastructure and human capital resources deficits,” Jordan says.

— “The Guyana tax system is expected to become more efficient in the future,” Jordan says.

— “We have a lot of challenges, but none are insurmountable,” Jordan says.

— “Guyana is putting together a migration policy to give certain benefits to those wanting to return home,” Jordan says.

— “Guyana will seek a loan with the World Bank to assist in the migration process,” Jordan says.

— “There is no definite word yet about a future refinery in Guyana,” Jordan says.

(With special assistance from Melissa Marchand, who moderated the Q&A session).

***

Whither Guyana?

(Energy Analytics Institute, Pietro D. Pitts, 14.Aug.2018) – On a per capita basis, Guyana is already probably the most resource-rich country on the planet, but is still the poorest English-speaking country, and the 2nd poorest overall after Haiti, writes an Caribbean region economist.

As the size of oil discoveries in Guyana begin to suffer from diminishing marginal stock-value, attention is shifting to the billion-dollar question – will Guyana somehow leapfrog itself into the region’s shiny new Norway, or devolve further into resource-cursed-istan? That’s the question posed by Caribbean Economist Marla Dukharan in her August “Caribbean Monthly Economic Report.”

“Like true West Indian cricket fans, we pray despite formidable odds for Guyana’s success but we smell the molasses-like bittersweet stickiness of corruption and all its concomitant dysfunctionality,” she writes.

Guyana’s Oil Outlook: The Nor-way or the Next-Door-Neighbour-way?

To this end, Dukharan along with the Honourable Winston Jordan, Guyana’s Minister of Finance, and Kevin Ramnarine, the Former Minister of Energy in T&T, plan to discuss the oil outlook for South America’s Guyana in a webinar on Wednesday 15 August 2018.

***

Guyana Oil Find Quadruples FDI Flows

(Jamaica Gleaner, CMC, 8.Aug.2018) – Regional commission ECLAC is reporting that foreign direct investments, FDI, in Guyana increased to US$212 million last year in part as a result of the oil and gas sector preparing for First Oil.

The flows nearly quadrupled relative to 2016 when foreign investments in the country were estimated at US$58 million.

Guyana has “bucked the trend” for flows to Latin America and the Caribbean as a region, which contracted 3.6 per cent last year, said the Economic Commission for Latin America.

“FDI grew in all sectors, except in manufacturing,” said ECLAC in a report on regional FDI flows. “The energy sector received US$90 million as part of a first wave of inward FDI related to ExxonMobil’s discovery of major oil reserves off Guyana’s coast. While it continues with its successful exploration efforts, ExxonMobil decided to launch the first development phase of the Liza field with an investment of US$4.4 billion,” the report added.

ExxonMobil expects to begin oil extraction in 2020.

The report also noted that Guyana hopes to take advantage of the international interest in the oil finds to promote other sectors, such as agriculture and mining.

“In the latter, Canadian mining company First Bauxite Corporation announced a bauxite production project valued at US$50 million, with construction of facilities set to begin in 2018,” ECLAC said.

Meanwhile, Guyana is putting together a list of priority projects it wishes to complete with resources provided under the China Belt and Road Initiative.

Under a Memorandum of Understanding signed with China, Minister of State Joseph Harmon said at a press briefing that Guyana will be able to tap into resources from the Belt and Road, which is intended to make available resources to recipient countries for projects related to transportation, and information and communications technology.

Guyana has now joined Panama, Bolivia, Trinidad & Tobago and Antigua & Barbuda as countries in Latin America and the Caribbean that have signed on to the initiative.

***

US Abandons Sanctions to Avoid Owning Venezuela Collapse

(S&P Global Platts, Brian Shield, 7.Aug.2018) – Just more than a year ago, it was not a question of ‘if’, but ‘when.’

As Venezuela’s leftist leader Nicolas Maduro consolidated power in an election derided as a fraud by the international community, the Trump administration readied exacting sanctions on the South American nation’s oil sector.

“All options are on the table,” said a senior administration official during a July 2017 briefing with reporters, adding that sanctions could be imposed in a matter of days. “All options are being discussed and debated.”

Analysts widely expected sanctions on diluent the US was exporting to Venezuelan refineries first, followed by a prohibition, perhaps phased in over a matter of months, on imports of Venezuelan crude into the US. It was unclear if US refiners, who had long imported Venezuelan crude, would be allowed to continue under an interim “grandfathered” arrangement, but analysts mostly agreed that sanctions were coming.

At the time, the US was importing about 800,000 b/d of Venezuelan crude and the administration was mostly concerned about the impact an import embargo would have on US Gulf Coast refineries, which would need to look for new sources of heavy crude.

Oil sector sanctions from the US seemed so likely that then-US Secretary of State Rex Tillerson told reporters that the administration was looking at ways to soften the impact of the sanctions once they were imposed.

“We’re going to undertake a very quick study to see: Are there some things that the US could easily do with our rich energy endowment, with the infrastructure that we already have available – what could we do to perhaps soften any impact of that?” Tillerson, the former CEO of ExxonMobil, said.

A year later, the US is importing less crude from Venezuela (about 530,300 b/d in July, according to preliminary US Customs data), but Gulf Coast refiners, particularly Valero, continue to rely on these imports.

In fact, US refiners may be importing even more, if Venezuela’s oil sector was not seemingly in a death spiral. Roughly one if every five barrels of oil imported by US Gulf Coast refiners comes from Venezuela.

The EIA forecasts Venezuelan oil production to fall below 1 million b/d by the end of this year, down from 2.3 million b/d in January 2016 as joint ventures fall apart and PDVSA, the state-owned oil company, struggles to feed, let alone pay, its workers. PDVSA has notified international customers than it cannot fully meet crude supply commitments and the country’s active rig count has fallen below 30, according to Baker Hughes International Rig Counts.

By the end of 2019, Venezuelan crude oil output is expected to plummet to 700,000 b/d, making it likely that it will produce less than the US state of New Mexico.

“We’ve never seen an industry or a country collapse this fast and this hard,” said EIA analyst Lejla Villar in a recent interview with the S&P Global Platts Capitol Crude podcast. “We’ve never seen anything like this.”

Industry collapse

The downfall of Venezuela’s chief industry, coupled with International Monetary Fund predictions that inflation in the country will skyrocket to 1 million percent by the end of this year, have created an unusual scenario, in which Maduro may even welcome US sanctions on its oil sector. As Venezuela’s economy continues to unravel, leading to surging prices and rampant hunger, Maduro could try to pin the blame on sanctions.

“If you break it, you buy it,” said George David Banks, a former international energy and environment adviser to President Trump. “The White House doesn’t want to own this crisis.”

The US has sanctioned individuals in Venezuela, including Maduro; prohibited the purchase and sale of any Venezuelan government debt, including any bonds issued by PDVSA; and banned the use of the Venezuela-issued digital currency known as the petro. But oil sector sanctions are viewed as the most powerful penalty remaining and one the Trump administration is more hesitant than ever to use.

“There’s already a humanitarian crisis, but we don’t own that, the Maduro government owns that,” Banks said. “We don’t want to lose the people of Venezuela and you don’t want to pursue a policy that jeopardizes that.”

David Goldwyn, president of Goldwyn Global Strategies and a former special envoy and coordinator for international energy affairs at the US State Department, speculated that it would take extreme action, such as a military assault on a civilian rebellion, for the US to now impose oil sector sanctions. “The system is collapsing and this administration does not want to own the collapse,” Goldwyn said.

The path ahead for Venezuela’s oil sector has, likely, never been less certain. And it remains to be seen what a full collapse of an economy looks like. It is clear, however, that the US wants to avoid blame for accelerating that collapse and has abandoned, at least for now, consideration of oil sanctions.

When Venezuela’s oil sector hits rock bottom, the US does not want to be accused of dragging it there.

***

Granger Says Guyana Energy Head Fit and Proper

(Department of Public Information, Guyana, Alexis Rodney, 2.Aug.2018) – President David Granger said today that he is confident of the work that will be executed by the recently appointed head of the newly established Department of Energy, Dr. Mark Bynoe as the unit takes off the ground.

Department of Energy head “fit and proper” – President Granger

Dr. Bynoe, an Environment and Resource Economist was appointed to the post by President Granger. He officially took up the appointment on August 1. According to President Granger, Dr Bynoe will be tasked with identifying qualified persons to be part of the department.

“We have been searching for someone who is experienced, not necessarily in petroleum, but who has the intelligence and the experience to find people who are experienced for the important industry… He knows enough to find people to make that sector functional,” the president told the media today.

He added that the government over the last seven months has been examining the state of the energy industry, especially following the recommendation by Minister of Natural Resources Raphael Trotman that a department be established for this.

Dr. Bynoe has the responsibility of embarking on a four-phase programme for the establishment of the department.

The first phase is administrative in which he will assemble a team of people to work in the department, President Granger said. The second is the issue of rationalisation. The Head of State said the petroleum units, within the Ministry of Natural Resources and other ministries, will have to be transferred to the department of energy. The government is also looking at the operationalisation of the department.

“A lot of work has to be done, we have to advertise for experts all over the world and we have to look at drafting legislation, look at financing and we have to look at all aspects of the operationalisation of the department “.

He said it is “an early day yet”, however, he hopes that much of the work will be completed within the month of August.

***

Guyana’s ‘Astonishing’ Future

(Trinidad Express, David Renwick, 31.Jul.2018) – The US’s leading oil company, ExxonMobil, continues to make discovery after discovery in its Stabroek block offshore Guyana, the latest being Longtail 1 – its eighth so far. The company says this “creates the potential for additional resource development in the south east area of the block.”

Longtail 1 encountered approximately 256 feet of high-quality oil-bearing sandstone reservoir and was drilled safely to 8,057 feet, in water depth of 6,365 feet.

Read the full story online.

***

Guyana: Will its Oil Boom Benefit the People?

(Al Jazeera English, 30.Jul.2018) – Oil companies have identified massive offshore reserves in Guyana, one of South America’s poorest nations. New estimates last week report that more than 4 billion barrels of oil could be extracted from a region known as the Stabroek block, where ExxonMobil expects to start pumping crude from in 2020. The country is poised to become a major energy supplier, but not everyone is optimistic about the potential for oil revenue to benefit Guyanese citizens. So what can Guyana do to avoid becoming another poor, yet resource-rich nation?

On this episode of The Stream, we speak with:

— Christopher Ram

Lawyer and newspaper columnist

chrisram.net

— Jan Mangal

Former petroleum advisor, President David A. Granger

linkedin.com

— Lisa Sachs @CCSI_Columbia

Director, Columbia Center on Sustainable Investment

ccsi.columbia.edu

— Imran Khan @imrankhangy

Press Secretary, Prime Minister Moses Nagamootoo

dpi.gov.gy

***

Review Guyana Oil Spill Plans Before Signing Contracts

(Kaieteur News, 30.Jul.2018) — Before any contract is signed with an oil operator, the government should require that it presents and obtains approval for contingency plans in the case of emergency.
According to the Natural Resource Governance Institute (NRGI), these contingencies should include the availability of equipment and expertise to manage accidents, such as oil spills. The Institute said that this should be accompanied by the means to monitor a project throughout its life cycle to ensure that all parties follow the plan and to identify future, unexpected impacts of the project.

As it is impossible to predict all the potential costs, NRGI said that requiring developers to have systems in place to monitor and manage environmental and social impacts on an ongoing basis is just as important as the assessments conducted in project planning.

The Institute opined that the government is responsible for setting and enforcing environmental standards (preferably in compliance with international standards such as the Equator Principles), while the extractive company is usually in the best position to mitigate environmental damage. The international organization said that companies may have only weak incentives to consider the environmental consequences of operations, unless the government makes it a condition of awarding the concession, with penalties attached. As such, NRGI said that the government should ensure that either it or the company sets aside funds for remediation, as the company may leave or sell to another party when projects become unprofitable, which may be long before the official project period ends. It said, too, that independent contractors, acquired on a competitive basis, can be hired to undertake environmental operations such as reclamation.
Further to this, NRGI said, “The security arrangements around projects can give rise to human rights concerns when private or state security forces use excessive force. Operations should include strong safeguards and legal recourse mechanisms in cases of human rights violations.”

NRGI said, “Finally, the government should separately and explicitly identify and factor into the decision-making process the social impact of extraction on vulnerable or marginalized groups of resource extraction since these groups are often omitted from broader community impact consideration.”

***

ExxonMobil Raises Stabroek Block to More Than 4 Bln Bbls

(ExxonMobil, 23.Jul.2018 ) – ExxonMobil has increased its estimate of the discovered recoverable resources for the Stabroek Block offshore Guyana to more than 4 billion oil-equivalent barrels and has advanced its evaluation to support a third phase of development and consideration of two additional phases.

The increase follows completion of testing at the Liza-5 appraisal well, a discovery at Ranger, incorporation of the eighth discovery, Longtail, into the Turbot area evaluation and completion of the Pacora discovery evaluation. The previous recoverable resource estimate was 3.2 billion oil-equivalent barrels.

“Outstanding resource quality across these opportunities combined with industry-leading project execution capabilities will provide great value to resource owners, partners and our shareholders,” said Neil Chapman, senior vice president, Exxon Mobil Corporation.

“Continued success in Guyana and progress in other upstream growth projects in the U.S. Permian Basin, Mozambique, Papua New Guinea and Brazil are giving us additional confidence in achieving our long-term earnings growth plans that we outlined in March.”

Guyana’s first development, Liza Phase 1, will use a floating production, storage and offloading (FPSO) vessel to produce 120,000 barrels of oil per day, starting by early 2020. Liza Phase 2, which is targeted for sanctioning by the end of this year, will use an FPSO vessel designed to produce up to 220,000 barrels of oil per day and is expected to be producing by mid-2022.

The Liza-5 well successfully tested the northern portion of the Liza field and, along with the giant Payara field, will support a third phase of development in Guyana. The Payara development will target sanctioning in 2019 and will use an FPSO vessel designed to produce approximately 180,000 barrels of oil per day, as early as 2023.

The Longtail well established the Turbot-Longtail area as a potential development hub for recovery of more than 500 million oil-equivalent barrels. Additional prospects to be drilled in this area could increase this estimate.

The collective discoveries on the Stabroek Block to date have established the potential for up to five FPSOs producing over 750,000 barrels per day by 2025. There is potential for additional production from significant undrilled targets and plans for rapid exploration and appraisal drilling, including at the Ranger discovery.

The Stabroek Block is 6.6 million acres (26,800 square kilometers). ExxonMobil affiliate, Esso Exploration and Production Guyana Limited, is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.

***

Former Cerro Negro Workers Still Seek Payment

(Energy Analytics Institute, Piero Stewart, 23.Jul.2018) – It has been 11 years and the 7,000 direct and indirect Venezuelan workers of US oil company Exxon Mobil still haven’t received their social benefits or other liquidations.

Those payment were assumed by the government of late Venezuelan President Hugo Chávez when his administration nationalized Exxon Mobil’s Cerro Negro heavy oil project located in the Hugh Chavez Orinoco Heavy Oil Belt, also known as the Faja.

“Several coworkers have died during this long time waiting while others have left the country, but we continue to demand our rights,” reported the daily newspaper El Nacional, citing Luis Vega, spokesman for those affected. In 2007, labor liabilities reached $5.2 billion, a figure that has increased due to accumulated interest, he said.

Many of the workers are from the Venezuelan states of Monagas, Sucre, Anzoátegui, Bolívar, Guárico and Delta Amacuro, said Vega.

About a month ago, Venezuela’s President Nicolás Maduro instructed PDVSA President Manuel Quevedo to solve the problem.

“PDVSA recognizes the debt, but doesn’t want to pay us alleging that [former PDVSA President] Rafael Ramírez stole the money,” added Vega.

***

Guyana’s Oil Reserves Are Larger Than Expected

(OilPrice.com, Julianne Geiger, 23.Jul.2018) – Guyana’s recoverable offshore oil reserves are larger than expected—by almost a billion barrels, Hess Corp CEO John Hess said in a Monday press release.

Gross discovered recoverable resources for Hess’s Stabroek Block has been revised upward to 4 million barrels of oil equivalent—up from the previous estimate of 3.2 billion barrels.

“The Stabroek Block is a massive world class resource that keeps getting bigger and better,” CEO John Hess said. “Since the end of 2016, the estimate for recoverable resources on the block has quadrupled and we continue to see multi billion barrels of additional exploration potential on the block. We believe the investment opportunity in Guyana has the potential to be transformative for our company and create significant value for our shareholders for many years to come.”

Hess Corp was trading down on Monday, despite the news.

Guyana has been hailed as the world’s most up and coming oil hotspot, as Exxon, Tullow Oil, and Eco Atlantic made remarkable headway in recent years and months.

Exxon, for one, has had multiple finds in Guyana—also in the Stabroek block.

That Guyana—the small South American country sandwiched between troubled Venezuela and Suriname—has oil, and lots of it, is not new. The United States Geological Survey (USGS) estimated oil reserves in the Guyana-Suriname basin somewhere around 15 billion barrels.

The Stabroek block alone is poised to lift Guyana from the status of one of the poorest countries on the continent to untold riches. Nevertheless, its newfound oil wealth may prove to be a stumbling block for the nation who is used to having next-to-nothing to mismanage.

Earlier estimates pegged oil revenues for Guyana at $700 million per year by the late 2020s just from Exxon’s finds alone.

Hess reported earlier that it did not expect to generate a positive cash flow offshore Guyana until about 2022, according to Oil and Gas Investor.

***

Offshore Guyana Oil and Gas Potential is “Massive”

(UPI, Daniel J. Graeber, 23.Jul.2018) – The size of a reservoir off the coast of Guyana is “massive,” the CEO of Hess Corp. said Monday after a multi-million barrel revision to reserve estimates.

Hess and Exxon Mobil on Monday revised the estimate of recoverable reserves at the Stabroek block off the coast of Guyana from 3.2 billion barrels of oil equivalent to more than 4 billion barrels of oil equivalent.

“The Stabroek block is a massive world class resource that keeps getting bigger and better,” Hess Corp. CEO John Hess said in a statement. “Since the end of 2016, the estimate for recoverable resources on the block has quadrupled and we continue to see multi-billion barrels of additional exploration potential on the block.”

Hess said the revision followed the inclusion of data from new discoveries offshore Guyana and the completion of the fifth appraisal well at the Liza oil field. Dubbed Longtail, the latest discovery made near the giant Liza field could be producing about 500,000 barrels per day by late 2023.

The initial phase of development at Liza was sanctioned in June 2016 and called for the use of a floating production, storage and offloading vessel that will lead to an initial production rate of 120,000 barrels of oil per day.

Phase 2 calls for a second FPSO with a gross production capacity of 220,000 barrels per day and planning is already under way for a third phase of development offshore Guyana.

“The collective discoveries on the Stabroek block to date have established the potential for up to five FPSOs producing over 750,000 barrels per day by 2025,” the statement from Hess read.

Hess in June sold off its joint venture interests in the Appalachian shale basin in eastern Ohio to Ascent Resources for $400 million, using the proceeds in part to fund operations offshore Guyana. The company estimates it would cost at least $3.2 billion to fully develop the broader offshore Liza field.

Consultant group Wood Mackenzie said offshore Guyana is a competitive prospect with a break-even price at about $35 per barrel. Brent, the global benchmark for the price of oil, was trading near $74 per barrel on Monday.

Hess reported a net loss of $106 million in the first quarter, compared with a loss of $324 million in the same period in 2017. The company attributed the improvement to higher crude oil prices and lower operating costs.

Hess releases its second quarter earnings report on Wednesday.

***

The $20 Billion Question for Guyana

Guyana fishermen make their way home to the coastal community of Clonbrook at the end of another day at sea. Guyana is one of the poorest countries in South America, but massive offshore oil reserves may well transform it to one of the wealthiest in the next few years. CreditChristopher Gregory for The New York Times

(The New York Times, Clifford Krauss, 20.Jul.2018) – Guyana is a vast, watery wilderness with only three paved highways. There are a few dirt roads between villages that sit on stilts along rivers snaking through the rain forest. Children go to school in dugout canoes, and play naked in the muggy heat.

Hugging the coast are musty clapboard towns like Georgetown, the capital, which seems forgotten by time, honeycombed with canals first built by Dutch settlers and African slaves. The power grid is so unreliable that blackouts are a regular plague in the cities, while in much of the countryside there is no electricity at all.

Such is the unlikely setting for the world’s next big oil boom.

In the last three years, ExxonMobil has drilled eight gushing discovery wells offshore. With the potential to generate nearly $20 billion in oil revenue annually by the end of the next decade, roughly equivalent to the revenues of the much-larger Colombia, there could be enough bounty to lift the lives of almost every Guyanese.

If all goes well, one of the poorest countries in South America could become one of the wealthiest. Suddenly the talk of Georgetown is a proposed sovereign wealth fund to manage all the money, as if this were a Persian Gulf sheikhdom.

But there are obstacles. If history is any guide, countries that discover oil often waste their opportunity, as the resource blends seamlessly with corruption. Countries with weak political institutions like Guyana are especially vulnerable.

“You have an alignment of money and power in the hands of the state, so the party in power controls the resources,” said Floyd Haynes, a Guyanese-born finance professor who is a consultant to Business Ministry. “And the money is usually squandered, misapplied or downright stolen.’’

Senior government officials here have little experience regulating a big oil industry or negotiating with international companies. The civil service is corrupt, and the private sector is slow to innovate, businessmen and aides to senior officials acknowledge.

Still, there is cautious optimism. “We see this oil discovery as almost like providence,” said Raphael Trotman, the natural resources minister. “We’ve been given a second chance to get things right.”

The first chance was independence from Britain in 1966, and that chance was blown. A plague of ethnic tribal politics has produced a fragile state with an economy propelled by drug trafficking, money-laundering, and gold and diamond smuggling. A vast majority of college-educated youths emigrate to the United States or Canada, while those who stay behind experience high rates of H.I.V. infection, crime and suicide.

Can oil wealth help Guyana overcome its history, or will the windfall that will flood government coffers merely turn the page to a new tragic chapter?

“The challenges are enormous and shouldn’t be underestimated,” said Lars Mangal, president of Totaltec Oilfield Services, a Guyanese company seeking to train local workers in safety and basic oil operations. “We have to overcome nepotism, entitlements, corruption, cynicism and skepticism.”

The Guyanese government, under its agreement with Exxon, will receive roughly half the cash flow from oil production once the company’s costs are repaid. Economists say that will mean the country’s current gross domestic product of $3.6 billion will at least triple in five years.

But with exploration out of sight 120 miles offshore, and no refinery planned, the economic benefits for the population have been limited so far, making some cynical. Only about 600 Guyanese have found direct employment on the drill rigs, shore bases and offices, and that number may increase only to about 1,000, oil executives say.

“When we have big projects, we hire foreign companies who bring their own workers,” said Khemraj Dhaneshrie, a young chemist at the Leonora estate sugar mill.

Mr. Dhaneshrie is typically skeptical about his government’s ability to oversee foreign operations after Guyana’s long experience of opportunistic Chinese investment. He noted that the Chinese financed and built an enormous factory in 2009 to rescue the sugar industry, but it turned out to be a $181 million boondoggle.

“The Chinese cut down our forest, dug out our gold, and we never got a cent,” he said. “We could end up with the same experience with ExxonMobil.’’

In the Past, Wasted Opportunities

Colorful Hindi monuments tower over Guyana’s rice fields, a reminder of the cultural distance between the country and its Latin American neighbors. It is English speaking because of the legacy of British rule, and its two biggest ethnic groups are Afro-Guyanese and Indo-Guyanese — the descendants of slaves from Africa and of indentured servants brought from the Indian subcontinent in the 19th century.

Until now, the country had never produced oil, and traditionally it has traded its rice crop for fuel from Venezuela. Now it is attracting experienced Texas oilmen like Doug McGehee, Exxon’s Guyana operations manager.

Over the last 37 years working for ExxonMobil, Mr. McGehee has taken his black cowboy boots, silver belt buckle and Texas A&M class ring into the oil fields of Angola, Kazakhstan and Equatorial Guinea. In all those places, oil wealth has risen to the top, only to leave the poor behind. Last year, for example, a Paris criminal court convicted the vice president of Equatorial Guinea of money-laundering and embezzling more than $100 million.

But as Mr. McGehee monitored operations aboard the Noble Bob Douglas drill ship on a recent day, he insisted that Guyana could be different.

“The math is right here,” he said, noting that the country has a tiny population — below 800,000 — to share all the new wealth. Guyana’s government stands to take in more than $6 billion in royalties and taxes annually by the end of the 2020s, according to the Norwegian consultancy Rystad Energy.

“If the government manages the resource right, every Guyanese should benefit with better schools, better health facilities, better roads,” Mr. McGehee said.

That is no small “if.”

Guyanese need look no further than neighboring Venezuela to see a failed state where the world’s largest oil reserves have not prevented hunger, shortages of medicine and hyperinflation from producing widespread misery. Nearby Trinidad and Tobago offers another example of how countries dependent on oil can neglect traditional industries and then suffer severe economic shocks when crude and natural gas prices fall.

Scholars call the syndrome the “resource curse.”

Others warn of the “Dutch disease,” a phenomenon so labeled in the 1970s after a natural gas boom sapped the strength of manufacturing in the Netherlands. Nations that contract the disease from a sudden influx of mineral money typically suffer a surge of inflation, while labor from farming and other traditional professions is drawn to the higher-paying oil sector. Thus, wealth becomes more concentrated.

There are some examples of countries effectively using oil to reduce poverty. Malaysia, with large offshore oil production, has kept its economy diversified and growing. In the Middle East, Oman is a model for using oil and gas wealth to modernize its economy.

But dispiriting examples of wasted opportunity abound.

“We’re all concerned about the negatives,” Prime Minister Moses V. Nagamootoo said.

Dawn Chung Layne, who operates a sewing business out of her mother-in-law’s concrete house in Georgetown, is also anxious. She is attending workshops at the Center for Local Business Development, a program financed by Exxon, to learn ways she can benefit from the oil economy. She hopes to make curtains and linen for cafeterias on the oil ships, and uniforms for sports teams established by foreign companies and their families.

But she also sees risks in these new ventures. More affluent Guyanese may turn away from the sports uniforms she already makes to buy name brands like Nike and Adidas, she said, and she is concerned that food prices will rise.

“Check out the Trinidad economy,” she said. “They thought oil was the best thing since sliced bread, and they spent Sunday to Sunday. They stopped producing and imported everything with oil money. It could happen here.”

‘This Could Be Game Changing’

Before the recent breakthrough, various oil companies had drilled more than 40 wells off Guyana and neighboring Suriname since the 1960s. All were dry holes or otherwise not economically promising. But as oil prices rose a few years ago, Exxon and Royal Dutch Shell decided to take another look. (Shell eventually dropped out of the partnership.)

Exxon’s top geoscientist on the scene was Kerry Moreland, an Oklahoman whose family has been in oil for three generations. Ms. Moreland toyed with becoming a professional bowler and had interned as a tornado chaser for a Tulsa television station before going to work for Exxon and traveling the world in search of new fields. She pinpointed on the map where the first deepwater well, named Liza-1, should be drilled.

Recalling the day three years ago when she decided to duck out of some business meetings in Georgetown to visit the drilling platform, she said there was no more than a 20 percent chance that a meaningful amount of oil would burst out from three miles below the ocean bottom.

As luck would have it, just as her helicopter landed on the platform, the drill bit penetrated the oil reservoir. She went to the control room as the first data from the wells showed promising signs of hydrocarbons. When rock fragments came to the surface a few hours later, they were dripping with oil.

“At that moment, it was ‘Oh, my God, we’ve made a discovery,’” Ms. Moreland said. “You have to pinch yourself and ask, ‘Is this really happening?’ And it hit right then, this could be game changing for the country, one of the poorest countries in the Western Hemisphere. It was a dream come true for any geologist.’’

Exxon is known in the industry as a slow-moving, stodgy company, but Ms. Moreland’s enthusiasm caught fire through the executive wing in the Texas headquarters known as the God Pod. Within three months, the company sent two vessels to conduct the largest three-dimensional seismic test that Exxon had ever undertaken, over 6,500 square miles, in search of more oil.

There’s a lot at stake for Exxon in Guyana.

In recent years, its stock price has slumped because of disappointing production and depleting reserves. The company invested heavily in Canadian oil sands and in natural gas when prices were high, bets that have not worked out as well as expected. While the company was forced to write off large assets in Canada, Western sanctions on Russia foiled its plans to drill in the Russian Arctic.

Darren Woods, the company’s chief executive, has a plan to reverse company fortunes, and Guyana is a big part of it.

Leading a consortium that includes Hess and the China National Offshore Oil Corporation, Exxon is making an effort here that is nothing if not ambitious. Within three years of its big first discovery, it has begun drilling the first of 17 wells that will start yielding oil in 2020, with a floating production, storage and offloading vessel able to handle 120,000 barrels a day. And that is just the first phase.

Another floating vessel, with a capacity of 220,000 barrels a day, is planned, and a third vessel is being considered. In all, 500,000 barrels a day could be produced by sometime in the next decade — the equivalent of Ecuador’s national output. (Repsol of Spain, Tullow Oil of Britain and other companies are exploring, too.)

“It’s a growth area for us,” said Mr. McGehee, the Exxon operations manager. “We keep finding oil.”

That produces nothing but excitement for the 60 Guyanese workers on the Noble Bob Douglas drill ship, who have typically seen their incomes soar.

Gorshum Inniss, a 25-year-old roustabout with an easy smile and flashing dark eyes, is working on a crane crew lifting casing pipe for new wells, doubling what he earned working on a tugboat. He said he now had enough money to visit his parents and younger brother in New York and planned to build a house for him and his daughter.

“I’m proud to be one of the pioneers in this big moment for Guyana,” he said. “I see Guyana as the new Middle East.”

An Endangered Beach?

Not far from the turbulent Venezuelan border, there is a quiet stretch of coastline, pounded by surf, known as Shell Beach because its sand is made of tiny crushed seashells that make it feel like sawdust. Several endangered species of turtles come to nest at night. Once hunted for food, they are jealously guarded from poachers by residents who make a living fishing and selling coconuts.

Audley James, a former turtle hunter who makes necklaces out of beads and coconut shells, remembers when Trinidadian environmental consultants representing Repsol came six years ago to give two days of spill-response training.

The Trinidadians taught the residents how to lay temporary floating barriers to protect the beach from an oil spill, and gave them training certificates that look like diplomas. But there has been no further training that might prepare them for what is now a much less theoretical hazard.

“Plenty of us don’t understand what is going on,” Mr. James said.

Environmentalists are worried that oil will forestall development of renewable energy and that the government and oil companies are not fully prepared to prevent a possible spill.

“It’s two years before first oil, and we don’t have a national oil spill contingency plan,” said Annette Arjoon-Martins, president of the Guyana Marine Conservation Society. “We have our hands in the mouth of a jaguar.”

Ms. Arjoon-Martins said the government’s agreement with Exxon did not specify in enough detail the company’s responsibilities in case of a spill. Government officials disagreed, saying the country’s laws would hold the company fully liable.

Exxon executives say the company is doing everything possible to minimize the dangers of a spill disaster. The company has skimmers and oil booms on hand to collect errant oil, and it has applied to the government to use chemical dispersants in an emergency to break up any spilled oil. They say Guyana is close enough to the Gulf of Mexico to bring in plenty of help in an emergency.

The company has agreed to map the coastal mangroves and study the area’s fish, bird and turtle migration routes to set priorities in case a cleanup is ever needed, executives said. And in another potential environmental benefit, the company is planning to build a natural-gas pipeline to shore that will replace the heavy fuel oil burned for the country’s power plants, lowering costs to consumers and businesses.

“We are committed to develop these resources in the most responsible way with a minimal impact on the environment,” said Rod Henson, Exxon’s Guyana manager. “We stand by our operations, and in the unlikely event of an incident, we will absolutely respond immediately and we will fully take care of our responsibilities.”

Local oil executives say one obstacle to overcome is a lackadaisical attitude toward safety among Guyanese workers, who frequently arrive at their construction and wharf jobs in flip-flops and sometimes use their hard hats as soup bowls. That is something Exxon and other companies are working to change with courses and other training that teach workers to be careful, not only for their own safety but also to safeguard the fragile marine environment.

At a recent daily meeting of the crew of the Noble Bob Douglas to review environmental and safety precautions, Mr. Inniss, the roustabout, was given a chance to make his own safety presentation. He told of a serious accident he had a couple of years ago working on his motorcycle when he neglectfully left the motor running while adjusting a chain. He lost three fingertips.

“Use your heads before you use your hands,” he told the room full of Guyanese and American workers. He got an ovation and smiled proudly.

‘I See a Lot of Red Flags’

To visit the most senior oil regulator in Georgetown, one needs to climb an exterior staircase of warped wood that could sorely use a fresh coat of paint.

At the top is the tiny office of Newell Dennison, the acting head of the Guyana Geology and Mines Commission, whose desk is stacked high with folders beside a single metal filing cabinet. His office is spare of decorations, aside from two bouquets of artificial tropical flowers.

Mr. Dennison has a computer by his desk, from which he could consult data gathered by Exxon drill ships, though he said he had yet to do so. “We’re in transition,” he explained. “It’s a challenge.’’

For all the international attention that Guyana’s oil bonanza is beginning to generate, Mr. Dennison and the Department of Natural Resources have a mere nine technically trained people responsible for regulating oil production, engineering and geological research.

“You would expect we would have a problem to have 100 percent monitoring with our lack of resources,” said Mr. Dennison, a middle-aged geologist with horn-rimmed glasses and a neatly trimmed goatee. “My commission cannot be all of a sudden everything people expect us to be.”

There are a few signs of progress.

Guyana’s president, David A. Granger, a retired military commander leading a fractious coalition, has tried to establish a legal framework for the coming bonanza. To bypass corrupt officials, Mr. Granger has announced his intention to form an energy department for policymaking, responsible to the president, and an independent petroleum commission to regulate the industry and grant exploration and production licenses.

Under pressure to break with past secretive deals with international companies, Mr. Granger published Guyana’s contract with Exxon on a government website in December, opening a vigorous public debate on its terms. He has promised to end closed-door bidding for drilling rights, and to open auctions for future development.

Many of the changes have been promoted by Jan Mangal, Mr. Granger’s personal petroleum adviser and brother of Lars Mangal, the businessman. Jan Mangal, a Guyanese-born former Chevron project manager, has advised the president to put a hold on new leasing until the petroleum commission can be established with new personnel and has called for an investigation of several oil-exploration concessions made by the previous government to small oil companies.

“I see a lot of red flags,” said Mr. Mangal, who shuttles between Guyana and his home in Houston. “We cannot allow the Guyanese industry to be built around this shabby foundation of corruption.”

There are other signs of trouble.

Foreign development bank advisers have told the government that legislation to create a sovereign wealth fund to invest the royalties and taxes coming to the government lacks sufficient regulatory controls to avert corruption. The legislation is now in limbo. Mr. Granger’s energy department has not gotten off the ground, and a bill to set up the petroleum commission is stuck in the National Assembly.

That leaves Mr. Dennison and his commission in charge of regulation. He said he and everyone in the government felt pressure to get things right.

“Of course I worry,” Mr. Dennison said.

Clifford Krauss is a national energy business correspondent based in Houston. He joined The Times in 1990 and has been the bureau chief in Buenos Aires and Toronto. He is author of “Inside Central America: Its People, Politics, and History.” @ckrausss

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Guyana’s Doors Open for Caricom Investors

(CMC, 13.Jul.2018) – President David Granger has extended an invitation to Caricom member states to invest in the oil sector and other sectors of Guyana.

Speaking on the sidelines of the 39th Meeting of the Conference of Heads of Government of the Caribbean Community (Caricom) here recently, Granger said, “The vision that I have for the Caribbean Community is that all parts of the Caribbean must see this new resource as parts of the community, and they should be willing to share their expertise with us and they should be willing to invest in it. I would like to affirm that the doors of investment, the doors of infrastructure, the doors of information technology, the doors of innovation will be open to our colleagues in the Caribbean.”

The president also placed on record his Government’s willingness to collaborate with stakeholders in Trinidad and Tobago’s oil and gas industry as Guyana becomes a major oil producer with first oil expected in 2020.

“As you know, Guyana is still putting in place the legislative framework, the regulatory framework; we are looking to recruit skilled persons in that sector. It is still too soon to tell. I look forward to working with the Caribbean. Trinidad has a long-established oil and gas industry and I would feel that our Caribbean colleagues would be able to participate in everything that Guyana does — agriculture, timber, gold, diamond mining,” President Granger disclosed.

Following eight major oil finds, ExxonMobil is set to begin production in early 2020.

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ExxonMobil says Not Funding Political Party in Guyana

(Stabroek News, Marcelle Thomas, 8.Jul.2018) – Facing questions from a parliamentary committee, ExxonMobil yesterday denied that it was funding any political party or political initiatives in Guyana.

A meeting between the Parliamentary Sectoral Committee on Natural Resources and the US oil giant became testy when allegations of possible funding of political initiatives were put to the company by opposition members.

In the Parliament Chamber, ExxonMobil quickly shot down suggestions that it was funding any initiative of the A Partnership for National Unity and Alliance for Change (APNU+AFC) coalition, saying that the company was not politically aligned.

Opposition members of the committee also raised questions about ExxonMobil’s funding of international environmental body, Conservation International (CI), stating that this was a clear conflict of interest for the latter.

Last evening, in response to questions from Stabroek News, Conservation International rejected the assertions by the parliamentary committee members, stating that notwithstanding the funding, the organisation will remain objective and impartial.

“As a science-based organization with over two decades of conservation success in Guyana, Conservation International is in a unique position to help Guyana achieve its green development goals. We carefully deliberated and determined that this effort will achieve its goals while also maintaining our independence and objectivity,” Global representative Salma Balramy said in response to the questions from this newspaper.

“We’ve worked with Guyana’s government and people in over 50 communities to help protect nearly three million acres of indigenous lands while improving livelihoods. As long-time partners of Guyana’s commitment to its people and ecosystems, Conservation International is confident this is a necessary step at this critical time in Guyana’s development,” she added.

Government representative on the committee Ronald Bulkan also rebuffed the line of questioning by the opposition MPs, lamenting that it was “a shame” that the meeting had descended to allegations against the company and CI, and members did not use the opportunity to grill the company on how Guyana’s citizenry were benefiting from its presence and works here.

“Sorry ma’am, I have to stop you. ExxonMobil is not involved with politics in Guyana. We don’t choose sides, we’re apolitical. We’re not funding any political party, any political side, any political initiatives, none, just full stop,” ExxonMobil’s Country Director Rod Henson said as he interrupted People’s Progressive Party/Civic (PPP/C) member Pauline Sukhai during her questioning about political funding here by the company.

ExxonMobil, according to a letter dispatched to it by the committee, was to “provide an update” on the “company’s operations and answer questions of concern to members.”

But while Henson had replied saying that he “welcomed the opportunity…to provide an update on EEPGL’s (ExxonMobil’s subsidiary) operations,” he explained yesterday that the communication was bungled as he believed that he would only be updating on the local content aspect of EEPGL’s operations and thus only came prepared to deal with that subject.

Nonetheless, he said that he would answer questions outside of his prepared subject as best as he could but provided no answers on who initiated the controversial US$18 million signing bonus between EEPGL and the government or what were short and long-term cost projections of work by his company.

Present at yesterday’s meeting were committee Chairman Odinga Lumumba and fellow opposition PPP/C MPs Neil Kumar, Pauline Sukhai and Yvonne Pearson. For the government side, Audwin Rutherford, Jermaine Figueira and Bulkan were present. The Committee was informed that Minister of Finance Winston Jordan was out of the country and Minister of State Joseph Harmon was meeting with residents in the flooded areas of Region Nine.

Tempering expectations

Henson made a presentation on general operations of the company, with a focus on local content, where he echoed earlier positions of tempering expectations that the footprint for many direct related oil and gas jobs would be met. He said again that there is only room for a few hundred direct jobs.

Highlights and highpoints were given as Henson also declared that for the first quarter of this year the company paid out US$21 million for products and services from which 227 Guyanese companies benefitted.

Then came the question and answer segment of the hearing, which focused heavily on local content and the grant given to CI.

Sukhai said that she was concerned about word in the public that the company was helping to fund government’s Green State Development Strategy (GSDS) though its partnership with CI.

Earlier this week, the philanthropic arm of ExxonMobil, the ExxonMobil Foundation, announced US$10 million ($2 billion) in funding for CI and the University of Guyana to train Guyanese for sustainable job openings and to expand community-supported conservation.

A statement from the Foundation had said that the investment is also aimed at supporting Guyana’s Green State Development Plan, the country’s 15-year development plan that, among other things, intends to diversify Guyana’s economy and balance economic growth with sustainable management and conservation of the country’s ecosystems.

This was pounced upon by Sukhai.

“The Green State Development Strategy is not in its totality or comprehensively documented and consulted upon as yet. In fact, that strategy has not even reached the Parliament for its debate or for its approval or to be laid as government’s main focal point strategy. There is a line of thought out in the public that ExxonMobil is actually funding a political initiative that is not yet established and approved by the National Assembly and that is, as I mentioned before, the Green State Development Strategy,” Sukhai said before she was quickly stopped by Henson from going further.

“I would like to say that there are concerns out there, which is speaking to the fact –two lines of thought and two lines of criticism-and that is CI is an international NGO and CI is considered to be an international watchdog on environment, nature and all the things that go with conservation, preservation of our environment and so on. Don’t you think that CI being a grantee of ten million US dollars is actually in a conflict of interest because they should be monitoring?” she nevertheless pressed.

She said that that while Henson may want to stop her questions, answers were needed as, “we have to stop the concern in the public domain, because that is what is circulating and that’s why I chose to raise it here with you, so you can have a chance to clarify.”

A seemingly shocked and perturbed Henson replied, “I can’t control every individual’s thoughts and opinions, but I appreciate your opportunity to allow me to say that’s complete hogwash.”

Henson would later be asked by the Chairman to withdraw the “hogwash” remark and he did but he stressed that he still wanted to dissuade any views that his company was political.

Further probing came from Chairman Lumumba, who wanted to know if when ExxonMobil signed the agreement with CI, whether “there was government input or government approval” and why the company does not see its funding as a conflict given CI’s watchdog role here.

“This is our ExxonMobil initiative. This was not directed by the government. This is a good thing. ExxonMobil partners with this organisation around the world. It is not just Conservation International, this is an excellent partnership with the University of Guyana,” Henson said.

“Chair, I think Conservation International would disagree with you and I disagree with you, respectfully. I don’t think this impedes Conservation International’s role in anyway in the country. We made the government aware but again this is an ExxonMobil initiative, something we chose to do,” he added.

Sugar

Questions were also posited by Sukhai and Kumar on if ExxonMobil had a role in the recent announcement that 100 sugar workers were getting skills training though a programme with the Ministry of Natural Resources.

“Is Exxon funding any of that training?” Sukhai asked, to which Henson replied, “No, we are not funding that.”

Questions were asked about the 227 companies which ExxonMobil said benefited in the first quarter and the Chairman asked for the list and services provided to be made available to the Committee so that it could be analysed to determine if the country was getting value for money. He pointed out also that since the list was publicly released there had been many criticisms and questions linger on if the list met the definition of what local content should be.

A puzzled Henson said that he had given the list to government and questioned if the bipartisan committee was not part of government.  “Aren’t you the government?” Henson asked, to which Lumumba replied “No, we are the opposition.” The ExxonMobil head said that he was prepared to go over the list with the committee if it desired.

Kumar also spoke of sugar workers being “on the breadline” and of “closed sugar estates” and wanted to also know if the company was helping government with legislation crafting as it pertained to local content. Henson said that the Guyana was a sovereign country and the company had no role in how its government spends money and could not be a part of law crafting.

Bulkan zoomed in on the opposition’s posture and told the Chairman that it was regrettable that the meeting yesterday seemed to stray from the focus of ExxonMobil’s operations.

“I would like to take strong objection to the [statement that the] government in one instance has placed persons on the breadline and that the government has closed sugar estates. I think we are in danger of being sidetracked from the purpose of this meeting,” Bulkan said.

“We have also heard, and I think it is it is regrettable, that the GSDS, as initiated by this administration, is political. It is not a political initiative, it is a government initiative and I think it is unfair for us to come and say here that it is not fully developed and to suggest that the activities of the company’s  funding to CI, to suggest it has an impact on the GSDS. I think it is unhelpful…,” he added.

Following the meeting, Henson told reporters that it was his error about the meeting’s overall focus as he came only to deal with local content. He said he welcomed the opportunity to talk and would take up another invite if extended.

***

Guyana Pre-2020 Investment Boom

(Energy Analytics Institute, Piero Stewart, 6.Jul.2018) – Oil production will begin in 2020, and the boom in investment beforehand will continue to drive activity, writes Caribbean Economist Marla Dukharan in her “Caribbean Monthly Economic Report.”

Guyana, located in the northeastern region of South America, is readying for an oil boom to come soon from commercialization of recent oil discoveries. Exxon Mobil and partners have to date found recoverable resources estimated at more than 3.2 billion oil-equivalent barrels on the Stabroek Block offshore Guyana. Three of ExxonMobil’s developments will produce more than 500,000 barrels per day, and initial oil flows are slated for 2020.

The economist also said Guyana’s reserves, which amounted to $507 million in April 2018, where down $77 million or 13% compared to December 2017.

“The IMF revised its growth estimate for 2017 down to 2.1% from 3.5%. Growth is then expected to ramp up to 3.5% in 2018, 3.7% in 2019, and with the impact of oil production, 27.8% by 2023. Nope this is not a typo,” wrote Dukharan in her July report.

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Petrobras New CFO Election

(Petrobras, 27.Jun.2018) – Petrobras informs that its Board of Directors, at a meeting held today, appointed the engineer Rafael Salvador Grisolia to the position of Chief Financial and Investor Relations Officer of the company, with an office term until March 26, 2019, the same term of the other officers of the Executive Board.

Rafael Grisolia is a Production Engineer, holding an MBA from Coppead/UFRJ. Has a 30 year extensive career experience having worked at the financial department of Esso – an affiliate of ExxonMobil Corp., and at Cosan Combustíveis e Lubrificantes SA, held a position of Chief Financial Officer (CFO) and Investor Relations Officer (IRO) of Cremer SA, CFO of Grupo Trigo SA, CFO and IRO of Inbrands SA. Since August 2017, as Chief Financial Officer (CFO) and Investor Relations Officer (IRO) at Petrobras Distribuidora SA (BR).

The nomination was subject to prior analysis by the Nominating, Compensation and Succession Committee of Petrobras’ Board of Directors.

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Linking Permian, Eagle Ford to Monterrey

(Natural Gas Intelligence, Carolyn Davis, 27.Jun.2018) – The mantra for a San Antonio, TX-based midstream operator, whose portfolio is increasingly weighted to southern destinations, could well be what’s good for Texas is good for Mexico.

Howard Midstream Energy Partners LLC, aka Howard Energy Partners (HEP), is making inroads in the Lone Star State and across the border as it builds out its multiple systems to carry natural gas and liquids to serve a growing customer base in northern Mexico, i.e. the Monterrey Energy Corridor.

Monterrey, the largest city and capital of the state of Nuevo León, has become an industrialized mecca for projects, something not lost on HEP executives, said President Brandon Seale. He discussed the myriad opportunities with an industry audience at the 4th Mexico Gas Summit held earlier this month in San Antonio.

HEP’s processing and pipeline assets extend from the Permian Basin to South Texas, and east of Houston in Port Arthur, all strategically sited to serve the “end goal,” said Seale, northern Mexico’s “growing appetite for hydrocarbons.”

Because of where HEP’s assets are in South Texas, the operator was “always going to be at the tail-end of the value chain,” he said. “We were trying to push product back to Houston or to other markets, but we wanted to be at the front-end of the value chain. So we stepped into Mexico with a very simple strategy,” to diversify and bring aboard strategic partners.

HEP about seven years ago bought the Maverick Dimmit and Zavala Gathering System, about 344 miles of pipeline in the South Texas counties of Maverick, Dimmit, Zavala and Frio.

Designed for rich and lean gas service, the system gathers for production from the Eagle Ford and Pearsall formations, and interconnects with several big pipelines that move gas in all directions, including south.

“From Day 1, we were selling gas to Mexico,” Seale said. “Mexico was always on our radar. And the funny thing is, if you don’t live and work close to the border, sometimes you look at infrastructure maps and you forget Mexico is there…It just looks like a big white space on the map. But of course, the resources don’t stop at the border and infrastructure doesn’t really stop either…The magnitude of the opportunity was always present in our minds.”

For example, Texas has an estimated 300,000 wellheads. In Mexico, there’s about 8,000. Texas has nearly 250,000 miles of gathering transportation pipelines. In Mexico, there’s around 75,000 miles.

“There’s a huge, huge opportunity there,” Seale said. “The resource is there…with some of the biggest wells ever drilled in the history of the world…Staggering, staggering numbers.”

Around the time the Maverick purchase was made, Mexico was becoming a net hydrocarbon importing country.

“The situation was quite acute on the natural gas side,” Seales noted. The country was suffering from critical power alerts and brownouts, and state-owned Petroleos Mexicanos at times would cut off service to customers with no notice. It was “exceedingly distractive,” he said.

Mexico had to turn to the Pacific markets to buy liquefied natural gas at “exorbitant” prices, when West Texas operators “would have given their left arm to sell gas at $2.50/Mcf. It didn’t make sense…”

HEP got acquisitive again, and a year after the Maverick purchase, it acquired the Eagle Ford Escondido and Cuervo Creek gathering systems to the south in Webb County, primarily 12- 16-inch diameter high-pressure gas pipelines that gave it another 83 miles of pipeline, a 102-mile lean gas gathering system, two leased amine treating plants and multiple intrastate pipeline outlets.

A 30-inch diameter pipeline was installed in 2013 to provide a direct connect to a Kinder Morgan Inc. system, which moves gas from Katy, near Houston, southwest to Laredo.

Three years ago HEP installed a direct connection with the NET Midstream system, whose affiliate NET Mexico Pipeline Partners LLC‘s 120-mile, 42- and 48-inch diameter Texas pipeline moves gas from the Agua Dulce hub in South Texas to Mexico.

“Our markets were all getting to Mexico,” but they were getting there indirectly, Seales said. “At this point too, our system was basically full…packed to the gills. So we had to find new markets.” Those opportunities led to the the genesis of Nueva Era Pipeline LLC, a cross-border system that ramped up in May.

Nueva Era, a 30-inch diameter system that is designed to carry at least 600 MMcf/d and up to 1 Bcf/d, is a joint venture between HEP and Mexico’s Grupo Clisa to supply Monterrey.

Suppressed Demand

“There was a huge market” for natural gas in the Monterrey area that “was basically tapped out” around 2013, with no new sources of supply on the horizon. HEP executives also had a theory about suppressed demand for natural gas in the region.

“Basically, if you just looked at the charts, it looked like Mexico’s gas demand was flat,” Seale said. “But if you considered the external factors…the fact that historically, there were all these subsidies” for fuel oil and liquefied petroleum gas and other alternative fuels. “And if you consider that pricing on natural gas had never really been that transparent in Mexico, there were a lot of disincentives for people to use natural gas as a feedstock.

“As the experience in the U.S. in the last 30 years has taught us, if you deregulate the product, if you make it plentiful and if you make it transparent in price and you make it liquid, people will find a lot of ways to use it.”

The United States uses 80-90 Bcf/d of gas, while Mexico uses 8-9 Bcf/d, he said. “Somewhere in there is opportunity.”

Mexico’s state power company, Comision Federal de Electricidad, is the anchor shipper on Nueva Era with 504 MMcf/d of capacity. Another 496 Bcf/d is still available.

“The pipeline is mechanically complete,” Seales said. In mid-June the partnership was “awaiting final regulatory approvals,” to go into full service by the end of the month.

While trucks and rail are adequate to transport oil and liquids, a “pipeline is really the end goal” to transport all energy products, Seale said. With its cross-border system, North America’s energy markets are becoming “truly integrated…

By connecting Monterrey via a pipeline in South Texas, there’s energy integration across “the entire North American network,” allowing a trader to “swap a barrel from New Jersey to Monterrey…That’s pretty remarkable…And we feel like we’re in a unique position because of our experience with cross-border transactions” from working with U.S., Texas and Mexico’s diverse regulatory regimes.”

For HEP, the Texas coastal community of Corpus Christi, which is near Agua Dulce, is an important piece of the puzzle. The port city, already a manufacturing hub for the Gulf of Mexico energy industry, is quickly becoming the go-to destination for oil and petrochemical exports.

In addition, Cheniere Energy Inc. is building a liquefied natural gas export project in Corpus, and newbuild petrochemical facilities, including one led by ExxonMobil Corp., are on the drawing board.

And that’s not including the pipelines destined for the region from the Permian Basin and Eagle Ford Shale.

“The importance of Corpus is obvious in the market,” Seale said. “The number of pipeline projects to link West Texas to Corpus Christi are almost too big to count…” and “almost every midstream in the space is looking at their own project” to potentially add on capacity.

“What that signals is that the same thing that’s happening in natural gas that makes Agua Dulce…the natural gas hub, the natural liquid point, is happening now with crude and other refined products,” Seale said.

“If we do our job right, Corpus Christi should become the northernmost delivery point into northern Mexico,” he said. A plethora of investments are earmarked to support energy product transport south of the border.

Mexico is no longer the “blank spot on the map…the infrastructure map is now fully connected and day by day becomes only more integrated across the border.

Consider the Nueva Era system, he said. “With our Nueva Era pipeline, we can connect to Waha with these other pipelines coming down…In a few months in theory, a Waha-Monterrey route, which HEP is calling the “WahaRey” route “is going to be a viable option for any gas shipper in West Texas.

By the same token, the Agua Dulce-to-Monterrey route, aka “AguaRey” is already available. Already there’s 500 MMcf/d going into Monterrey,” with pipeline capacity “almost tapped out,” Seale said, as the region grows and commerce builds.

“Imagine what a 20-inch diameter presidential permit pipeline across the border could do for liquids products?” he asked the audience. “It would be something very, very similar.”

HEP is creating a path, he said, “connecting the most efficient and largest points of product in South Texas with Monterrey, the most industrialized market in Latin America, the gateway to all of Latin America…

“What’s good for Texas is good for Mexico, and what’s good for Mexico is good for Texas,” Seale said, borrowing a line from an HEP executive. “I really think that the integration of these energy markets is one of the finest results of that.”

***

Macri’s Reverse Unnerves Shale Investors

(Financial Times, Benedict Mander, 25.Jun.2018) – The collapse of the Argentine peso and the government’s struggle to tackle soaring inflation are causing disquiet among companies developing Vaca Muerta, one of the world’s largest deposits of shale oil and gas.

In his drive to liberalise Argentina’s energy markets, President Mauricio Macri phased out consumer subsidies and increased tariffs. Local oil prices rose and late last year converged with those of international crude, providing an important stimulus for companies in Vaca Muerta, Argentina’s star investment attraction.

But the government has now capped the price at which companies producing oil in Argentina can sell to refineries, along with the price of petrol at the pump, to shield consumers from rising global oil prices and prevent inflation soaring even further.

Companies now must sell at prices considerably below the international level, which on Thursday was above $77 a barrel for Brent crude, the global benchmark. This, as well as the devaluation of the peso, is hitting profitability and forcing companies to reassess their plans in Vaca Muerta.

“Suddenly from moving in the right direction, it feels like the country is taking a step back,” said Anuj Sharma, chief executive of Phoenix Global Resources, a mid-sized oil company investing in Vaca Muerta. “If there’s one thing markets hate, it is uncertainty. It makes planning very difficult.” He added that it was hard to plan more than 3-5 months ahead.

As little as four years ago, the state oil company YPF estimated that the break-even oil price for wells in Vaca Muerta to be economically viable was about $80 a barrel. Wood Mackenzie, the energy consultants, now estimates the break-even price to be $56 a barrel. After the first well began producing commercially in 2013, Vaca Muerta is now producing 120,000 barrels a day, or more than 10 per cent of national production.

“Just 5 years ago Vaca Muerta was a dream. Now it is starting to become a reality. It is at an inflection point where you can actually make money drilling it,” said one senior executive whose company is investing in Vaca Muerta.

“You can argue that at $67-68 a barrel you can make more than the break-even price, but you are not obliged to drill Vaca Muerta. Elsewhere you get 75 or even higher if oil prices go up . . . if there’s no [price] visibility, it’s very hard to deploy billions into Vaca Muerta.”

With Javier Iguacel replacing Juan José Aranguren as energy minister as part of a shake-up last week, the government’s plans remain unclear. Mr Aranguren, a former executive at Royal Dutch Shell, was widely applauded by the private sector for increasing the tariffs that consumers pay for electricity and natural gas, which enabled the government to cut subsidies in its effort to rein in the fiscal deficit. But he is unpopular with voters.

How Mr Iguacel, a petroleum engineer who also has a private sector background, proceeds depends on a precarious political scenario for Mr Macri, who is seeking re-election next year. Tariff hikes — as well as a $50bn bailout from the IMF in response to the currency crisis — was one of the main motives for trade unions on Monday holding their third national strike since Mr Macri took power.

Freezing prices at petrol pumps may go some way to keeping voters happy, even if it is debatable what impact it might have on inflation, which is running at more than 25 per cent annually. But international companies are not keen on effectively financing Mr Macri’s “gradualist” economic reform programme, which seeks to cushion the impact of austerity on poorer Argentines.

“If prices remain uncoupled, that would be negative. Without doubt, investment would fall, production too, and we would have to import more,” said Daniel Gerold, an energy consultant in Buenos Aires. “If it becomes clear that prices do not follow clear rules or the law is not respected, even if costs are low in Vaca Muerta, investments are not going to come.”

Nevertheless, analysts are broadly optimistic about the prospects for Vaca Muerta, which has seen a sharp fall in costs in recent years, while production has jumped dramatically. Argentina might even have an oversupply of natural gas this summer, when demand is lower, said Amanda Kupchella, an analyst at Wood Mackenzie.

“There are a lot of things that just come with the territory in Argentina — like price controls, working with unions and so on. They are things that operators are used to dealing with,” said Ms Kupchella. “Productivity in Vaca Muerta is so good that it doesn’t seem to be keeping [investors] away . . . wells just seem to be getting better and better.”

Alejandro Bulgheroni, chairman of Pan American Energy Group, expects that in 2-3 years it will be as cheap to drill wells in Vaca Muerta as it is in the US.

“Let’s hope this is resolved and that we return to international prices,” said Mr Bulgheroni. Although it was a “difficult moment”, he recognised that under this government, negotiations had always ended in mutual agreements, with no impositions. “We have lived through much worse times.”

***

ExxonMobil, Partners Spent $24 Mln in Guyana

(Energy Analytics Institute, Piero Stewart, 22.Jun.2018) – US-based ExxonMobil Corporation and partners continue to invest in small-to-medium sized enterprises in Guyana.

Irving, Texas-based ExxonMobil and project partners spent $24 million with more than 300 local suppliers in 2017 and opened the Centre for Local Business Development in the capital city of Georgetown to promote the establishment and growth of small- and medium-sized local businesses, the oil giant announced in an official statement.

Guyanese businesses, contractors and employees continue to play an important role in ExxonMobil’s operations in the country. ExxonMobil’s priorities in Guyana are focused on enabling local workforce and supplier development and collaborating with government to support the growth and success of its economy, both in the energy and non-energy sectors.
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ExxonMobil Announces 8th Find Offshore Guyana

(Energy Analytics Institute, Piero Stewart, 20.Jun.2018) – Irving, Texas-based Exxon Mobil Corporation’s good luck continues in Guyana.

The oil giant announced it has made its eighth oil discovery offshore Guyana at the Longtail-1 well, creating the potential for additional resource development in the southeast area of the Stabroek Block, Exxon announced in an official statement.

ExxonMobil encountered approximately 256 feet (78 meters) of high-quality, oil-bearing sandstone reservoir. The well was safely drilled to 18,057 feet (5,504 meters) depth in 6,365 feet (1,940 meters) of water. The Stena Carron drillship commenced drilling on May 25, 2018.

“The Longtail discovery is in close proximity to the Turbot discovery southeast of the Liza field,” said ExxonMobil Exploration Company President Steve Greenlee, in the company statement. “Longtail drilling results are under evaluation. However, the combined estimated recoverable resources of Turbot and Longtail will exceed 500 million barrels of oil equivalent, and will contribute to the evaluation of development options in this eastern portion of the block.”

Second Exploration Vessel

ExxonMobil is currently making plans to add a second exploration vessel offshore Guyana in addition to the Stena Carron drillship, bringing its total number of drillships on the Stabroek Block to three. The new vessel will operate in parallel to the Stena Carron to explore the block’s numerous high-value prospects.

The Noble Bob Douglas is completing initial stages of development drilling for Liza Phase 1, for which ExxonMobil announced a funding decision in 2017. Phase 1 will consist of 17 wells connected to a floating production, storage and offloading (FPSO) vessel designed to produce up to 120,000 barrels per day (b/d) of oil. First oil is expected in early 2020. Phase 2 concepts are similar to Phase 1 and involve a second FPSO with production capacity of 220,000 b/d. A third development, Payara, is planned to follow Liza Phase 2, according to ExxonMobil

The Stabroek Block is 6.6 million acres (26,800 square kilometers). Partners in the Stabroek Block include ExxonMobil affiliate Esso Exploration and Production Guyana Limited (Operator, WI 45%. Hess Guyana Exploration Ltd. (WI 30%) and CNOOC Nexen Petroleum Guyana Limited (WI 25%).
***

ExxonMobil Reconfirms March 2020 for First Guyana Oil

(Denis Chabrol, DemeraraWaves, 12.Jun.2018) – ExxonMobil on Tuesday reconfirmed that Guyana will pump up its first barrel of oil in March 2020, even as the Guyana government continued to fend off criticisms of the 2016 production sharing agreement.

Vice President of ExxonMobil Development Company, Lisa Walters said work was well advanced by several companies in Singapore, Brazil and the United States Gulf Coast to ensure that commercial oil production begins in less than two years. “We are on track for first oil in March of 2020,” she said. “In just a little over a year and a half, the Liza Destiny will deliver its first oil to its first tanker offshore,” she added.

ExxonMobil estimates that oil discoveries at Liza, Payara, Snoek and Turbot offshore Guyana total 3.2 billion barrels and would eventually lead to daily production of 500,000 barrels. ExxonMobil estimates that Liza Phase 1 will generate over US$7 billion in royalty and profit oil revenues for Guyana over the life of the project.

Walters said the drill-ship, Noble Bob Douglas, recently started drilling the production wells located at Liza more than 125 miles off the Demerara Coast. She said “all of the design work on the project is nearing completion” and “construction is well-underway worldwide” for the Floating Storage, Production, Storage and Offloading (FPSO) vessel named “Liza Destiny”. SBM Offshore has won the contract to construct that vessel, while TechnicFMC, and Saipem have been hired for sub-sea construction of the umbilical cords and flow-lines. Guyana Shorebase Inc was awarded the contract in June, 2017 for shore-base services and in August, 2017 the Noble Bob Douglas was hired for drilling services.

ExxonMobil’s Country Manager, Rod Henson also used the opportunity of the official start of the Liza Phase 1 Development Programme to show off that in the first quarter of 2018, over US$14 million were spent with Guyanese suppliers; together with its contractors ExxonMobil utilized 262 Guyanese registered suppliers, 227 of which are Guyanese owned.

Minister of Natural Resources, Raphael Trotman reiterated that the revised ExxonMobil Production Sharing Agreement has “the same or very similar contractual terms” as those Guyana has signed with other companies such as Anadarko Petroleum, Ratio, CGX, REPSOL, Ratio, Eco-Atlantic and Mid Atlantic.

“In that regard, they will enjoy the same rights and obligations as every other company that has been contracted by the government to explore and develop our hydrocarbons.

That they were the first to find a large deposit should no redefine their contractual terms or place them in any position less than that enjoyed prior to discovery. For government to do otherwise is not how responsible or how well-organised and governed States function,” she said.

The Minister of Natural Resources said the proceeds of Guyana’s oil production would be fairly shared among all Guyanese without discrimination as part of a process that would eventually lead to the removal of negative labels such as Third World, backwards, underdeveloped and developing from Guyana. “With the blessings that have been revealed, and are within our grasp, we purpose to develop a modern, peaceful and cohesive State-one in which every man, woman and child, without exception, reservation, and/or discrimination of any kind, is able to enjoy the full and equal benefits of the bounty we are about to be bestowed,” he said.
***

Venezuela’s Ex-Oil Czar Sees Economic Collapse Accelerating

(AP, 27.May.2018) – Venezuela’s former oil czar said crude production in the OPEC nation will continue to plummet in the aftermath of President Nicolas Maduro’s re-election, as the embattled socialist leader takes the country down an increasingly authoritarian path that scares off private investment and leads to more international sanctions against his Government.

In a rare interview, Rafael Ramirez on Friday blasted Maduro, saying that in the wake of his recent victory he has showed no signs of reversing policies blamed for hyperinflation and widespread shortages.

“The demons have been unleashed,” Ramirez, who went into exile after a bitter split last year with Maduro, said in a phone interview from an undisclosed location. “Maduro keeps insisting on the same rhetoric, taking no responsibility for his own actions.”

Maduro coasted to another six-year term in an election last Sunday that was boycotted by the biggest opposition parties and condemned as rigged in his favour by several foreign governments. The Trump Administration responded by tightening sanctions on the Government, making it tougher for State-run oil giant PDVSA to raise badly-needed cash to pay off creditors and jumpstart production.

Ramirez, who headed the oil industry for a decade until 2014, said a purge that started last year and has led to the arrest of more than 80 PDVSA managers, including its president, as well as the arrest last month of two managers at Chevron, has paralysed oil production.

Since Ramirez was removed from his dual post as energy minister and PDVSA boss in 2014, production has tumbled almost 40 per cent, to 1.4 million barrels of oil per day, the lowest level in seven decades. He predicts that unless Maduro changes course, it could fall soon to 900,000 barrels per day, the bulk of which is already sold at a huge loss domestically or used to pay off debts to China and Russia.

He also pointed to a recent decree signed by Maduro giving PDVSA’s newly installed president, Major General Manuel Quevedo, special powers to rewrite the terms of PDVSA’s joint ventures with foreign oil companies, circumventing the constitutionally-mandated oversight of the Opposition-controlled National Assembly.

“There’s a climate of terror inside the oil industry and everyone is afraid to make decisions,” he said.

PDVSA and Venezuela’s Information Ministry didn’t respond to requests seeking comment.

Ramirez, who was close to the late Hugo Chavez, quit as the country’s ambassador to the United Nations in December amid a public feud with Maduro over the direction of economic policy. Ramirez had been arguing for a more pragmatic course that included unifying Venezuela’s multi-tiered exchange rates while Maduro doubled down on policies to attack criminal “mafias” and going after opposition groups he blamed for waging an “economic war” with the backing of the US.

In January, chief prosecutor Tarek William Saab announced he would seek Ramirez’s arrest for allegedly profiting from illegal oil sales. Several close associates including his nephew have already been arrested in Venezuela and two former deputies were picked up in Spain last year on a US warrant as part of a separate probe led by prosecutors in Houston into corruption at PDVSA under Ramirez’s watch.

Ramirez rejects the accusations and said that his conscience is clear. Since leaving the US last year, he said he’s moved among cities around the world and avoided returning to Venezuela for fear of arrest.

“It hurts me because in the name of pursuing corruption Maduro has destroyed the industry so he can take control of PDVSA,” he said.

He said that none of the people running PDVSA today have experience in the oil industry, and coupled with the departure of thousands of oil engineers, the company that is the source of almost all of Venezuela’s export earnings is on the verge of collapse. A recent display of what he considers the current management’s incompetence was its failure to outmanoeuvre Houston-based ConocoPhillips’ attempts to collect on a US$2 billion arbitration award, which forced PDVSA to scramble and divert oil tankers from its facilities in the Dutch Caribbean for fear of seizure.

Ramirez said that he headed off a similar legal action years ago by Exxon Mobil in the United Kingdom.

“What’s surprising, and concerning, is that PDVSA didn’t anticipate this,” he said. “If the actions of a single company have jeopardised the entire country, imagine what will happen if the US imposes sanctions.”
***

Jamaica Encouraged by 3D Oil, Gas Surveys

(Amsterdam News, Bert Wilkinson, 24.May.2018) – Jamaica is fancying its chances of becoming the latest Caribbean Community nation after Guyana to find commercial quantities of oil and gas in the wake of encouraging indications from the most recent round of offshore surveys.

Jamaican authorities said on the weekend that they were upbeat about the results of three dimension offshore surveys aimed at determining whether the northern Caribbean island nation will remain as a net importer rather than a producer of oil and gas.

The Petroleum Corporation of Jamaica said the 3D program run by Tullow Oil of the United Kingdom marked the first time that such high-tech surveys were done anywhere in island waters, and the signs are good for further investment.

“Tullow’s decision to do the 3D seismic survey shows that the data indicators are pointing in the right direction, and we hope that the results of the post-survey data analysis will prompt them to move forward to the next phase,” said Winston Watson, group general manager of the PCJ.

Encouraged by consistent seepages of live oil both on and offshore in Jamaica in recent months, Tullow and the PCJ decided to step up exploration and survey work, convinced that commercial quantities of both oil and gas lie below the seabed and on land in Jamaica.

Late last year, local fishermen pointed authorities to live oil on top of the water off Jamaica’s south coast. Initially, the seepage was dismissed as waste oil either from cruise or other commercial ships operating in or passing through Jamaican waters.

But the fishermen insisted that the oil was new, fresh and recurring, so authorities decided to take a second look, and Tullow unpacked its equipment and started work anew.

Weeks later, inland in northern Jamaica, locals also pointed officials to seepages. Experts investigating the seepages discovered that the two were a mere 47 miles apart, which suggests that there might be an active system underground.

The PCJ’s Watson said, “The 3D seismic survey, Jamaica’s first, is the most advanced oil-and-gas exploration study ever carried out in Jamaica, and its completion marks the steady progress of the exploration PSA the PCJ signed with Tullow in 2014.”

The study area, The Gleaner newspaper reported, covered 2,250 square kilometers, and the survey ran for 45 days.

Jamaica’s efforts to determine whether it has commercial quantities of oil and gas come amid a mad rush by Caribbean nations such as Guyana, Grenada, Barbados and Suriname and also the Bahamas to become oil producers.

U.S. giant ExxonMobil is preparing for a late 2019 or early 2020 production startup in Guyana. Grenada’s government in March said that recent surveys prove the island, close to oil and gas-rich Trinidad, has commercial quantities that will be developed in the coming years.

***

The Insignificance of Venezuela’s 342-Year R/P Ratio

(Energy Analytics Institute, Pietro D. Pitts, 24.May.2018) – Venezuela’s reserves-to-production or R/P ratio was a remarkable 342 times in 2016 based on reserves of 300.9 billion barrels and production of 2.41 million barrels per day (MMb/d), according to BP’s Statistical Review of World Energy.

Today, in a best-case scenario, Venezuela’s R/P ratio could reach 550 times assuming no decline in reserves but a 38% drop in production to 1.5 MMb/d. Stated another way, Venezuela has enough reserves to last for 550 years, up 61% from 2016. In a presumed worst case scenario, if reserves were to declined for numerous reasons by 10% to 271 billion barrels with the same production of 1.5 MMb/d, Venezuela would still have enough reserves to last for 495 years, up 45% from 2016.

When compared to a Reuters’ peer group (comprised of Exxon, BP, Chevron, Total, Eni, Shell, and Equinor, the former Statoil – see chart above) with a combined R/P ratio of 80, Venezuela’s R/P ratio is still a whopping 7x higher than the seven-company peer group.

For what it’s worth, we know reserves are worth nothing in the ground unless they are produced. Maybe it’s correct and better to focus on reserve quality versus quantity but that still doesn’t drive me from my most important point in the case of Venezuela, a country with a lot of potential, but many more wasted opportunities.

Just think what will happen to Venezuela’s R/P ratio as the denominator approaches zero.
***

Exxon Mobil: Second Well has no Commercial Quantities of Oil

(Asianet-Pakistan, 28.Apr.2018) – ‘Unfortunately, the well did not encounter commercial quantities of hydrocarbons. Exploration wells come with a certain amount of risk and this is particularly true in frontier areas like Guyana. Success is not guaranteed,’ the local office of ExxonMobil said in a statement.

The well is the second one to turn up dry out of the eight wells that were drilled in the Stabroek Block area so far.

ExxonMobil’s Vice President and Secretary, Jeff Woodbury, who made the announcement, said ‘the Soribrum well reached total depth this week but failed to encounter commercial quantities of hyrdrocarbons’.

The company said that it began drilling the Sorubim well on April 3 and that the drill ship, Bob Douglas, will complete this well and then move to begin drilling the Liza Phase 1 wells.

Woodbury said additional drilling is planned later this year as ‘we continue to explore the full potential of the Stabroek Block’.

The company said the Stena Carron drill ship will continue to explore and evaluate other areas of the block. The Stena Carron is currently drilling the Liza 5 well, which will likely be followed by a new prospect, called Long Tail.
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ExxonMobil Announces Seventh Oil Discovery Offshore Guyana

(Exxon Mobil, 28.Feb.2018) – Exxon Mobil Corporation announced its seventh oil discovery offshore Guyana, following drilling at the Pacora-1 exploration well.

ExxonMobil encountered approximately 65 feet (20 meters) of high-quality, oil-bearing sandstone reservoir. The well was safely drilled to 18,363 feet (5,597 meters) depth in 6,781 feet (2,067 meters) of water. Drilling commenced on Jan. 29, 2018.

“This latest discovery further increases our confidence in developing this key area of the Stabroek Block,” said Steve Greenlee, president of ExxonMobil Exploration Company. “Pacora will be developed in conjunction with the giant Payara field, and along with other phases, will help bring Guyana production to more than 500,000 barrels per day.”

The Pacora-1 well is located approximately four miles west of the Payara-1 well, and follows previous discoveries on the Stabroek Block at Liza, Payara, Liza Deep, Snoek, Turbot and Ranger.

Following completion of the Pacora-1 well, the Stena Carron drillship will move to the Liza field to drill the Liza-5 well and complete a well test, which will be used to assess concepts for the Payara development. ExxonMobil announced project sanctioning for the Liza phase one development in June 2017. Following Liza-5, the Stena Carron will conduct additional exploration and appraisal drilling on the block.

The Stabroek Block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
***

Mexico Tops BP Growth Plans

(Reuters, Jessica Resnick-Ault, 17.Jan.2018) – BP is expanding its retail presence with plans to open 3,000 branded retail stations globally in the next five years, half in Mexico, as that market becomes increasingly open to international business.

The company already has over 100 retail outlets in Mexico, many operated by distributors that previously worked for Mexico’s state-owned oil company Pemex.

Energy reforms ended Pemex’s nearly 80-year monopoly several years ago and opened Mexico’s gasoline stations to international investment from the likes of Exxon Mobil Corp, Valero Energy Corp and Andeavor. Trading firm Glencore announced plans last year to start importing fuel for Mexico’s domestic market.

“We are looking at all different kinds of operations there,” Rick Altizer, BP senior vice president of sales and marketing said on Wednesday. He said they are open to waterfront terminals, rail operations or other logistical assets to supply its stations.

BP is also in the process of opening 10 stores in the U.S. Northeast under the Amoco brand, which it had previously retired. The Amoco label allows BP to expand in areas already saturated with BP stations, and appeals to customer nostalgia for the older label, Altizer said, speaking at an Amoco station in Pelham, New York. The label will also be used in other parts of the country.

The company expects global demand growth of 2.4 percent this year and 1.7 percent in 2019 even as automotive efficiency improves, he said.

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ExxonMobil Announces Sixth Oil Discovery Offshore Guyana

(Exxon Mobil, 5.Jan.2018) – Exxon Mobil Corporation announced positive results from its Ranger-1 exploration well, marking ExxonMobil’s sixth oil discovery offshore Guyana since 2015.
The Ranger-1 well discovery adds to previous world-class discoveries at Liza, Payara, Snoek, Liza Deep and Turbot, which are estimated to total more than 3.2 billion recoverable oil-equivalent barrels.

ExxonMobil affiliate Esso Exploration and Production Guyana Ltd. began drilling the Ranger-1 well on Nov. 5, 2017 and encountered approximately 230 feet (70 meters) of high-quality, oil-bearing carbonate reservoir. The well was safely drilled to 21,161 feet (6,450 meters) depth in 8,973 feet (2,735 meters) of water.

“This latest success operating in Guyana’s significant water depths illustrates our ultra deepwater and carbonate exploration capabilities,” said Steve Greenlee, president of ExxonMobil Exploration Company. “This discovery proves a new play concept for the 6.6 million acre Stabroek Block, and adds further value to our growing Guyana portfolio.”

Following completion of the Ranger-1 well, the Stena Carron drillship will move to the Pacora prospect, 4 miles from the Payara discovery. Additional exploration drilling is planned on the Stabroek Block for 2018, including potential appraisal drilling at the Ranger discovery.

The Stabroek Block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
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The Caribbean Poised To Become Major Oil Region

(OilPrice.com, Haley Zaremba, 22.Aug.2017) – In the future, we may be hearing about the Caribbean a whole lot more when talking about oil and gas. Previously, the area was virtually off the map for the fossil fuels industry, despite its proximity to the vast oil reserves of Venezuela. Now, the Caribbean has suddenly become a point of interest since ExxonMobil discovered major reservoirs in nearby Guyana in 2015.

After their initial huge discovery of the Liza oil field 2 years ago, Exxonmobil also announced last month that they’ve discovered more oil in the Payara reservoir off the coast of Guyana, increasing the total discovery to approximately 500 million barrels. This is huge news for both Exxonmobil and for Guyana, which ranks among the poorest countries in the Western Hemisphere.

ExxonMobil (partnered with Hess Corp. and Statoil) has also recently purchased a new deepwater block for exploration off the coast of neighboring Suriname, another potentially oil-filled nation. Some in the industry are already referring to the Guyana-Suriname Basin as the next big oil region.

Now, those good fortunes could be spreading to the Caribbean as well. Trinidad and Tobago has long been the Caribbean’s largest oil and gas producer. The nation has depended economically on their petroleum reserves since the 1990s, with the energy sector currently comprising 34.9 percent of the country’s GDP. However, more recently the small island-nation’s production has been in decline as production from mature fields has waned and exploration for new fields has been slow in starting. Now, Trinidad and Tobago is hoping that the discoveries in nearby Guyana will bring more interest and investment to the Caribbean.

It’s looking like Trinidad and Tobago will get their wish. Just this month BP Trinidad and Tobago announced two major discoveries totaling approximately two trillion cubic feet (tcf) of gas, which the company’s president called “the start of a rejuvenated exploration program on the Trinidad shelf”.

Similarly encouraged by the massive discoveries in Guyana over the last few years and the foreign interest it has garnered, several other Caribbean nations are beginning to assert themselves as potentially oil-rich countries and attempting to woo foreign companies to start investing in exploration around their islands. One of the biggest examples of this is Jamaica, who have recently caught the attention of UK-based Tullow Oil.

Last week Tullow announced plans to return to offshore locations off the southern coast of Jamaica to explore a field of “live oil” that was brought to their attention by local fisherman earlier this year. The firm will ramp up their 3D seismic surveys this year in hopes that the floating oil will lead them to vast oil fields the likes of their neighbors to the south and the nearby Gulf of Mexico.

The Bahamas has also recently publicized their plans to invite international companies to drill in deep waters off the coast, pointing not only to Guyana and the Gulf, but also to neighboring Cuba’s oil reserves as an indication of what treasures may be laying under the surface of the sparkling Caribbean Sea.

Exploration of oil reserves in the Caribbean may also soon be ramped up and revolutionized by major technological advancements from Ursa Space Systems. The high-tech company has announced a planned expansion to take a global oil inventory, with the Caribbean as one of its first major surveyed regions. Ursa will use satellite imagery to provide reliable and independent weekly inventories of oil stocks down to the tank level for easy calculations and better insight on oil supply and demand, especially in areas of the world where there has previously not been readily-available data.

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ExxonMobil Announces New Oil Discovery Offshore Guyana

(Exxon Mobil, 30.Mar.2017) – Exxon Mobil Corporation announced positive results on the Snoek well offshore Guyana, confirming a new discovery on the Stabroek Block. Drilling targeted similar aged reservoirs as encountered in previous discoveries at Liza and Payara.

“The latest discovery at Snoek demonstrates the continued success we have achieved in this technically complex play, which is just part of the significant exploration province offshore Guyana,” said Steve Greenlee, president of ExxonMobil Exploration Company.

ExxonMobil affiliate Esso Exploration and Production Guyana Ltd. commenced drilling of the Snoek well on Feb. 22, 2017 and encountered 82 feet (25 meters) of high-quality, oil-bearing sandstone reservoirs. The well was safely drilled to 16,978 feet (5,175 meters) in 5,128 feet (1,563 meters) of water on March 18. The Snoek well is located in the southern portion of the Stabroek Block, approximately 5 miles (9 km) to the southeast of the 2015 Liza-1 discovery.

Following completion of the Snoek well, the Stena Carron drillship has moved back to the Liza area to drill the Liza-4 well.

“As we continue to evaluate the full potential of the broader Stabroek Block, we are also taking the necessary steps to ensure the safe, cost-efficient and responsible development of this world-class resource, which can provide long-term, sustainable benefits to the people of Guyana,” said Greenlee.

The Stabroek Block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
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ExxonMobil Announces New Oil Discoveries Offshore Guyana

(Exxon Mobil, 12.Jan.2017) – Exxon Mobil Corporation announced positive results from its Payara-1 well offshore Guyana. Payara is ExxonMobil’s second oil discovery on the Stabroek Block and was drilled in a new reservoir. The Payara-1 well targeted similar aged reservoirs that were proven successful at the company’s Liza discovery.

“This important discovery further establishes the area as a significant exploration province,” said Steve Greenlee, president of ExxonMobil Exploration Company. “We look forward to working with the government and our co-venturers to continue evaluating broader exploration potential on the block and the greater Liza area.”

The well was drilled by ExxonMobil affiliate Esso Exploration and Production Guyana Limited, and encountered more than 95 feet (29 meters) of high-quality, oil-bearing sandstone reservoirs. It was safely drilled to 18,080 feet (5,512 meters) in 6,660 feet (2,030 meters) of water. The Payara field discovery is about 10 miles (16 km) northwest of the 2015 Liza discovery.

In addition to the Payara discovery, appraisal drilling at Liza-3 has identified an additional high quality, deeper reservoir directly below the Liza field, which is estimated to contain between 100-150 million oil equivalent barrels. This additional resource is currently being evaluated for development in conjunction with the world-class Liza discovery.

“These latest exploration successes are examples of ExxonMobil’s technological capabilities in ultra-deepwater environments, which will enable effective development of the resource for the benefit of the people of Guyana and our shareholders,” Greenlee said.

Drilling on Payara began on Nov. 12 with initial total depth reached on Dec. 2. Two sidetracks have been drilled to rapidly evaluate the discovery, and a well test is underway to further evaluate the successful well results. The well data will be analyzed in the coming months to better determine the full resource potential.

The Stabroek Block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
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ExxonMobil Awards Key Contracts for Liza in Guyana

(Exxon Mobil, 20.Dec.2016) – Exxon Mobil Corporation subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), announced that it has awarded contracts to SBM Offshore for a floating production, storage and offloading (FPSO) vessel, a key step in moving the Liza field toward first production.

Under the contracts, SBM Offshore will perform front end engineering and design for the FPSO, and, subject to a final investment decision on the project in 2017, will construct, install and operate the vessel.

“Liza development activities are steadily progressing, and we’re excited to reach this important milestone,” said Neil Duffin, president of ExxonMobil Development Company. “We look forward to working with the government of Guyana to develop its valuable resources, which have the potential to provide long-term, sustainable benefits to the country.”

ExxonMobil submitted an application for a production license and its initial development plan for the Liza field in early December. The development plan, submitted to the Guyana Ministry of Natural Resources, includes development drilling, operation of the FPSO, and subsea, umbilical, riser and flowline systems.

The Liza field has a potential recoverable resource estimate in excess of 1 billion oil-equivalent barrels and is located in the Stabroek block approximately 120 miles (193 kilometers) offshore Guyana.

The Stabroek block currently comprises 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is the operator and holds a 45 percent interest in the Stabroek block. Hess Guyana Exploration Ltd. holds a 30 percent interest, and CNOOC Nexen Petroleum Guyana Limited holds a 25 percent interest.
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Next Hot Spot for Shale Drilling? Argentina

(CNN Money, 28.Jul.2016) – Argentina has exceptional hydrocarbon reserves, but politics has greatly affected its development.

The economy in Argentina is best described as a “pendulum”, going from loose economic policies in the ’80s to Washington-consensus liberalisation in the ’90s and back again under the Kirchner regime.

Since the current president Macri took office in December 2015, he has been reversing the policies of his predecessor and has focused on boosting the economy with free-market measures through eliminating currency controls and lowering utility subsidies.

In March, the government also announced a $7.50 per barrel subsidy on exported oil while Brent remained below $47.50 per barrel to attract foreign investment.

Argentina’s recoverable shale oil reserves are estimated at 27 billion barrels and hold the third largest shale gas and fourth-largest shale oil reserves in the world. Appearing in the spotlight is the Vaca Muerta formation with technically recoverable shale gas of 308 trillion cubic feet and 16 billion barrels of oil.

The Vaca Muerta Shale spans across four provinces – Neuquén, La Pampa, Mendoza and Rio Negro and is almost double the size of the Eagle Ford shale.

Current production from the Vaca Muerta formation is about 50,000 bbl/day, an amount that is expected to double by 2018. IHS Energy research indicates that the Vaca Muerta is characterized by favourable traits such as thick, high-quality, organic-rich shale, similar to the Permian Basin.

While the American consumer basks in low oil prices, the Argentinean consumer is helping to fund the oil industry. Government regulated oil prices were imposed to protect citizens from market fluctuations, although consumers currently face the reverse effect by paying a premium on Brent and WTI.

For 2016 the price of oil in Argentina is frozen at $67.50, with gas prices of $7.50—almost 4 times that of the United States.

The recent nationalization of YPF has opened doors for foreign investments, making Argentina’s oil industry more attractive. Chevron (CVX) has decreased drilling costs in Vaca Muerta by 20% this year. Chevron’s Argentinian drilling costs dropped from $14 million per well to $11.2 million per well in the last three months of 2015.

One major source of savings stemmed from the discovery of a sand deposit in Chubut enabling YPF to eliminate the use of imported sand. Sand is the main ingredient in hydraulic fracturing treatments, which are essential in the completion process in shale oil and gas wells.

In the current environment of low oil prices, Argentina’s regulated crude prices combined with 27 billion barrels of recoverable oil and 802 trillion cubic feet of gas is one of the most attractive ventures for oil companies.

While the U.S. experienced severe cuts in spending by as much as 40%, YPF increased spending by about 4%.

In 2013, Chevron and YPF signed a $1.6 billion exploration deal to develop tight shale oil and gas resources through drilling 132 wells. Dow Chemical Company (DOW) and Shell Argentina followed shortly thereafter by drilling 16 horizontal natural gas wells and a $500 million investment.

YPF also signed a memorandum of understanding with Malaysian oil company PETRONAS in a $550 million pilot project in 2014. Russia’s Gazprom, the world’s largest natural gas producer also engaged in a confidential deal for the development of the Vaca Muerta field.

Exxon Mobil (XOM) has announced the initiation a $250 million pilot project, which if successful would lead to the further development and an excess of $10 billion in additional investment.

Although Argentina is becoming an increasingly attractive investment for oil companies, Vaca Muerta remains vastly untapped. Analysts estimate that YPF is expected to need up to $200 billion to fully exploit the formation.

The rich geological characteristics of Vaca Muerta is only a piece of the puzzle, the recent change in government and the economic policy reforms have set the stage for a more favourable business environment in Argentina.

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ExxonMobil Sells Share of Chalmette Refining, LLC in Louisiana

(Exxon Mobil, 18.Jun.2016) – Exxon Mobil Corporation has reached an agreement with PBF Energy Inc. for the sale and purchase of its 50 percent interest in Chalmette Refining, LLC in Chalmette, Louisiana.

PBF Energy will purchase 100 percent of Chalmette Refining, LLC, which is a joint venture between affiliates of Petróleos de Venezuela, S.A. (PDVSA) and ExxonMobil.

The agreement includes the Chalmette refinery and chemical production facilities near New Orleans, La. and the company’s 100 percent interests in MOEM Pipeline, LLC and 80 percent interest in each of Collins Pipeline Company and T&M Terminal Company. ExxonMobil operates Chalmette Refining, LLC and Mobil Pipeline Company, an ExxonMobil affiliate, operates the logistics infrastructure.

“This decision is the result of a strategic assessment of the site and how it fits with our large US Gulf Coast Refining portfolio,” said Jerry Wascom, president of ExxonMobil Refining & Supply Company.

“We regularly adjust our portfolio of assets through investment, restructuring, or divestment consistent with our overall global and regional business strategies,” said Wascom. “ExxonMobil remains committed to doing business in Louisiana through ongoing operations at the Baton Rouge refinery and chemical plants, the development and production of oil and natural gas resources, and sales of fuels and lubricants. All of these businesses are unaffected by this agreement.”

Subject to regulatory approval, change-in-control is anticipated to take place by the end of 2015. Details of the commercial agreements are proprietary.
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ExxonMobil to Invest $10 Bln in Vaca Muerta

(Energy Analytics Institute, Jared Yamin, 3.Jun.2016) – U.S.-based ExxonMobil plans to invest $10 billion over the next 20 years in the Vaca Muerta area in Argentina.

The announcement was made by ExxonMobil President Rex Tillerson during a visit the Vaca Muerta area in Neuquén with Argentine President Mauricio Macri, reported the daily newspaper iEco. Exxon has already spent $200 million on exploration drilling activities in the area.

“Depending on the success of the program, we will determine if it is possible to advance with the complete development of the project,” said Tillerson.

ExxonMobil Exploration Argentina — together with XTO Energy in association with Gas y Petróleo from the Neuquén region — plans to start a pilot project in the Bajo del Choique-La Invernada area. The project could commence in coming months with an estimated investment of nearly $250 million.

“I am very optimistic with the changes that have taken place here in Argentina with the new government. Clearly the investment climate is improving as well as the functioning of foreign trade,” said Tillerson who added that Argentina was an important area for his company.

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Guyana Cabinet Briefed on Oil Sector Management

(Guyana Government Information Agency, 4.Sep.2015) – Minister of Governance, Raphael Trotman, has briefed Cabinet on the strategic, legislative, regulatory and institutional arrangements for the management of upstream activities in the Petroleum Sector.

This disclosure was made by Minister of State, Joseph Harmon, who briefed the media on the deliberations of the last meeting of Cabinet. According to Harmon, the policy as explained by Minister Trotman, is geared towards attracting and securing investments in upstream operations activity in the oil and gas sector in Guyana. It relates specifically to activities involving petroleum production, storage, refining, and marketing of these products.

The overall objective of this initiative is to place significant emphasis on ensuring that all the necessary arrangements be put in place for the effective and efficient development of the sector

Minister Harmon further advised that the Commonwealth Secretariat had already provided some assistance in this regard and assistance will be coming from other international agencies.

“It is a matter of for us to now agree on an updating on that policy, the UNDP has also offered technical cooperation and assistance, by providing us with some experts who are likely to come to Guyana in October to assist us in this work,” Harmon said.

Earlier this week, a team from ExxonMobil met with Minister Trotman and provided their continued commitment to proceed from the point of exploration to production of oil and natural gas. Trotman holds ministerial responsibility for natural resources.

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Moody’s Changes PBF Rating Outlook

(Moody’s, 22.Jun.2015) – Moody’s Investors Service changed PBF Holding Company LLC’s rating outlook to positive from stable. Moody’s also affirmed PBF’s Ba3 Corporate Family Rating (CFR), Ba3-PD Probability of Default Rating, and Ba3 senior secured notes ratings following its announced acquisition of the Chalmette refinery.

“PBF’s positive rating outlook reflects the expected increase in refining scale and geographic diversification, and the potential for better crude sourcing and product distribution ability if the Chalmette refinery acquisition closes as anticipated in 2015,” said Arvinder Saluja, Moody’s VP. “This acquisition builds on PBF’s four year track record of operating its existing three refineries.”

On 19.Jun.2015, PBF’s parent, PBF Energy Inc., announced that it has signed an agreement to purchase the Chalmette refinery with 189,000 b/d throughput capacity from subsidiaries of ExxonMobil (Aaa stable) and Petroleos de Venezuela, S.A. (Caa3 stable). The $322 million purchase price plus an estimated $300 million – $500 million of working capital will be funded using a combination of cash and debt. The transaction is subject to customary closing conditions and regulatory approvals, and is expected to close in the 4Q:15.

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ExxonMobil Sells Share of Chalmette Refinery in Louisiana

(Exxon Mobil Corporation, 18.Jun.2015) – ExxonMobil reached an agreement with PBF Energy Inc. for the sale and purchase of its 50% interest in Chalmette Refining, LLC in Chalmette, Louisiana.

“This decision is the result of a strategic assessment of the site and how it fits with our large US Gulf Coast Refining portfolio,” said Jerry Wascom, president of ExxonMobil Refining & Supply Company.

PBF will purchase 100% of Chalmette Refining, LLC, which is a JV between affiliates of Petróleos de Venezuela, S.A. (PDVSA) and ExxonMobil.

The agreement includes the Chalmette refinery and chemical production facilities near New Orleans, Louisiana and the company’s 100% interests in MOEM Pipeline, LLC and 80% interest in each of Collins Pipeline Company and T&M Terminal Company. ExxonMobil operates Chalmette Refining, LLC and Mobil Pipeline Company, an ExxonMobil affiliate, operates the logistics infrastructure.

We regularly adjust our portfolio of assets through investment, restructuring, or divestment consistent with our overall global and regional business strategies, said Wascom.

“ExxonMobil remains committed to doing business in Louisiana through ongoing operations at the Baton Rouge refinery and chemical plants, the development and production of oil and natural gas resources, and sales of fuels and lubricants. All of these businesses are unaffected by this agreement,” said Wascom.

Subject to regulatory approval, change-in-control is anticipated to take place by YE:15. Details of the commercial agreements are proprietary.

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