15. Guyana. ExxonMobil announces second giant field.

Guyana - Payara 2 Giant discovery - ExxonMobil - MCAL
Guyana - Payara 2 Giant discovery - ExxonMobil - MCAL
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Guyana – Payara 2 Giant discovery – ExxonMobil – MCAL

15. Guyana. ExxonMobil announces second giant field – Payara – 500 million barrels. V.020817

Stabroek Block contains 2.25 billion – 2.75 billion oil-equivalent barrels. July 25, 2017.  

 

Guyana - ExxonMobil - Payara 2 giant field - MCAL
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Guyana – ExxonMobil – Payara 2 giant field – MCAL
Guyana - ExxonMobil - Payara 2 giant field - MCAL
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Guyana – ExxonMobil – Payara 2 giant field – 12 publications – MCAL

Contents:

0. Note Marcel Chin-A-Lien – Arrangement Guyana Government with ExxonMobil –

How much money would Guyana get from ExxonMobil’s offshore oil production – July 27, 2017

1. ExxonMobil announces second giant oilfield offshore Guyana – Payara – 500 million barrels found – July 25, 2017 – D.Chabrol

2. ExxonMobil strikes more oil offshore Guyana – value could be US$6.2 billion –

3. Guyana: ExxonMobil says Liza to flow at 100,000 barrels per day – Jan 29, 2017,  Kaieteur News

4. Another find confirms Guyana’s oil deposits larger than envisaged – March 31, 2017, Kaieteur News

5. ExxonMobil to continue exploring in Guyana waters despite Venezuela’s claim – Map – June 24, 2015, Caribbean360

6. Guyana basin floor fans (Liza, Payara)

0) Arrangement Guyana Government with ExxonMobil

How much money would Guyana get from ExxonMobil offshore oil production ?

Note of Marcel Chin-A-Lien

The contents of the arrangement that the Guyana Government in 1999, has signed and apparently recently renegotiated with ExxonMobil, has never been published.

Therefore there is a lot of uncertainty and public discussions on transparency going on regarding this important item.

This to know how much money Guyana would get from its offshore production.

In 1998 Guyana signed an arrangement (PPL) with CGX.

My educated-guess is that the arrangement signed with ExxonMobil in 1999 could resemble the arrangement signed previously with CGX.

The contents of this PPL can be found by researching Internet publications.

The Petroleum Prospecting License (PPL) was signed between CGX Energy,Inc.(Company) and the Government of Guyana (Government) on June 24, 1998.

The main articles are:

Cost recovery production allocation is as follows.

Maximum Cost Recovery is 75% during the first 3 years, afterwards 65%.

Profit Oil Split (Developer Share): During the first 5 years, 50% for the first 40,000 b/d. And 47% for Production above 40,000 b/d. After 5 years, 45 % for all production.

The Developer does not pay income tax. The PPL provides that the income tax is paid from the Government’s share of the profit oil.

The Company has an exemption from VAT, exercise taxes, duties, fees, levies and from property tax.

The Company does not pay royalty. This is considered to be included in the Government’s share of profit oil.

Training expenses of US$ 40,000 per year are required, only during the exploration period. These are qualified as exploration expenses.

Annual license rental payments of US$ 40,000 per year are required during the exploration and production period.

In my opinion this represents a very good deal (arrangement) for the Company.

And a rather ” inconvenient deal ” for the Government.

Tip that can benefit a country with billions of US$:

Always be so diligent to first design, negotiate and only later sign your own PSC.

Customised with those clauses and articles you wish to have.

Consult e.g. with a clever and seasoned PSC and E&P specialists and advisors with worldwide experience. Once signed it is extremely difficult to change and adapt it substantially.

From what I perceive from publications the Government did recently renegotiate the original PPL with ExxonMobil and obtained somewhat better conditions.

Including a royalty and a 50% – 50% overall share.

One would assume that the original 1999 PPL was rather favourable for ExxonMobil. Given that it was signed in a period when there was relatively little interest of IOC’s in offshore Guyana.

As is usual in such cases and in high risk, still non-oil-proven basins, it is to be assumed that Guyana has granted rather favourable (“soft”) conditions to ExxonMobil. In order to attract exploration investments with a clear work program, including seismic and drilling.

Now that it has become a proven basin, it is a different ball game.

Contracts with new entrants could be negotiated with a much better share for Guyana.

By focussing on items such as the royalty percentage, ring fencing, the ceiling for cost recovery. By drastically optimising its profit share, from the ‘ profit oil “, immediately after the IOC has recouped its investments from the ” cost oil ” .

Financial engineering, valuation and cash flow modelling, in tandem with the expected production profiles from the fields are fundamental in this respect.

The main objective of Guyana should be to maximise its petroleum wealth by encouraging appropriate levels of offshore activities.

To this end Guyana must design a robust fiscal system with for example the following characteristics. It should provide a fair return for both the state and the international companies. It has to be clear and avoid undue speculation, just as is now frequently surfacing in the press. Administration has to be efficient without undue rules, permits and burdens. At the same time it should provide enough flexibility and create a healthy, competitive competition and market efficiency.

A much different Petroleum Sharing Contract is certainly highly recommended in my opinion.

How much money would Guyana get from ExxonMobil’s offshore oil production ?

The following estimate represents merely my own, personal opinion.

Assuming that the ExxonMobil PPL contains the same articles as the PPL with CGX.

A ballpark estimate of the monies involved is as follows.

Precise data can be obtained by making a full DCF economic analysis.

Assumptions are:

Gross oil production volume of 1.5 billion barrels, 160 thousand /bbls /day /during 13 years, oil price US$ 50 / barrel, Capex-Opex 11 billion US$, initial production starting 2020:

Total oil revenue is some 75 billion US$.

Total profit oil is 68 billion US$.

Guyana Government Profit Share is some 35 billion US$.

This amount will be received in the period 2020 – 2033.

Almost 3 billion US$ per year.

Payout (end of negative cash flow) is reached in about 4 years, in 2024.

The economics of the Liza – Payara – Snoek giant fields development is highly profitable, with an IRR exceeding 100%.

Marcel Chin-A-Lien – Advisor Petroleum Exploration & Production, Business-Commercial-Policy Development, PSC’s.

1) ExxonMobil announces second giant oilfield offshore Guyana – Payara – 500 million barrels found

> Inserted note at october 2018:

ExxonMobil announced its ninth discovery offshore Guyana at the Hammerhead-1 well on August 30, 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 3,373 feet (1,150 meters) of water.

The company said 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. <

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IRVING, Texas–(BUSINESS WIRE)–Exxon Mobil Corporation (NYSE:XOM) today announced it has discovered additional oil in the Payara reservoir offshore Guyana, increasing the total Payara discovery to approximately 500 million oil-equivalent barrels.

These positive well results increase the estimated gross recoverable resource for the Stabroek Block to between 2.25 billion oil-equivalent barrels and 2.75 billion oil-equivalent barrels.    

The well was successfully drilled by ExxonMobil affiliate Esso Exploration and Production Guyana Limited and encountered 59 feet (18 meters) of high-quality, oil-bearing sandstone in the Payara field.

It was safely drilled to 19,068 feet (5,812 meters) in approximately 7,000 feet (2,135 meters) of water. The well is only 12 miles (20 kilometers) northwest of the recently funded Liza phase 1 project on the Stabroek Block, which is approximately 130 miles offshore Guyana.

“Payara-2 confirms the second giant field discovered in Guyana,” said Steve Greenlee, president of ExxonMobil Exploration Company. “Payara, Liza and the adjacent satellite discoveries at Snoek and Liza Deep will provide the foundation for world class oil developments and deliver substantial benefits to Guyana. We are committed to continue to evaluate the full potential of the Stabroek 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.

ExxonMobil, the largest publicly traded international oil and gas company, uses technology and innovation to help meet the world’s growing energy needs. ExxonMobil holds an industry-leading inventory of resources, is the largest refiner and marketer of petroleum products, and its chemical company is one of the largest in the world.

2) ExxonMobil strikes more oil offshore Guyana – value could be US$6.2 billion

Stena Carron oil drill ship

US oil giant ExxonMobil made its third significant discovery in its drilling explorations offshore Guyana.
ExxonMobil’s partner, Hess Corporation made this announcement in its third-quarter earnings on Wednesday, noting that the Liza 3 exploratory well’s net present value could be US$6.2 billion based on calculations from the Bank of Montreal (BMO) Capital Markets.

Liza 3, the fourth well spud by the super major, is in the Stabroek block, about 193 kilometres offshore Guyana.   

In late June, Exxon’s drilling results at Liza 2 revealed more than 58 metres of oil-bearing sandstone reservoirs in Upper Cretaceous formations. The well was drilled to 5475 metres at 1692 metres water depth. Drilling results confirmed recoverable resources to be between 800 million and 1.4 billion barrels of oil equivalent. Data from the Liza 2 well test is being assessed.

In May 2015, Exxon confirmed its significant oil discovery at its Liza 1 exploration well, where more than 295 feet of high-quality oil-bearing sandstone reservoirs was encountered.
The Liza wells are being drilled with the Stena Carron harsh environment drillship.
On September 8, ExxonMobil announced that its third exploratory well, Skipjack (the third well drilled and not Liza 3 as reported in the local media) was unsuccessful since it did not yield commercial quantities of hydrocarbons.
ExxonMobil spud Liza 3 after Skipjack turned up unfavourable. Skipjack was a separate prospect 25 miles northwest of the Liza wells.
The Liza 3 well, like Liza 2, will be focused on testing the flank of the Liza structure to determine the aerial extent of the reservoir.
In July 2016, ExxonMobil submitted a development plan for Liza to Guyana’s Environmental Protection Agency to begin the environmental review process.
That plan calls for a pair of rigs to drill development wells from two drill centres, each with a corresponding water injection site to the east.

Business site Bloomberg in June this year reported that ExxonMobil’s oil discovery off the coast of Guyana may hold as much as 1.4 billion barrels, twice the size of the previous estimate, making it potentially worth about US$70 billion based on current prices.
Bloomberg observed that this announcement comes as the oil industry emerges from the worst market slump in decades. Since dipping to a 12-year low in January, Brent crude oil, the international benchmark for crude oil, has risen nearly 80 per cent to about US$50 a barrel.
However, the discovery may not add to global oil supplies for years as deepwater finds can take half a decade or more to bring into production.

ExxonMobil Country Manager Jeff Simmons had announced that the US super major was likely to start production in 2020 with up to 100,000 barrels per day.
He noted though that the estimated 100,000 barrels per day would not remain constant for the proposed 20-year period that the company would be drilling, since there would be continuous drilling and actual production of oil, causing the output to fluctuate.
According to a BMO report on Oil and Gas 360, ExxonMobil plans to use two drillships to simultaneously drill development wells beginning in 2019.

Exxon holds a 45 per cent interest in the project, with Hess holding 30 per cent, and the remaining 25 per cent belonging to China State-owned offshore oil producer CNOOC.
ExxonMobil is expected to make an announcement on this new find sometime this week.

3) Guyana: ExxonMobil says Liza to flow at 100,000 barrels per day

Jan 29, 2017  Kaieteur News –  17 production wells planned

Trinidad (Oil and Gas Journal)- ExxonMobil Corp.’s giant Liza discovery offshore Guyana will have an average production of 100,000 b/d of oil when it begins flowing in 2020 according to the company’s Country Manager Jeff Simons.

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Country Manager Jeff Simons

It also expects to produce 165 MMscfd of natural gas that will be mainly used for re-injection into the wells.
Speaking last week at the Energy Chamber of Trinidad and Tobago’s annual energy conference, Simmons said the company will use a floating production, storage, and offloading (FPSO) unit to produce the oil and would then export it, and raised the possibility of it being refined in nearby Trinidad and Tobago.  

He told delegates that the company planned to drill 17 production wells with subsea tiebacks to the FPSO and that ExxonMobil was confident it could meet the early start up deadline because of its use of “cutting edge” technology.

Simmons said no decision had been taken as of yet on whether ExxonMobil would use one or two drillships during the development stage. He noted that ExxonMobil has always been committed to the maximum use of local content but admitted that during production very few jobs will be created in Guyana because a total of 60 people will be required for the production of the oil.

ExxonMobil’s Country Manager said the company has had to use Trinidad and its services during the exploration phase due to the Caribbean island’s relatively close proximity, its long history in oil and gas, and its capacity to service the industry.

Asked if he thought that the company’s production out of the Stabroek block could increase with additional discoveries in the offing, Simmons was careful to point out that there was no certainty in exploration and pointed to the Skipjack prospect, which he said was a geological lookalike to Liza and turned up a dry hole.

“Before drilling Liza our partner left us and we were looking for a new partner because we were not prepared to take the risk alone. Luckily we got Hess and Nexen and luckily we drilled Liza 1 before we drilled Shipjack, which, if you look at them, they look like a mirror image, and one was a massive find while the other failed. So I hope we will find more oil but I can only speak to what we know is there.” Simmons told the conference.

Earlier this month ExxonMobil and its partners announced its Payara-1 well offshore Guyana as its second discovery on the Stabroek block (OGJ Online, Jan. 12, 2017). The Payara-1 well targeted similar aged reservoirs that were proven successful in the Liza discovery.
The well was drilled by ExxonMobil affiliate Esso Exploration and Production Guyana Ltd., and encountered more than 95 ft of high-quality, oil-bearing sandstone reservoirs. It was drilled to 18,080 ft in 6,660 ft of water. The Payara field discovery is about 10 miles northwest of the Liza discovery.

ExxonMobil also announced that in addition to the Payara discovery, appraisal drilling at Liza-3 identified an additional high-quality, deeper reservoir directly below Liza field, which is estimated to contain between 100-150 million boe.

The Liza 1 well encountered more than 295 ft of high-quality oil-bearing sandstone in May 2015. With the second well on the block, Liza 2, the company confirmed the finding as significant with a potential recoverable resource of 800 million-1.4 billion boe of high-quality oil.

Esso Exploration and Production Guyana Ltd. is operator and holds 45% interest in the Stabroek block. Hess Guyana Exploration Ltd. holds 30% interest and CNOOC Nexen Petroleum Guyana Ltd. holds 25% interest.

4) Another find confirms Guyana’s oil deposits larger than envisaged – March 31, 2017.     Kaieteur News

Another find confirms Guyana’s oil deposits larger than envisaged

The Stena Carron drillship

Another discovery by United States (US) oil and gas giant – ExxonMobil, has confirmed that Guyana’s oil deposits are larger than what was previously envisaged by experts.

The Stena Carron drillship has moved back to the Liza area to drill the Liza-4 well. (File Photo)

The ExxonMobil Corporation, as promised, yesterday announced positive results on its sixth well – Snoek – located 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 announcement would come days after top officials and experts in the field of oil and gas journeyed to Guyana to participate in a major conference which was hosted in the nation’s capital, Georgetown.
Government announced that ExxonMobil was set make a major announcement on its latest well.

According to insiders, the findings so far would suggest that the deposit from the wells are accumulatively over 2.5 billion barrels of potential recoverable resources – way beyond what was previously estimated to be found in the Stabroek Block.
Back in May 2015, ExxonMobil announced a huge oil find in the Liza-1 well and encountered more than 295 feet (90 metres) of high-quality oil-bearing sandstone.

With the second well on the block, Liza-2, the company confirmed the finding as “significant,” with a potential recoverable resource of 800 million to 1.4 billion barrels of oil equivalent.

Drilling operations on ExxonMobil’s Skipjack prospect, the company’s third well in the block offshore Guyana, yielded disappointing results. It was reported that the company did not find commercial quantities of hydrocarbons within that well.

The Liza-3 appraisal well was subsequently drilled to a total depth of 18,100 feet in 6,000 feet of water on a location about 2.7 miles from the Liza-1 discovery. The well hit around 200 feet of net pay “in the same high-quality reservoirs” as the first two Liza wells which would further solidify the potential recoverable oil in the reservoir.

The Payara-1 well – the fifth well – located approximately 10 miles (16 kilometres) northwest of the Liza-1 discovery, was drilled by ExxonMobil affiliate Esso Exploration and Production Guyana Limited (EEPGL), and encountered more than 95 feet (29 metres) of high-quality, oil-bearing sandstone reservoirs. The well was safely drilled to a depth of 18,080 feet (5,512 metres) in 6,660 feet (2,030 metres) of water.

According to the Company’s website, the latest discovery at the Snoek well demonstrates the continued success the company has achieved in this ‘technically complex play’.

EEPGL commenced drilling of the Snoek well a little over a month ago and encountered 82 feet (25 metres) of high-quality, oil-bearing sandstone reservoirs.

The well was reportedly safely drilled to 16,978 feet (5,175 metres) in 5,128 feet (1,563 metres) of water on March 18. The Snoek well is located in the southern portion of the Stabroek Block, approximately 5 miles to the southeast of the 2015 Liza-1 discovery.

“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 Steve Greenlee, the President of ExxonMobil Exploration Company.

The Guyana Government yesterday issued a statement welcoming the announcement made by ExxonMobil.
The administration noted its satisfaction with the ‘steady and safe progress’ being made in the execution of the exploratory work programme and congratulated the Captain and crew of the Stena Carron for the continued good results of their endeavours.

“The news of another find offshore Guyana is a source of great pride and pleasure for all Guyanese. The Government of the Cooperative Republic of Guyana, through the Ministry of Natural Resources, will continue to work with ExxonMobil and its partners in the exploration and development of resources in the Stabroek Block of the Guyana Basin even as it continues to engage and update the citizens and important stakeholders about the preparations for petroleum production and other related activities,” the release stated.

Meanwhile, following the drilling exercise Snoek, the Stena Carron drillship has moved back to the Liza area to drill the Liza-4 well – the seventh well – which is approximately 102 nautical miles from the coast of Guyana and covers an area of one square kilometre.

The Stabroek Block is 6.6 million acres (26,800 square kilometres).
EEPGL 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.

Meanwhile, the RV Furgo Explorer will commence a geotechnical survey within the Stabroek Block of the Guyana Maritime zone. This exercise is scheduled for a period of six months.

5)  ExxonMobil to continue exploring in Guyana waters despite Venezuela’s claim

CARIBBEAN360  – JUNE 24, 2015

GEORGETOWN, Guyana, Wednesday June 24, 2015 – Don’t expect Guyana to stop its offshore oil exploration because Venezuela is claiming territorial waters where the “black gold” was recently discovered.

President David Granger has made it clear that his government will continue to back oil giant ExxonMobil in its work because the exploration is taking place in Guyana’s exclusive economic zone.  He said he had met with officials from the company and assured them that they had nothing to fear as far as their operations in Guyana’s waters were concerned. 

Venezuela’s President Nicolás Maduro issued a decree on May 25, claiming sovereignty over Guyana’s territorial waters in the Essequibo region of the Atlantic Ocean. Maps created by Venezuela’s National Organisation for Rescue and Maritime Safety (ONSA), after the decree, indicate that the claim would include a large part of the Stabroek Block, where ExxonMobil discovered oil a month ago.

Granger said the Caribbean Community (CARICOM) has been notified of Guyana’s situation and leaders would be formally briefed on the situation at the 36th Heads of Government Conference in Barbados next week.

In addition, all the countries of the Organization of America States (OAS) and Union of South American Nations (UNASUR) have been notified of Venezuela’s claim.

Granger has described Venezuela’s claim as a “legal absurdity” and the worst intrusion on Guyana’s sovereignty.

“It is an affront to the nation and it collides with internal maritime law; it is completely in breach of the United Nations Convention on the Law of the Sea,” the president said.

On May 20, ExxonMobil, the world’s largest refiner of petroleum products, disclosed that it found a deposit of a “significant” amount of oil in the Stabroek Block, about 120 nautical miles offshore Guyana. The company said the discovery was made in one of the two wells it dug, which realized more than 295 feet of high-quality oil-bearing sandstone.

The total area allotted to ExxonMobil for exploration (the Liza Area or the Stabroek Block) covers 26,806 square kilometres.

Source: http://www.caribbean360.com/news/exxonmobil-to-continue-exploring-in-guyana-waters

Map showing Atlantic areas of Guyana claimed by Venezuela.

Venezuela has adjusted Decree 1787 adding a clarification that the delimitation of the Zodimain Atlantica (part of which covers almost all of Guyana’s maritime territory) is to be determined pending the resolution of the 1966 Geneva Agreement.

6) Guyana basin floor fans (Liza, Payara)

Guyana - Berbice Canyon and Basin Plain - Gustavson Associates 2008 - Fig 4-9 - MCAL
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Guyana – Berbice Canyon and Basin Plain – Gustavson Associates 2008 – Fig 4-9 – MCAL

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