…will attract global interest when Govt goes out to auction
While the Stabroek Block, which is responsible for 33 out of the 38 oil finds made in Guyana’s waters since 2015, has been more lucrative than neighbouring blocks, Norwegian consultancy Rystad Energy Vice President Shreiner Parker believes that outside of the Stabroek Block has serious potential for future oil finds.
During a recent engagement with the media, Parker, who heads the Latin America division for Rystad Energy, said that while Stabroek, with its reputation as one of the most prolific exploration blocks of all time, has overshadowed neighbouring blocks, this will not dissuade companies from continuing exploration outside of Stabroek.
“We do believe that there is a lot of prospectivity outside of Stabroek, although we’ve not seen that yet. In terms of the way the turbidites are formed, we’ve certainly seen a development of a kitchen in the South East corner of the Stabroek Block, which extends into Block 58, Suriname, which is operated by Total, with Apache as a partner.”
“Exxon will continue to push and I think, as will others, continue to push to the bleeding edge and go deeper along the turbidite distribution to see how material that is. Whether that resource will be overcooked… I guess there are some question marks around that. But we do believe that there is prospectively outside of Stabroek.”
According to Parker, Exxon’s level of success in the Stabroek block has not yet been replicated by Exxon and other oil companies in other blocks in Guyana’s waters. He noted that of the four oil discoveries outside Stabroek, only one has commercial potential – although there has been talk by the Orinduik partners of revisiting one of the wells, Jethro, and its commercial viability.
“Typically, exploration success rate is about five per cent. Meaning every five exploration wells drilled, only one encounters pay. That has not been the case in Stabroek. There have been very few dry holes drilled, versus actual commercial discoveries.”
“We know that Jethro and Joe both had uncommercial lines for a number of different reasons. So, I think there are some questions about the commerciality outside of Stabroek. But certainly, Exxon and the other block owners are going to continue exploration efforts outside of Stabroek,” Parker explained.
And while Parker was of the view that Guyana will get interest from around the globe when it goes out to auction its oil blocks, Parker warned that getting the financial terms of the blocks right would be very important. He gave the example of Brazil.
“In recent years they’ve had unsuccessful bid rounds. Even though Brazil is an extremely important source of offshore production globally, they were unable to attract the interest that they wanted, because the fiscal regimes were too onerous. And they were asking for too much.”
“So, the balance that Guyana will have to strike on these new blocks, is understanding that we’re no longer going to have the Stabroek fiscal regime. We are a petroleum province. Yet at the same time we cannot expect that it’s a guaranteed success that every hole poked into the ground will produce oil. So, getting that fiscal regime correct is going to be paramount to attracting interest globally.”
When asked if Guyana doing its own 3D seismic survey of the remaining blocks to establish the value of the blocks would help Guyana’s chances, he noted that while it could be of interest, it may not be necessary. As he put it, Guyana is already a hot story.
Guyana has long been expected to go out and auction oil blocks, both untapped and relinquished, by September. There are relinquishment clauses, which is typically included in contracts so that companies can relinquish a portion of the block when the renewable period is up, thereby allowing other companies to buy into the respective blocks.
For the Stabroek and Canje Blocks, operators are required to relinquish 20 per cent of their blocks after the first renewal period; while those of the Demerara and Corentyne Blocks are expected to relinquish 15 per cent within this period.
The Kaieteur Block’s relinquishment provision is said to be 25 per cent, then 20 per cent by the first renewal; with the Mahaicony and Roraima Blocks at 25 per cent. By the time of the first renewal for the Orinduik Block, the operators are not expected to relinquish any portion.
