Guyana seen as major source of low-cost oil amid Russia-Ukraine war-related shortage

Last Updated on Wednesday, 27 April 2022, 13:10 by Denis Chabrol

Hess Corporation, one of the co-venturers in oil exploration and production  offshore Guyana, on Wednesday singled out Guyana as a major source of low-cost oil especially due to reduced global output due to the Russia-Ukraine war.

The company also said Guyana’s prolific oil discoveries and production haven been helping to drive down Capital Expenditure (CAPEX) cost. Chief Financial Officer, John Rielly said that with Payara expected to be brought to production earlier than originally scheduled and getting a fourth rig up and running in the Bakken,  “it’s that mix and having Guyana drive down our cash cost”. He said that would be aided by getting

Already, a Wood Mackenzie study shows that Guyana is one of the highest margin, lowest carbon intensity oil developments globally. “The world will need these low cost oil resources for decades to come to meet future energy demand,” Chief Executive Officer, John Hess said during the first quarter conference call. Noting that the world needs reliable, “low cost” and oil gas resources for decades to come, he said Hess was in a very strong position to offer a differentiated value proposition.

“With multiple phases of low cost oil developments coming online in Guyana and our robust inventory of high return drilling locations in the Bakken, we can deliver highly profitable production growth of more than 10 percent annually over the next five years,” he added.

Currently, Liza is producing 130 thousand barrels of oil per day and this is expected to increase to more than 140 gross thousand barrels of oil per day over the course of this quarter. Hess already said the Liza Phase 2 development, which achieved first oil in February, is ramping up ahead of schedule and expected to reach its gross production capacity of approximately 220 thousand barrels of oil per day by the third quarter; a third development on the Stabroek Block at the Payara Field, with a gross capacity of  approximately 220 thousand barrels of oil per day, is also ahead of schedule and is now expected to  start up in late 2023. Yellowtail is expected to produce 925 million barrels of oil and have a gross production capacity of approximately 250 thousand barrels of oil per day, with first oil expected in 2025.

In terms of cost, the CEO of Hess said its expanding high quality resource base has positioned its company to “steadily move down the cost curve.”

The company released figures on Wednesday shown that its four approved oil developments in Guyana have a breakeven Brent oil price of between $25 and $35 per barrel, with a projection that by 2026 Hess Corporation’s breakeven expected to decrease to a Brent oil price of
approximately $45 per barrel.

Mr. Hess noted that with Russia’s invasion of Ukraine, the spotlight has been put on energy security and the critical importance of oil and gas to the global economy. “Energy security is essential for an orderly energy transition. Oil markets were tight even before the Russian-Ukraine conflict,” he said.

The Hess Chief noted that the world had seen seven consecutive quarters of oil inventory draws, and at the end of March, global oil inventories were estimated to be more than 400 million barrels less than pre COVID levels. “The world is facing a structural oil supply deficit, and the only way to address it is through more industry investment – and that will take time to have an impact,” he said. “So, to ensure an affordable, just and secure energy transition, we need to invest significantly more in oil and gas – and we also must
have government policies that encourage investment, rather than discourage it,” he added.

Hess, China’s National Overseas Oil Corporation and ExxonMobil are partners in Esso Exploration and Production Guyana Limited (EEPGL), with ExxonMobil as the operator in the Stabroek Block.