Guyana has become an oil celebrity with billions of barrels discovered by ExxonMobil off the coast of the small South American country. Along with the oil riches came gas, and there were plans to add LNG to Guyana’s export goods. However, the government is now considering keeping the gas for the domestic market.
Guyana’s crude oil exports are set to end the year on a high note, exceeding 1 million barrels per day, according to a recent report by Bloomberg. It took the country only 10 years to go from no oil production to this export rate, after Exxon and its partners in the Stabroek Block—Hess Corp and CNOOC—made a series of discoveries with reserves estimated at over 11 billion barrels.
Production ramped up quickly, with Exxon and its partners deploying a total of four floating production, storage, and offloading vessels to the Stabroek Block. As a result of this rapid development, by September of this year, wells in the block had yielded a cumulative 1 billion barrels of oil. Exxon and CNOOC, along with new partner Chevron, are not slowing down. By 2030, Exxon aims for a production capacity of 1.7 million barrels daily from eight offshore projects. This is what is interfering with natural gas plans.
Two years ago, the government of Guyana launched a tender for companies interested in developing its gas reserves. It would have been faster and likely easier to rely on the Exxon-led consortium again, but the authorities in Georgetown made it clear at the time that they desired some diversification. The tender, however, concluded in a somewhat unusual manner. Of the 17 companies that submitted proposals, Guyana’s government selected one called Fulcrum LNG—established by a former Exxon executive just a year prior.
Fulcrum was chosen by the government of Guyana to develop an LNG export project, with an estimated price tag of up to $30 billion at the time. The selection of the LNG developer was considered odd, as Fulcrum competed against established LNG market players. Since that tender, Guyana’s LNG plans have not progressed significantly, and a major reason for this is the availability of natural gas for liquefaction.
Exxon requires approximately 2 billion cubic feet of natural gas daily for reinjection into its wells to stimulate production, Reuters reported this week, citing unnamed sources. These sources also indicated that the company had informed the Guyanese government of this requirement. The gas injection is necessary for Exxon to meet the oil production targets set for its existing projects in Guyana. In other words, there does not appear to be enough natural gas being produced in Guyana at this moment to make an LNG export project feasible.
One option for the government is to reserve the gas produced by Exxon, Chevron, and CNOOC in the Stabroek Block for domestic consumption, including power generation and petrochemical production. Another option is to reduce the annual capacity of the planned LNG facility from 6 million tons to 3 million tons, according to Reuters sources.
However, it is not even clear at this point how much gas the fields in the Exxon consortium bloc can yield. The supermajor is reportedly working on this right now, along with estimates on the cost of extracting that gas and the timeline for its commencement. The current gas production in Guyana is associated gas from the Exxon fields in Stabroek.
"We're working with the government of Guyana on development plans that maximize resource recovery and value to the country," an Exxon spokesperson told Reuters earlier this week, adding that gas supply in Guyana must develop alongside demand.
