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ExxonMobil's Midas touch

Guyana’s exploration success shows no sign of slowing. But the promise of oil revenues is also driving political division

Less than a year before ExxonMobil begins producing first oil from its offshore Liza field in Guyana, the firm's winning exploration streak shows few signs of breaking. In February, it revealed a further two discoveries, Tilapia and Haimara, taking its total to 12 major discoveries in the Stabroek block.

The Tilapia discovery was made just 3.4 miles (5.5km) west of the Longtail well—the fourth in the Turbot area—and contains around 305ft of oil play. The Haimara find contains roughly 207ft of high-quality gas condensate sandstone reservoir, around 19 miles east of the Pluma discovery. Since the announcement, ExxonMobil has raised its gross recoverable resources in Stabroek to approximately 5.5bn bl oe.

Guyana will see plenty more drilling over the next few months. "Tullow is expected to drill two wells in Orinduik in 2019, Repsol is expected to drill a well in the Kanuku block and CGX Energy in the Corentyne," says Keith Myers, head of exploration and production at Westwood Global Energy, a research consultancy. "Various plays are being targeted—some attempting to replicate the Liza style play but in shallow water [Repsol's Carapa and CGX's Utakwaaka], and some testing younger Tertiary plays [Tullow's Jethro-Lobe]."

London-listed Eco Atlantic, a junior partner, estimates Jethro-Lobe in the Orindiuk block may have reserves of up 250mn bl oe, but UK independent Tullow, its operator, manages expectations at a more conservative 100mn bl oe. It will use the drillship Stena Forth to spud the Jethro-Lobe exploration well, with an option for a second well. Other potential drilling targets in Orindiuk include Kumaka, Amaila and Aurituk.

ExxonMobil has contracted the Noble Tom Madden drillship to spud its next wildcat at the Yellow-tail prospect in the Turbot area, six miles west of Tilapia.

Cause for concern

But while the discoveries are a boon for ExxonMobil and other IOCs, the future economic windfall is creating government uncertainty. In December, Guyana's governing coalition suffered a no-confidence vote over its production-sharing contract renegotiated in 2016. The opposition says the 2pc royalty is far below what the government should be receiving, particularly given the increase in reserves. In a statement, the coalition said it would take the decision to the Court of Appeal, and, failing a positive decision, appeal to the Caribbean Court of Justice.

New elections must now be held within 90 days of the 21 December vote, but the prospect looks doubtful. President David Granger has been receiving cancer treatment in Cuba and is yet to call elections. Added to the confusion, the Guyana elections commission (Gecom) says it does not have adequate funding to organise an election and has recommended delaying the ballot. Under Guyana's constitution a delay can only occur if the National Assembly backs the move by a two-thirds majority; but opposition leader Bharrat Jagdeo says his party will not support an extension, regardless of Gecom's claim.

In an address to the nation, President Granger defended the delay, pointing to the importance of Gecom to the election. "Free and fair elections are essential to representative democracy. The credibility of elections, in turn, is dependent in part on the integrity of the official list of electors," says the president.

While IOCs continue exploring, the lack of clarity is likely to impact any further finds beyond the 90-day deadline. "The opposition has said that it will not recognise contracts entered into by the government after March 21, so any delay in holding elections could impact the industry in the near future. It is imperative that elections be called and the political situation resolved as soon as possible for the benefit of all Guyanese," says Kevin Ramnarine, a consultant at IPD Latin America, a Latin American energy consultancy.

Guyana had planned to redesign its fiscal regime, but the political upheaval could yet delay this process. "There will undoubtedly be moves to create a national oil company and to extract a higher government take in future license agreements. They may also want to slow the pace of development down to allow them to put an effective regulatory regime and revenue management policies and procedures in place," says Westwood's Myers.

Source: Petroleum Economist
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