OIL-and-gas exploration is a risky business. Hundreds of millions of dollars are invested, often with little to no success. In geographic locations with no proven reserves, this risk increases ten-fold.
In Guyana, the quest for petroleum offshore began as far back as 1958, when California Oil Company conducted seismic surveys before withdrawing in 1960. Other companies followed, and several licences were awarded.
The first company to spud a well was Tenneco, in 1967, when Guyana Offshore # 1 and # 2 were drilled, but with no success. ExxonMobil had also undertaken drilling campaigns in Guyana from 1971 to 1976, but these were not promising. In total, over 40 wells were drilled, with no success.
Territorial controversies between Guyana and two of its neighbours, Venezuela and Suriname, also led to exploration vessels being seized and evicted. In mid-2000, CGX Energy was prepared to drill the Eagle-1 well, but the rig had to abandon the location because a Surinamese gunboat threatened to fire on it.
Following this fiasco, Exxon’s agreement with Guyana went into force majeure, and was not resolved until the 2007-2008 period. Then, in 2013, the MV Teknik Perdana, chartered by the Texas-based company, Anadarko, was conducting seismic work off the Guyana coast when it was approached by a Venezuelan navy vessel and forced to sail to Margarita Island. Five US citizens were among the crew members on board.
Notwithstanding these circumstances, both the government and Exxon remained resolute, and did all in their power to ensure exploration activities continued offshore. The government took legal steps to address the maritime threat, and Exxon, following Shell’s departure in 2014, brought in new investors to help carry the risk of investing hundreds of millions of dollars in exploration activities.
Bloomberg reported just last week that the Liza well cost $225 million. Coming up empty-handed meant the investors would’ve taken all the loss, since Guyana was not a participating partner in the offshore exploration operations. So, Shell had looked at the same data that led to the Liza discovery and made a fateful decision to exit Guyana, since, in their view, the chances of success were too low.
But perseverance finally paid off in 2015 when Exxon hit pay at Liza 1, delivering 800 million to 1.4 billion barrels of oil, the biggest discovery in a generation. This has now led to over 30 commercial discoveries, and multiple oil-production projects underway, with others being planned.
For Guyana, this is translating into a growing stream of revenue, and new opportunities as a formidable emerging oil-and-gas-producing nation. Bloomberg said the oil resources have transformed Guyana from one of South America’s poorest countries into one that will pump more crude per person than Saudi Arabia or Kuwait by 2027.
At present, 29% of the 2024 national budget is funded by oil revenue, and this will increase in the coming years. So far for the year, US$850 million (G$177 billion) has been withdrawn from the Natural Resources Fund to support the government’s development agenda.
President Irfaan Ali has also spoken about the growing importance of the ‘Guyana Brand’, the immense interest now being shown in the country, and value this has for lifting up the economy and opening doors for entrepreneurs.
The government has made it clear that it intends to hold the oil companies accountable, and work with them to ensure maximum benefits are delivered to Guyanese. And, already, the face of the country is transforming.
If the old saying, ‘no risk, no reward’ is anything to go by, Guyana’s almost sudden emergence as a major regional oil producer and energy player, with no known hydrocarbon resources pre-2015, certainly shows this to be true.
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Publish date : 2024-08-10 21:20:00
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