This information was provided by Director of the Department of Energy, Dr. Mark Bynoe in a media briefing via Zoom on Monday.
Guyana sold its first 1 million barrels of oil on 19 February 2020, to Shell Western Supply and Trading which raked in nearly US$55 million. Meanwhile, coming from its first-quarter gross production, the country received US$4.9 million — now deposited into the Natural Resource Fund (NRF).
Liza Crude Performing Well
Dr. Bynoe said that the ‘light sweet’ Liza Crude has been well received despite it being new to the market and despite the drop in global oil demand. Updates from Shell indicate that the crude oil assay — testing of the properties and composition of crude oils — is performing consistent with samples put out over a year ago.
“It is looking pretty good for the Liza Crude at this point in time,” he said.
Dr. Bynoe explained that the DE was strategic in its initial search for International Oil Companies (IOCs) to buy its crude, as it wanted to ensure that many potential refineries would come into contact with its crude for the creation of a “global footprint”.
Already, the Liza Crude has touched at least 20 different refineries non-inclusive of what the operator and the co-venturers are lifting.
Dr. Bynoe stated: “We are beginning to see that the Liza Crude is indeed having a global impact, a number of refineries are touching to know how it will perform. That feedback that comes to us gives us a very good idea as to how our crude is performing and how it can be marketed.”
The projection that Guyana is entitled to five cargoes for this year has not changed, which means that, after Shell would have received its three cargoes by July, the country can market its crude to another company/location.
Given the current volatility of oil prices, persons are curious about whether Guyana will receive a lower price for its next shipment of crude to Shell. In response, the DE Director reminded that each cargo will be paid for on ‘dated Brent’ which means that 10 days after the bill of lading (working days) the average price will be calculated and paid for the cargo.
Even so, he informed the public that the resounding advice of industry experts is that Guyana should not halt production but continue at a steady rate at the Liza Destiny, as doing otherwise could jeopardize operational integrity.
Added to this, shutting down existing production can prove costly and detrimental to future production from the reservoir. Hedging crude entitlement has also been advised against, as it comes with a high cost and does not offer full protection.
Challenges to Operations
Altogether, Dr. Bynoe said that the major challenges affecting all operators at the moment are their ability to change out crews in light of international travel restrictions and slippages in work plans, due to the quarantine period in place.
“In the case of the Liza Destiny we have seen operational slippages due to the inability to complete the commissioning phase of operations and ramp up to steady state production, as some of the operations have encountered some challenges with the gas compressor,” he said.
He noted the contract for the Cost Recovery Audit is progressing well with the multi-agency team from IHS Markit working alongside the consultant, but this contract has received a no-cost extension because of the impact of the COVID-19 pandemic.
This is due to the reality that many of Guyana’s contracts require that consultants be in the country but travel restrictions have prevented this.
When it comes to storage, Dr. Bynoe said that this issue does not pose a current challenge to Guyana as its first three million barrels of crude have been sold to Shell which must take up the responsibility for storage.
However, should the global storage issue progress, Guyana will consider all options, even as it remains aware that storage is very expensive, given the current demand. The DE is also aware that some world economies such as China are beginning to reopen which may reduce the current global backlog.
Ultimately, Dr. Bynoe said that Guyana, as a new producer, is unlikely to be largely affected economically and socially by the slump in oil prices because the dependence on oil has not penetrated to household incomes.
“The growth forecast for the country which was expected to be staggering from 2020 onwards will be delayed with the steepest of the growth curve expected to materialize beyond 2021,” he stated.
Other Plans Progressing
Meanwhile, offshore Guyana, the Liza 1 field has produced over 8 million barrels of oil, with average daily production between 75 – 80 kbd, with an expected ramp up to 120 kbd by early June 2020.
There are currently two active rigs focused mainly on drilling water injection wells for the Liza Destiny FPSO and two hot-stack rigs on standby, as they require crew change and are faced with restriction to drilling operations, due to the pandemic.
At Liza Phase 2, the laying and installation of riser campaign has commenced and work is continuing apace, but this too will require a crew change soon.
The DE is working closely with the National Covid-19 Task Force (NCTF), the Maritime Administration Department (MARAD) and the Ministry of Citizenship, among others, to facilitate a smooth flow of operations without contravening the country’s laws and regulations.
Regarding the Lisa Unity FPSO with works contracted to SBM Offshore, topsides fabrication is progressing with all 19 modules under construction. Several trees/tubing heads have been completed, with the first two trees shipped to Trinidad from Brazil, with trees 3-8 expected to be shipped shortly.
Development drilling has commenced, as well as the installation of the risers and this project remains on schedule. The Operator is working with the DE to include Guyanese expertise in various stages of the Unity’s completion as per the FDP approval.
To ensure institutional strengthening, the DE has contracted the services of a Petroleum Accounting Specialist, and has been working to secure the services of a Contract Administration Specialist, Sub-Surface Engineer and an Oil and Gas Advisor to the Director of the DE.
In addition, the DE hopes to conclude the Market Price Determination Procedure and Provisional Crude Oil Basket for marketing Guyana’s crude as per Article 13 of the Production Sharing Agreement (PSA).