Oil prices have fallen sharply as the U.S. summer driving season ends, driven by worries about an economic slowdown in China. The international Brent benchmark plummeted over 12% in a month, hitting levels not seen since early 2022. Although prices have rebounded slightly due to rising tensions in the Middle East, they are still down 4%. This situation has led the OPEC+ group to postpone plans to increase production until December 2024. Analysts believe that growing non-OPEC supply will limit any price recovery, particularly with Guyana emerging as a significant oil producer.
Guyana, long overlooked by major oil companies, has quickly become a key player in global petroleum production. This transformation began after ExxonMobil and its partners made major discoveries in the Stabroek Block, which spans 6.6 million acres offshore. Exxon holds a 45% stake in this block, with Hess and CNOOC owning 30% and 25%, respectively. Since 2015, Exxon has identified nearly 40 oil discoveries in this area, estimated to contain over 11 billion barrels of oil.
The first discovery, the Liza-1 well, was made in 2015, followed by significant finds in 2017. The Liza Phase One project began operations in December 2019, with the Liza Destiny vessel able to produce 120,000 barrels per day. By February 2022, the Liza Phase 2 project was completed, increasing capacity to 220,000 barrels per day. By November 2023, the Payara project was online, boosting total capacity to 560,000 barrels per day, with ongoing enhancements pushing production above 600,000 barrels daily.
Remarkably, it took just four years for Guyana to progress from its first discovery to producing oil, a timeline far shorter than the industry average of seven years. In contrast, similar projects, like Suriname’s Block 58, face delays, with first oil not expected until 2028.
In August 2024, Guyana’s Minister of Natural Resources announced an increase in oil reserves by 600 million barrels, bringing the total to 11.6 billion. This positions Guyana as the third largest oil reserve holder in South America, following Brazil and Venezuela. The discoveries indicate that the true potential of the Guyana-Suriname Basin exceeds previous estimates by the U.S. Geological Survey.
Foreign investment in Guyana’s oil sector is booming, particularly due to the high quality of its crude oil. The oil from the Liza field is medium density and sweet, making it easier to refine into low-emission fuels. Similar qualities have been found in other offshore discoveries.
As investment grows and new projects come online, Guyana’s oil production is set to rise. Exxon is working on four new projects in the Stabroek Block, with completions planned between 2024 and 2029. The first is the Yellowtail development, expected to produce 250,000 barrels per day by the end of 2025. This will be followed by the Uaru and Whiptail projects in 2026 and 2027, respectively, and the Hammerhead project in 2029.
Recent upgrades to the Liza Destiny and Liza Unity FPSOs caused temporary production drops, but output has since returned to previous levels. Additionally, a new gas-to-energy project is set to begin operations by the end of 2024, which aims to reduce electricity costs in Georgetown by up to 50%.
The U.S. Energy Information Administration predicts that Guyana will produce 865,000 barrels of crude oil daily by November 2025, making it the second-largest oil producer in South America and 20th globally.
However, concerns have arisen over a dispute between Exxon and Chevron regarding Hess’s recent acquisition. Exxon, which holds a 45% stake in the Stabroek Block, argues that Chevron’s $53 billion takeover of Hess triggers a right of first refusal to acquire Hess’s 30% share of the block. Both companies are now in arbitration, with Exxon suggesting it may bid for Hess’s stake if it wins. Meanwhile, Chevron maintains that there is no change of ownership as Hess would remain a subsidiary after the acquisition.
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