Page 5 - LatAmOil Week 47 2020

LatAmOil COMMENTARY LatAmOil

Brazil’s Barreirinhas Basin, for example, does service agreement that will allow it to lead
not appear to have the same extent of commer- exploration campaigns at Blocks 30, 44 and 45 in
cially viable reserves as Ghana’s Tana. Similarly, Namibe. This move makes some sense, in light
Brazil’s large-scale pre-salt discoveries in the of the fact that these blocks lie within the conju-
Santos Basin have not been duplicated in Ango- gate of Brazil’s Santos Basin, home to many large
la’s Namibe Basin. pre-salt fields. However, it is also risky, given the
Nevertheless, interest in Central and South high level of expense involved in deepwater and
Atlantic conjugates remains strong enough. It ultra-deepwater drilling, even if large reserves
has, for example, led petroleum geologists to are discovered.
investigate the possibility that the sizeable oil Under these conditions, Richards told Petro-
reserves found offshore Guyana and Suriname leum Economist, ExxonMobil may opt to aban-
have their analogues in the large gas discover- don the Namibe blocks. “It would be a close call
ies made in the MSGBC (Mauritania-Sene- whether or not those resources would be devel-
gal-Gambia-Bissau-Conakry) Basin. As recently oped if prices stayed as they are,” she said. “My
as September of this year, Welligence, a Hou- feeling is that they would not be.”
ston-based oil and gas analytics firm, pointed Alternatively, the US giant might simply wait,
out that Royal Dutch Shell (UK/Netherlands) she added. “Current prices are extremely restric-
had increased its exposure to the South Atlantic tive of exploration in general, and most new
conjugate margin through a subsidiary’s pur- acreage picked up over 2020-21 will be taken up
on the assumption of a longer-run recovery in
chase of exploration assets offshore Namibia, is nothing to encourage ExxonMobil to try [to] “
São Tomé and Príncipe, South Africa and Suri- the market,” she commented. “Certainly, there Profit margins
name from New York-listed Kosmos Energy. for conjugate
It remains to be seen, though, how far these fast-track its activities on these blocks in the cur-
shows of interest can drive exploration along rent price environment.” projects are
conjugate margins.
Offshore implications likely to be thin
Operating costs Even so, ExxonMobil appears to have no such
In an article published on November 20, Petro- reservations about its work offshore Guyana.
leum Economist pointed out that conjugate The company has already brought the Liza-1
plays have one very significant disadvantage – site online at the Stabroek field and is slated to
namely, high operating costs. launch production at another two sites, Liza-2
One of the industry observers who has ques- and Payara, within the next four years. Addi-
tioned the economics of Central and South tionally, it seems to have high hopes for Canje,
Atlantic plays is Emma Richards, a senior ana- another block in the Guyanese offshore zone
lyst at Fitch Solutions. In response to questions that lies to the north of Stabroek. The US com-
from Petroleum Economist, Richards indicated pany and its partners are on track to spud Bullet-
that profit margins for conjugate projects were wood-1, their first exploration well at the block,
likely to be thin. before the end of this year.
She noted that the World Bank and other According to AIM-listed Westmount Energy,
institutions have predicted that world crude an indirect investor in the project, Canje may
prices will average around $44 per barrel in turn out to hold 10bn barrels of oil, even more
2021. This is uncomfortably low for companies than Stabroek’s 9bn barrels. At the same time,
working in Brazil’s pre-salt zone and the Guy- though, the block is also further from shore and
ana-Suriname Basin, where full-cycle break- located in deeper water, which means that it may
even projects are in the $30-40 per barrel range, carry higher operating costs.
she commented. If so – and if world oil prices take a turn for
the worse – ExxonMobil may have to reconsider
Breaking even the question of whether and when to proceed
It may also be too low for companies working with drilling offshore Guyana. If it does, other
in frontier areas such as the deepwater and companies working in the Guyana-Suriname
ultra-deepwater sections of the Namibe Basin Basin – and by extension, in other conjugate
offshore Angola. basins on both sides of the Atlantic – may also
ExxonMobil (US) recently signed a risk have to decide whether to push forward. ™

(Photo: File)

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