Page 9 - LatAmOil Week 17 2020
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Guyana’s government has previously said that it will shortlist up to 20 companies. It opened up bidding for the contract inlate February and was originally due to close the tender on March 12, but it later extended the deadline to last week.
The winner of the contract will help George- town sell and export its share of oil production from the offshore Liza field, where a consor- tium led by ExxonMobil began to extract oil last December. It will be expected to lift around five cargoes, each consisting of 1mn barrels, over a
period of 12 months.
Guyana started to sell Liza crude via
open-market tenders last year, since it has no refining capacity. Its first cargo was sold to Royal Dutch Shell.
Liza, a field within the offshore Stabroek block, holds more than 8bn barrels of crude in recoverable reserves. A consortium led by Exx- onMobil began to extract oil from the site last December and hopes eventually to push output up to 750,000 barrels per day (bpd).
SHIPMENTS of crude oil from the Liza field offshore Guyana could be affected by the global storage glut that has resulted from the corona- virus (COVID-19) pandemic, according to the head of the country’s Department of Energy.
Mark Bynoe, the director of the department, explained that storage might become a problem later in the year. “No shipment from the Liza Destiny has been affected due to COVID-19 presently. However, going forward, as entities begin to run out of storage capacity due to an over-supplied market and depressed demand, shipments could be impacted,” he told the Guy- ana Chronicle, a state newspaper.
Oil producers and consumers have seen their inventories fill up in recent weeks, owing to demand destruction stemming from the coro- navirus outbreak. The world has an estimated storage capacity of 6.8bn barrels, of which nearly 60% is full, according to a recent report by the New York Times.
Bynoe noted that several countries have recently resorted to hiring very large crude car- riers (VLCCs), tankers that can hold 2.0-2.2mn barrels of crude, to expand their storage capac- ity. Since these vessels can now serve as floating storage, charter rates are rising, he stated.
“These are going at premium rates at the moment because of the substantial demand for these vessels and limited storage options else- where,” he was quoted as saying by the Guyana Chronicle.
He went on to say that the recent slide in crude prices had made him grateful that Guyana
has not become dependent upon oil revenues. The South American country saw first oil from the Liza field, which is operated by ExxonMobil (US), last December.
The director also indicated that Guyana intended to establish its own storage depots in the future. The country could build its own tank farms, but it would probably have to spend billions of dollars on a pipeline connecting the facilities to offshore oilfields, he said.
“For Guyana to consider storage onshore, that would most likely involve bringing a pipe- line to shore. That will involve billions of dol- lars, as most vessels will be too large to enter our waters,” he said.
“Anyinvestment[proposal]willhavetolook at the relative costs and benefits,” he added.
Guyana pre-sold its first three cargoes of oil to Royal Dutch Shell (UK/Netherlands) and expects to complete these sales in July, accord- ing to Bynoe. The country received $55mn for its first cargo of 1mn barrels of oil, which was delivered to Shell in February.
Winston Jordan, Guyana’s Minister of Finance, recently warned that the next cargo would be much less lucrative. This second ship- ment could bring in as little as $20mn, he said.
But Bynoe took a different stance, saying that it was not possible to determine how much the next lifting might earn. He also asserted that Guyana’s oil remained valuable. “Even under the current situation, Guyana’s oil is still profitable,” he said. “[But when we are] likely to see oil at $60 a barrel again is any body’s guess.”
Liza is the first oilfield to be developed at the Stabroek block (Image: Hess)
Storage glut could hit shipments from Liza
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