In Guyana, planned offshore projects, which have already started putting related infrastructure in place in the Stabroek block, will not have their capital expenditures (CapEx) reduced as ExxonMobil and Hess Corporation, operator and partner, have announced they have decided to protect this world-class opportunity.
Currently, sanctioned offshore projects in Guyana will require development breakeven prices less than $35 per barrel (bbl) with lifting costs of $9 per bbl. Two out of four projects, Liza Phase 1 and Liza Phase 2, are well on track in their initial production and development respectively and Payara project is waiting for the final government approval. The fourth project, the greater Hammerhead development, is still to reach a final investment decision, which is likely to be delayed.
With Brent prices crashing as a result of Covid-19 and the oil price war between Russia and Saudi Arabia, the oil revenue received by the government as state take will be significantly lowered. Still, Guyana was expected to receive revenue estimated at $71m, starting in 2020, mainly due to the start of the production in Liza Phase 1 and was expected to reach $324m by 2022 when Liza Phase 2 will also start production. This forecast for future fiscal take assumes that oil price will average above $36 per barrel in 2020.
In spite of the current crisis in the upstream sector, Guyana remains resilient in its upstream projects. While the plunge in crude oil prices will have an impact on cash flow from planned projects, the operator Exxon plans to make adjustments as necessary to mitigate the drop. It is also likely that upstream growth in Guyana and the drive for investment in exploration elsewhere in the region may decelerate over the next few years, with more scrutiny before deciding to move ahead with future development of other 12 discoveries in the Stabroek block.