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ExxonMobil could still make money even if oil prices halved – Bloomberg
…Guyana’s production costs are among the lowest in the world
Kaieteur News – Guyana’s oil production costs are among the lowest in the world, ensuring profitability for ExxonMobil Guyana Limited (EMGL) and its Stabroek Block partners even if oil prices were to fall by half.
Stabroek Street District
ExxonMobil Guyana is the operator of the Stabroek Block with a 45% interest, Hess Guyana Exploration Ltd. has a 30% interest, and China National Offshore Oil Corporation (CNOOC) Petroleum Guyana Ltd. has a 25% interest. Guyana has one of the fastest growing economies in the world thanks to offshore oil production.
Kevin Crowley of Bloomberg said in a recent article that Guyana has become a cornerstone of ExxonMobil’s post-pandemic corporate resurgence. The article also noted that “…with production costs of less than $35 per barrel, (the Stabroek block) is one of the most profitable blocks outside OPEC. With crude currently trading at $85 per barrel, the field would still be profitable even if the transition away from fossil fuels caused demand to collapse and prices to fall by half.”
Kaieteur News The International Energy Forum (IEF) and S&P Commodity Insights said in a June 2024 report that Guyana has the lowest production cost per barrel of oil. The report, titled “Upstream Oil and Gas Investment Outlook,” reveals the changing dynamics of global oil production costs, specifically highlighting Guyana’s position as a cost-effective producer in the industry. According to the report’s findings, global oil production costs have increased. The report highlights that most new oil supplies can be extracted at an average cost of $60 per barrel of Brent crude oil or less.
Guyana, the Middle East and West Africa are the regions with the most competitive production costs. The report shows that the Middle East has the lowest average breakeven price of about $30 per barrel of Brent crude oil, followed by Guyana with a breakeven price of $36 per barrel of Brent crude oil.
Last month, the publication reported that according to EMGL Vice President and Business Services Manager Phillip Rietema, the company’s Guyana projects are internationally competitive and among the best in the world. In an episode of the local Energy Perspectives podcast, Rietema spoke about the industry’s price volatility, noting that the projects are designed to withstand market fluctuations. “So the cost of supply for these projects is all under $40 a barrel…” he said.
According to Hess’s filing with the U.S. Securities and Exchange Commission in August 2024, Guyana crude oil will sell for an average of about $82. ExxonMobil currently produces more than 600,000 barrels per day of crude oil from just three projects in the Stabroek block (Liza Phase 1, Liza Phase 2 and Payara). Currently, the partners in the block plan to reach a total production capacity of about 1.3 million barrels per day by the end of 2027, and plan to develop three more projects: Yellowtail, Uaru and Whiptail.
The first significant oil discovery offshore Guyana was made at the Liza Project in the Stabroek Block in 2015. Since then, ExxonMobil and its partners have made more than 30 additional offshore oil and gas discoveries within the Stabroek Block.
In addition to the low breakeven price for ExxonMobil’s Guyana operations, the company struck a “sweetheart” deal for the oil block back in 2016. The Stabroek Block Production Sharing Agreement (PSA) provides Guyana with an industry-low 2% royalty. In addition, Guyana shares revenue with ExxonMobil after ExxonMobil deducts 75% of the cost of developing the Stabroek Block resources. After deducting 75% to repay the oil company, Guyana shares the remaining 25% 50/50 with ExxonMobil as profit. This equates to 12.5% of operating profit.
Additionally, ExxonMobil and US oil giant Chevron are currently embroiled in a legal dispute over Guyana’s lucrative Stabroek Block. Chevron has agreed to acquire Hess for $53 billion. The acquisition would give Chevron a 30% stake in Hess’s Stabroek Block, a prospect that has sparked tensions with ExxonMobil. ExxonMobil claims that it has a preemptive right of purchase over Hess’s stake in the Guyana oil block, a claim that has led to an ongoing court battle. The case is due to continue next year.
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