FPSO Liza Unity; Source: SBM Offshore

Guyana’s dash for gas: ExxonMobil linking up with US firm to unlock untapped potential as govt pushes for speedy development

As the dust over the government’s decision to hand-pick Fulcrum LNG, a U.S.-based energy player, to assist the Stabroek block operator and Guyana in tapping into the country’s natural gas arsenal settles down, the pressure keeps mounting to develop these gas resources quickly to bring down energy prices and monetize total reserves. The Houston-based ExxonMobil is expected to work side by side with Fulcrum LNG, McDermott, and Baker Hughes to make this happen as the Guyanese government continues to push the envelope to ensure gas development will become a top priority.

FPSO Liza Unity; Source: SBM Offshore

Guyana’s hydrocarbon potential catapulted it into an exploration hotspot with ExxonMobil spearheading the inroads made in developing the country’s prolific oil resources. Given the series of discoveries that have been made and continue to spring up, Rystad Energy’s research in 2022 forecasted that the government’s revenue from domestic production would reach $7.5 billion annually in 2030.

With these growth opportunities at the forefront, the country’s government has made it clear that one of its key priorities in the oil and gas industry is the development of natural gas resources. In line with its strategic objective, the authorities embarked on a mission to develop Guyana’s first gas-to-shore project in August 2020. This development is anticipated to cut electricity costs by at least 50% while spurring massive economic growth, especially in the industrial and manufacturing sectors.

The Natural Resources Ministry has left no room for doubt that the government intends to advance the development of the infrastructure needed to harness Guyana’s vast resources in the interest of national development and the Guyanese people. As a result, the plans to utilize and monetize the total reserves of associated gas were discussed on many occasions with ExxonMobil and its partners: Hess Corporation and CNOOC.

Since the gas-to-shore project is expected to utilize a relatively modest amount of gas and is perceived to be geared more toward power generation, these discussions were guided by the government’s aim to generate additional revenue for the country and create opportunities for Guyanese people, through upstream and downstream development of infrastructure in a bid to harness associated gas reserves.

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Upon becoming aware that the development of gas resources was not an immediate priority for the Stabroek block operator, Guyana’s government turned its efforts to seeking an independent third-party operator to either work with the U.S. giant on the project or carry out the activity on its own.

To this end, it was decided earlier in the year to advertise locally and internationally through a request for bids (RFB) for the design, finance, construction, and operation of gas infrastructure to support upstream developments in Guyana.

Therefore, qualified developers were invited to submit proposals for comprehensive solutions to develop the required gas infrastructure, which includes the necessary pipelines to connect and monetize upstream gas. ExxonMobil is moving forward with plans for the Gas to Energy (GtE) project in cooperation with the government and the start-up is expected by the end of 2024.

The proposed project would bring associated gas from the U.S. energy heavyweight’s Liza Phase 1 and 2 offshore projects via pipeline to onshore gas processing facilities. The pipeline would transport up to 50 million standard cubic feet per day of natural gas to the facilities.

Guyana keen on pursuing second gas project

According to Dr Mohamed Irfaan Ali, Guyana’s President, the country’s government is evaluating the feasibility of a second major gas initiative to complement the ongoing Gas to Energy project at Wales, Essequibo Islands-West Demerara.

“We have identified a technical team to work with the stakeholders in coming up with the model and to negotiate a heads-up agreement and look at the viability, technically and financially, of the project,” emphasized Guyana’s President.

While emphasizing a wave of new economic opportunities from this new project, President Ali outlined several possibilities, including developing an energy corridor to Northern Brazil and Suriname, in line with the regional energy security agenda.

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“We have 1.5 billion tonnes of bauxite preserved between Guyana and Suriname. So, depending on the cost structure, this might be an opportunity which makes the aluminium plant viable. All of these options are being examined. We also have the marketing of the byproducts and the use of natural gas in other jurisdictions,” highlighted the country’s President.

Furthermore, President Ali claims that the government is hopeful about its ability to secure funding from the United States EXIM Bank, with the $660 million loan expected to be submitted to the EXIM Board on or before the third quarter of 2024. The government has assured that delays in getting the loan will not derail the project.

“Exxon expects completion of the pipeline by the end of the year. The government of Guyana is also working in a parallel way to have an NGL [natural gas liquids] storage facility and market for the NGL to be advertised shortly,” the country’s President explained.

Kalpataru Projects International Limited (KPIL), the Indian company contracted to establish transmission lines and substations for the project, anticipates that these elements will also be completed this year. 

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Moreover, President Ali elaborated that dredging of Guyana’s main channel was necessary to accommodate the ongoing development of the Gas to Energy project, particularly the pipeline installation and the operationalization of a materials offloading facility (MOF).

With this in mind, the government is exploring a viable, long-term plan to dredge the country’s main channel, with around $80 billion earmarked in the 2024 budget to advance the gas-to-shore project and its associated infrastructure, including transmission and distribution upgrades to offtake the power.

Taking into account the project’s potential to curb electricity costs in Guyana by half, the Gas to Energy project will see a 200-kilometer pipeline bringing gas from the Liza Destiny and Liza Unity FPSOs onshore.

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Upon arrival at this West Coast Demerara facility, the pipeline will continue for approximately 25 kilometers to the NGL plant to be constructed in Wales, bringing multiple benefits to Guyanese people, including job creation, improved electricity access, foreign investment, and energy security.

Bankrolling second gas project is not on Guyana’s current agenda

While reaffirming the government’s confidence in Fulcrum LNG’s capacity to develop untapped gas resources in the wake of media speculation regarding the newcomer’s ability to handle the task, Dr. Bharrat Jagdeo, General Secretary of the People’s Progressive Party (PPP), is adamant that the government does not intend to participate financially at this stage in the advancement of Guyana’s second major gas project.

The project is estimated to require billions in investment to set the ball rolling on its development and bring it online. The government intends to use and profit from all the associated gas resources in the Stabroek block to unleash more revenue for the country and offer new opportunities to its people.

“At this stage, we don’t have any intention to participate financially, as owners. Because that means putting aside large sums of money into the venture, which we don’t have, and secondly, it’s a risky undertaking,” underlined Dr Jagdeo.

Considering the Guyana administration’s determination to move forward with the project regardless of whether ExxonMobil is on board, steps have been taken to engage a third-party player to collaborate with the U.S. giant or carry out the project independently.

In response to a request for design, financing, construction, and operation of essential gas infrastructure to support upstream developments in Guyana, 17 companies submitted proposals, including Fulcrum LNG, which was pinpointed as the most responsive and compliant bidder.

As the U.S. firm has been selected to support the government and ExxonMobil in utilizing the non-associated gas, the Ministry of Natural Resources engaged in preliminary stage discussions with the company and the U.S. oil major to advance the project.

“The most comprehensive proposal came from Fulcrum and they had some of the top U.S companies as their partners. You had McDermott, who is the lead contractor as part of this company. You had Baker Hughes as part of this company. These are some of the top companies in the world, they had clearly the best proposal,” Dr Jagdeo noted.

Using the occasion to hammer home that the government intends to push the project development forward, as the partners are fully interested, he elaborated that there was no conflict of interest despite rumors about Fulcrum LNG’s CEO, Jesus Bronchalo, since he had severed all ties with ExxonMobil, where he served as vice president.

“Now, people raise questions of start-ups, this is a new company but when you look at the partners, these are massive companies,” underscored Dr Jagdeo.

Meanwhile, ExxonMobil has revealed plans to develop Hammerhead as its seventh oil project in Guyana, to add up to 180,000 barrels per day (bpd) by 2029, raising the country’s overall production capacity bar to nearly 1.5 million bpd.

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In a bid to tap into more than 11 billion barrels of oil equivalent, the U.S. heavyweight, which intends to have six FPSOs with a gross production capacity of more than 1.2 million barrels of oil per day online on the Stabroek block by the end of 2027, has also hinted at the potential for up to ten such units to be in operation.