Latest update November 5th, 2024 1:00 AM
Aug 31, 2021 News
…Guyana’s high quality crude will not become stranded assets – Int’l Analyst
Kaieteur News – The stranded asset phenomenon is one that plagues many countries across the globe. It occurs when assets have suffered from unanticipated or premature write-downs, devaluations, or conversion to liabilities. With the global energy transition intensifying since the COVID-19 pandemic, there have been calls by some for Guyana to rush its oil production while there is still a demand or market for it, otherwise, its oil assets could become stranded.
Upon noting those comments, an international analyst has offered his perspective on the matter, stating that there is no need for Guyana to rush its oil production in the Stabroek Block since it has light sweet crude, low production costs, and high turnover for same. Making this position known was Co-Director of Energy Practice at a regional consultancy firm, America’s Market Intelligence (AMI), Arthur Deakin.
During an interview on Kaieteur Radio’s, Guyana’s Oil and You Programme last Tuesday, Deakin highlighted that development of the country’s oil and gas sector in a sustainable way will also lend to it not being left with stranded oil assets.
“Carbon capturing, utilisation and storage (CCUS) technology, renewable energy to power the floating production storage and offloading vessel (FPSO), using its forest as a carbon sink — all of these things are going to be very beneficial for the overall emissions that Guyana produced from its oil and gas sector,” Deakin explained.
He continued that it also helps that Guyana has light sweet crude that is easier refined. “It is very highly demanded because of the International Maritime Organization’s new regulations and also the fact that Guyana has very fast drilling rates, high recovery from its wells, low operation costs. Basically, it is a very attractive jurisdiction,” he pointed out.
The Co-Director went on to refer to Guyana’s neighbour to the west, Venezuela, which is not the beneficiary of fortunes similar to Guyana’s. In fact, this Spanish-speaking country produces a heavier crude which costs more to drill out of the earth. Further to this, Venezuela for the past five years has been caught in an ongoing socio-economic and political crisis that began in Venezuela during the presidency of Hugo Chávez and has continued since. It has been marked by hyperinflation, escalating starvation, disease, crime, and mortality rates, resulting in massive emigration from the country.
“There is no investor guarantee in Venezuela,” Deakin pointed out, “so as long as Guyana can develop its sustainable side to the oil and gas development and keep a regulatory framework that is attractive to its investors and provides some guarantees, I don’t see it being stranded asset anytime soon, if ever, because oil is still going to be produced at least for our lifetime. So, there is plenty of time for Guyana’s oil to come out of the ground, to be honest.”
Earlier this year, Deakin told Kaieteur News that Guyana’s high-quality crude is what allowed the country to weather the COVID-19 pandemic. The International Analyst reminded that since Guyana’s crude is lower in sulfur content, it enjoys high global demand, particularly in China.
“Both Brazil and Guyana that have this type of oil, in addition to their low breakeven costs, lower than US$40 a barrel. Guyana I think is US$35 for Phase One of exploration and that price is expected to go down to US$25 in Phase Two of exploration… The panorama is positive,” Deakin had related.
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