Fifth oil project to cost more than US$10B

Nov 02, 2022 News

Hess puts Guyana on notice…

Kaieteur News – American energy company, Hess Corporation, has put Guyana on notice, that the fifth project targeting 1.3 billion barrels of oil in the Stabroek Block’s Uaru field, will cost way more than US$10B. The company issued this forewarning about the most expensive development to come during its 2022 third quarter earnings call.

Hess Executives told shareholders that they were able to insulate development costs for Payara and Yellowtail to some extent, from inflationary pressures by locking in key contracts early. In fact, Hess said its partner and operator of the block, ExxonMobil affiliate, Esso Exploration and Production Guyana Limited (EEPGL) has “done an excellent job of offsetting any inflation through a series of efficient strategies.”

With respect to the Uaru Project, Hess officials said the circumstances will be different, adding that the cost for the Floating, Production, Storage and Offloading (FPSO) vessel, will surely reflect current market conditions, as well as scope changes. While it would be affected by inflation, Hess said the project would still carry “world-class breakevens.” It said a more detailed update on Uaru will be provided once government approval is received.

In its project summary that was submitted to the Environmental Protection Agency (EPA), Esso Exploration and Production Guyana Limited said the Uaru Project will be located in the eastern portion of the block, approximately 200 km from Georgetown and amid previous Stabroek Projects.

Current plans include drilling to produce oil from approximately 40-76 wells which costs millions of dollars. Production is expected to begin between the fourth quarter of 2026 and the second quarter of 2027, with an expected field life of at least 20 years.

EEPGL said the production facilities to be installed include subsea equipment attached to the seafloor as well as processing equipment on the ocean’s surface known as a Floating, Production, Storage, and Offloading vessel.

The anticipated production rate for the FPSO ranges between approximately 220,000 barrels and 275,000 barrels of oil per day. The vessel will be capable of storing approximately two million barrels of oil.

Additionally, third party oil tankers will be scheduled to offload the oil from the FPSO, making the oil available for export to the international market. The FPSO will also process, dehydrate, compress, and reinject associated gas produced from the reservoir. As the Uaru and Mako reservoir pressures deplete over time, this gas reinjection will help maintain reservoir pressure and allow for optimum production of hydrocarbons to continue over time. In addition, some of the gas will be used as fuel on the FPSO.
Furthermore, EEPGL told the EPA that it has undertaken additional studies to obtain an even more comprehensive understanding of potential impacts of effluent discharges to water, the feasibility of alternative handling of produced water, cradle to grave waste management in Guyana, emergency response capabilities, and environmental compliance monitoring and verification. The company said the learnings from current operations and environmental studies will enhance the design and implementation of the Uaru Project, thereby increasing environmental performance and economic value.
It concluded that the Uaru Project will contribute positively, directly and indirectly, to economic growth in Guyana, including increased national revenues, local procurement of select goods and services, increased direct and indirect local employment opportunities, which drive associated beneficial “multiplier” impacts throughout the local economy.

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