Guyana’s surge in oil production shifts global shipping dynamics

Jun 01, 2024 News

A large Suezmax crude tanker

Kaieteur News – The surging oil production in Guyana is changing the dynamics of the industry globally, with reports now suggesting that the huge volumes of crude being exported from the Stabroek Block to the US Gulf Coast, has led to an increase in demand for Suezmax crude tankers, versus the smaller versions.

Under Guyana’s Crude Lifting/Entitlement Agreement exports from each of the Floating Production Storage and Offloading (FPSO) vessels in the Stabroek Block, sees each of the partners–ExxonMobil Guyana Limited (EMGL), Hess and CNOOC and Guyana—uplifting and exporting crude in, one million barrel tranches, as per turn.

Reports have since found that this surging Guyanese crude exports to the US Gulf coast may in fact benefit Suezmax crude tankers, as a potential new export market develops for the South American country’s booming production.

Suezmax tankers—the largest ships that can transit the Suez Canal, are on average some 900 feet with capacities to ferry loads of 800,000 barrels of oil, to more than 1,000,000 barrels.

According to a recently published report by Argus– a global market intelligence energy and commodity markets provider – Citgo’s 167,500 barrels per day Corpus Christi refinery in Texas has already taken three, one-million-barrel cargoes, of what it describes as “medium sweet Payara Gold” in May.

A fourth Suezmax tanker, the Nordic Hawk, transited the Corpus Christi ship channel on 29 May, according to ship tracking data from Kpler.

To this end, it was pointed out that were the Nordic Hawk and the Aframax vessels to complete their shipments by the end of the month, the refinery’s imports of Payara Gold would top 100,000 b/d in May, up from 60,000 b/d in April and 32,000 b/d in March.

US Gulf coast refiners last year imported just two Suezmax-size cargoes of Guyanese crude, or about 5,500 b/d.

The primary destinations for the country’s roughly 370,000 b/d of oil exports last year, about 85 Period of Charter, (pc) of which were hauled on Suezmaxes, were Europe, which took about 60pc, and the US west coast, which took about 25pc via re-export on the Trans-Panama pipeline, according to Vortexa data.

With this in mind, it was observed that a new market to the US Gulf coast would add to the already-rising Suezmax demand in Guyana, where tonne-miles this year through May 20, 2024 increased from the same period last year and by almost fivefold from the same period in 2022.

As such, it was noted that charterers moving Guyanese crude often opt for the economies of scale offered by 1mn bl Suezmaxes compared with smaller 700,000 bl Aframaxes.

Additionally, with the start of production at the 220,000 b/d Prosperity, FPSO in November 2023, this helped boost Guyana’s oil production to 625,000 b/d in April, according to government data, while output in April exceeded the country’s rated capacity by 65,000 b/d following improvements at the older Liza 1 and Liza 2 projects in the deepwater Stabroek block.

To this end the increased US Gulf coast imports of Guyanese crude come as crude imports from Mexico fall, exerting downward pressure on rates for Aframaxes since March, thereby shifting the entire dynamics of the global crude shipping industry in the process.

According to international reports US Gulf Coast imports of Mexico’s medium sour Isthmus have led the declines, falling to about 135,000 b/d from 1 March through May 27, 2024 compared with about 220,000 b/d over the preceding three-month period, according to Vortexa data.

“Given the expectation of depressed Mexican crude exports going forward, the push and pull for Guyanese barrels between the US and Europe is likely to be stronger than ever,” Kpler analyst Matt Smith wrote in a research note.

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Guyana’s Crude Lifting, Hess and CNOOC and Guyana, Stabroek Block, Suezmax

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