ExxonMobil announced yet another discovery in its coveted Stabroek block in Guyana. The Bluefin well encountered 197 feet of hydrocarbon-bearing sandstone in 4,244 feet of water, adding to Exxon’s growing list of over 30 oil discoveries in the Stabroek block since 2015.
The latest announcement follows explosive growth in Guyana’s production, which benefitted from the early completion of the Payara Gold stream late last year.
Guyana’s oil output has grown from near-zero to approximately 650,000 bpd in five short years. By 2027, the country’s production is estimated to grow to more than 1.3 million bpd from the addition of three new projects:
- Yellowtail: +250,000 bpd
- Uaru: +250,000 bpd
- Whiptail: +250,000 bpd
Guyana’s entrance onto the global producer scene is among the fastest on record, and its three primary crude grades are competitive across a wide range of refinery setups.
All Guyanese grades are low in sulfur content, meaning they cause less damage to refinery equipment and require fewer investments in sophisticated processing technology to remove sulfur.
The country’s Unity Gold provides a light sweet option that can compete with grades like Nigeria’s Bonny Light or Russia’s ESPO.
Its Liza grade can compete with supplies like Russia’s Urals or Saudi Arabia’s Arab Light, and its newest Payara Gold offers an alternative to medium slates like Norway’s Sverdrup or Saudi Arabia’s heavier grades.
Moreover, Guyana’s Liza and Payara Gold are highly attractive as demand for middle distillates like diesel pushes refineries to reduce the output of lighter products like gasoline.
Guyana’s Top Customer in 2024
On the import front, Europe emerged as Guyana’s top customer in 2023 and early 2024. In the trailing 12 months, over 60% of Guyanese crude exports crossed the Atlantic to European buyers.
In with the new, out with the old
Guyana’s Payara Gold output is adding pressure on Europe’s traditional import sources, such as Norway and the Middle East.
Given the similar API gravity, lower sulfur content, and uninterrupted access, Payara Gold presents an attractive source of medium-sweet crude for European refineries that face steep freight costs to import medium-sour grades from the Middle East via the circuitous Cape of Good Hope route.
Furthermore, the incremental growth in Guyana’s exports is beginning to impact Johan Sverdrup’s diffs from Brent heading into the European refinery maintenance season.
The Norwegian grade saw its prices jump to several-dollar premiums to Dated Brent late last year. However, the addition of Payara Gold volumes has reversed the trend since early February. According to Platts, Sverdrup prices touched their lowest in over a year on March 5, reaching a three-dollar per barrel discount to Dated Brent.
Guyana’s Demand Outlook
Europe:
Europe’s gasoil demand outlook is more promising than gasoline’s, aligning Guyanese Payara Gold and Liza supplies with European refiners’ preferences for 2024 and 2025.
Guyana’s European outlook is further supported by the production forecast at Equinor’s Johan Sverdrup oil field, which is expected to start declining from ~755,000 bpd at the end of 2024/beginning of 2025.
The CEO of the project’s second-largest partner, Aker BP, flagged the earlier-than-expected decline in output in February:
“We assumed previously that we would be able to maintain the enlarged rate on Johan Sverdrup well into 2025. Now the operator has informed us that they might reduce this volume earlier, that is late-2024 or early-2025. There is quite a bit of uncertainty.”
Aker BP CEO – Karl Johnny Hersvik
United States:
U.S. refineries will need heavier crude supplies after Mexico cuts exports of its heavy-sour Maya, the U.S. restores sanctions on Venezuelan exports, and Canada reroutes exports of heavy-sour WCS to the Pacific.
In January, the U.S. imported its first 1 million barrel cargo of Payara Gold to Morgan City, Louisiana. Those volumes will likely increase in the second half of the year.
Asia:
The Exxon-led consortium’s success in Guyana has attracted investment interest from import-dependent countries looking to diversify supplies outside of OPEC+. In February, India signed a five-year memorandum of understanding (MoU) to consider acquiring stakes in Guyanese exploration acreage outside Exxon’s Stabroek block.
Key Takeaways:
- Guyana’s three primary crude grades can satisfy demand from a wide range of refinery complexities.
- Guyana’s newest grade, Payara Gold, is capturing European market share from Norway’s Sverdrup and supplies from the Middle East, which are hurting from reduced transits through the Red Sea/Suez Canal.
- Increased demand for middle distillates like diesel/gasoil and fuel oil will expand Guyana’s export market, as its medium sweet grades are ideal for those products.
- S. refineries will likely increase purchases of Guyanese crude in 2H24 as fewer supplies are available from Mexico, Canada, and Venezuela.
- The Exxon-led consortium of producers in Guyana’s Stabroek block has three approved projects in the pipeline that will increase output to approximately 1.3 million bpd by 2027.
- Further exploration deals will unfold in 2024/2025 as import-dependent countries like India seek long-term supply agreements.
By: Alex Melvin-Mobius Research & Insights
Discover more of Mobius Risk Group’s commodity risk insights for geopolitics, energy policy, and structural supply and demand here: https://insights.mobiusriskgroup.com
