Guyana continues to outperform market expectations on volumes produced from the ExxonMobil-operated Stabroek Block, with oil production expected to reach 1.1 million barrels per day (bpd) by the end of the decade. Average production in Guyana exceeded 625,000 bpd during the first half of this year, representing a near 55% increase from the second half of 2023 and 12% above the combined initial nameplate capacity of 560,000 bpd. This significant rise was primarily due to the start of operations from the Prosperity floating production, storage and offloading (FPSO) vessel on Stabroek in November last year and has been possible due to ExxonMobil’s attempts to optimize production.

The South American nation’s oil revenue is estimated to reach $32 billion by 2030 on Rystad Energy’s long-term oil price assumption of $70 ber barrel of Brent crude. Government take, which includes royalties and the government’s profit share after the operator’s cost recovery, is set to increase from a modest $155 million in 2020 to $9.2 billion in 2030. Putting that figure into context, Guyana’s real GDP currently stands at about $16.8 billion. The government registered 33% year-on-year real GDP growth in 2023, with 70% of the value attributed to oil production alone, as indicated by World Bank in its Macro Poverty Outlook for Guyana, April 2024. The World Bank forecasts real GDP growth of around 37% to $23 billion this year. Oil GDP is expected to grow by around 50% to nearly $17.5 billion.  

ExxonMobil controls most of Guyana's discovered resources and has been instrumental in making the country a prominent exploration and production hub. The US major has conducted debottlenecking to optimize existing infrastructure, enabling higher production levels than initially designed. ExxonMobil is currently spending around 19% of its total exploration and production investments on Guyana, estimated to touch $4 billion this year and total around $30 billion cumulatively by 2030.

In retrospect, it could be argued that the government has succeeded in generating the activity it had been hoping for. With more than 13 billion barrels of oil equivalent (boe) of recoverable resources identified in Guyana since the initial Liza discovery, the country ranks behind only Russia on total volumes discovered (liquids and gas) since 2015 to date and is the leader on discovered liquids resources.

ExxonMobil continues to explore the remaining prospects in Stabroek and in March announced completion of the Bluefin wildcat, located between the Sailfin and Haimara fields. Rystad Energy estimates Bluefin to hold around 500 million boe of recoverable resources.

Updated fiscal terms for future discoveries
Now that Guyana has firmed up its credentials as an attractive upstream destination, it has elected to alter its fiscal terms. The updated fiscal policy tries to strike a balance between attractive terms and more revenue for the country’s development.

Guyana hoped to engage more international partners with its first-ever licensing round, launched in December 2022. The round offered 14 shallow-water and deepwater blocks, eight of which received bids. The government has recently accepted the production sharing agreements for five of the offshore blocks, with Cybele Energy (S7), Delcorp (D1), International Group Investment (S5, S10), Petronas, QatarEnergy and TotalEnergies (S4). ExxonMobil and its consortium partners CNOOC and Hess won offshore S-8 Block in the licensing round and negotiations are currently under way. Lastly, a response is awaited from Sispro Energy, which bid for blocks S3 and D2.

Guyana updated its fiscal terms with the round’s launch, increasing the royalty to 10%, up from the 2% applicable to Stabroek, and reducing the cost recovery ceiling to 65%. The government also mandated a corporate tax of 10%. The profit-sharing system after cost recovery remains the same, at 50-50 between the contractor and the government. Oil companies participating in the auction were required to pay a minimum signing bonus of $10 million for shallow-water blocks and $20 million for deepwater blocks.

The new terms do not apply to the existing Stabroek Block agreement, and while more favorable to the government, the fiscal terms remain competitive to attract investments, relative to other PSC contracts in the region by not including any additional income taxes or new fees. The royalty rate of 10% is also in line with other major producing countries in Latin America, while the corporate tax is lower than most. Guyana has also been willing to change its non-fiscal terms to attract investment.

Comparison with Suriname’s PSC structure
Suriname is also seeing a significant amount of ongoing offshore exploration and appraisal work, with TotalEnergies having recently announced a final investment decision on its $10.5 billion Gran Morgu project (earlier known as Sapakara South and Krabdagu) located on offshore Block 58. Comparisons have been drawn between the fiscal regimes of these neighboring countries, with even Guyana’s Vice President Bharrat Jagdeo agreeing that Suriname has better fiscal terms for the government when compared to the Stabroek PSC.

Suriname has a higher royalty share than the Stabroek PSC at 6.25% although still 3.25% less than the Guyana 2023 PSC. The corporate income tax is 36%, which is 3.6 times more than the 2023 fiscal regime of Guyana, whereas the Stabroek PSC has no corporate income tax at all. The government profit oil share in Suriname is calculated based on an array of R-factors (broadly, a ration between upstream revenue and upstream cost). Specifically, for Block 58, which was recently sanctioned, it can vary anywhere between 20% to 70%, which means the country benefits more if production from the field increases and the burden on the contractor reduces in case the field does not perform well. This is beneficial for both parties and can be attractive to new entrants in the country without undermining the country’s share in profits. The cost ceiling is, however, higher in the case of Suriname, with a cost recovery of up to 80% allowed in revenue for exploration, development, and production.

Rystad Energy undertook an analysis to understand the impact of the Stabroek PSC, the updated fiscal terms by Guyana for outside of Stabroek, and the Suriname PSC terms on the volumes produced from the Destiny FPSO on the Liza field for the period 2017 to 2030. Given the large field size and high associated revenues, assuming a realized Brent price fixed at $70 per barrel, the costs were able to be fully recovered under all three cases. However, it was the difference in the rate of royalty, corporate tax and share of profit oil that had the most impact on government take.

The Stabroek PSC was the least favorable to the government, given that the other two fiscal regimes involve a higher rate of royalty and inclusion of a corporate income tax. Government take in the case of the Suriname PSC tax model was more favorable than the Stabroek one for these reasons but was still less compared to the updated fiscal terms by Guyana since a slightly higher rate of royalty and a flat 50% share of profit oil more than offset the impact of a higher 36% corporate tax rate versus the 10% in Guyana.

However, it is important to note that the results of this analysis could be different when applied to a smaller field than the Liza (Destiny) in this case or under a different oil price scenario.

Guyana is, on current data, seeing a decline in average volumes discovered per well each year — possibly because the superior prospects have already been drilled, and new prospects and their potential resources tend to be smaller. Even so, Stabroek’s western side remains largely unexplored, apart from the 2018 Ranger discovery. This discovery was made in a different type of play than other Stabroek finds, requiring more detailed analysis and new technology to unearth the resources optimally. Guyana’s need to maintain its status as a top producer for decades to come may necessitate more domestic exploration success in the near future.

Authors: 

Radhika Bansal

Vice President, Upstream Research
radhika.bansal@rystadenergy.com

Avnika Pandita

Analyst, E&P Research
avnika.pandita@rystadenergy.com

(The data and/or forecasts in this column are Rystad Energy’s, and the opinions are of the authors.)