Guyana and Suriname the most exciting exploration hot spots in the world?

Guyana and Suriname may just be the most exciting exploration hot spots in the world, and maybe in history. The Liza-1 well will be equated with the 1-RJS-628 well in terms of discovering a major petroleum province in a single go. For reference the 1-RJS-628 wildcat well was drilled in 2006 by Petrobras in block BS-M-11 in the Santos Basin, where they found what we now know as the Lula field. As the pre-salt exploration boom changed the hydrocarbons picture significantly in Brazil, so to will the exploration boom occurring on the Guiana Shield just now. 

The discovery in the Corentyne Block is significant in that, if it’s deemed commercial, it will be the first discovery outside of the Exxon operated Stabroek Block that could eventually start producing. There have been other discoveries in Guyana ex-Stabroek, notably Jethro and Joe in the Orinduik Block, but these were of lower quality and for various reasons will not be developed. The CGX discovery will go a long way to de-risking the play on the Guyanese side even further and should provide some extra interest in the proposed bid round the government of Guyana is seeking to launch sometime in the second half of 2022. 

Although Guyana may be the emerging hydrocarbons powerhouse in the neighborhood, Suriname has taken another significant leap towards closing the discovered volumes gap after TotalEnergies revealed yet another oil and gas discovery on Block 58. The French supermajor and US independent partner Apache have hit pay at the Krabdagu-1 wildcat. This is the company’s fifth discovery in the prolific block and Suriname’s sixth offshore discovery. The find extends a string of exploration successes broken only by an uncommercial find at the Bonboni. These finds, together with the Sloanea discovery on Block 52 by operator Petronas and partner ExxonMobil, put Suriname firmly on the map. 

All the best,
Georgetown, Guyana
February 17, 2022 

W. Schreiner Parker
Senior Vice President and 
Head of Latin America

Caribbean Oil & Gas Virtual Summit (CARIVS-2022) – March 15 and 16 

Our Upstream Analyst – Latin America Sofia Forestieri will present on his conference hosted by Valiant & Company with the topic: "The Caribbean Oil and Gas Industry’s competitive landscape". 

CARIVS 2022 will focus on enabling an exclusive interregional collaborative platform for the entire oil & gas value chain. >> Learn more

Press releases  

Upstream M&A deals reached a three-year high of $181 billion in 2021, returning to pre-Covid levels. >> Article

Utility-scale renewable capacity additions set to pass 220 GW for the first time, but slowdown may be imminent. >> Article

Rystad Energy - Your Energy Knowledge House

Independent energy research and business intelligence company providing data, analytics and consultancy services to clients exposed to the energy industry across the globe.
>> Read More     

Newsletter Subscription

If you are not yet a subscriber to our industry newsletters and want to get monthly updates, please fill out the Newsletter Subscription Form.

Not just Stabroek: Guyana gets fresh boost as CGX strikes in Corentyne Block

Guyana has yet another offshore oil discovery on its hands, but in what is a rarity in the nascent South American producer’s upstream sector, this find was not unearthed on ExxonMobil’s prolific Stabroek Block. Canadian independent CGX Resources has struck oil at its Kawa-1 wildcat on the Corentyne Block, hitting a 54-meter column of hydrocarbon-bearing reservoir. The exploration well took longer to drill than expected, with the cost estimated to have risen significantly from an original estimate of $90 million. The discovery away from Stabroek, where a plethora of floater developments are already under way, will inject further optimism into the exploration sector in Guyana and neighboring Suriname, with CGX and its block partner Frontera Energy already setting their sights on another wildcat on the block.

CGX operates Corentyne on 66.67% and is joined by Frontera on the remainder. The operator this week revealed it had made a liquid hydrocarbon discovery with its maiden exploration campaign on the block, which lies south of Stabroek and adjacent to the TotalEnergies-operated Block 58 in Suriname, where multiple oil finds have also been made. The Kawa-1 probe was spud in August 2021 using the Maersk Drilling-owned semisubmersible rig Maersk Discoverer. It was drilled to a total depth of 6,578 meters in 370 meters of water. The well was initially expected to be completed in the second half of December but drilling went beyond the original schedule. Well costs are, therefore, estimated to have increased from $90 million to between $115 million and $125 million.

Ambitious 80 GW Brazil offshore wind plans in motion but fine print pending

A new decree in Brazil promises to outline the steps developers must follow to exploit offshore wind resources in the country, leading to a 45% jump in capacity under pre-application from domestic and international players eyeing its untapped potential. Projects at the environmental impact study stage currently total 80.4 gigawatts (GW_AC) of capacity under assessment. This is great news for a country that heavily relies on hydropower, which left Brazilians stranded during the most recent dry season. While the bar is set high, Rystad Energy estimates that the nascent offshore wind market in Brazil – given the many regulatory and logistical hurdles ahead –  will end the decade with no more than 3 GW_AC of installed offshore wind capacity.

Aggressively dry weather between March and May 2021, led to a water supply shortage in Brazil, with disastrous consequences for the country’s economy and power sector. The Parana River Basin, which supplies water to the Itaipu dam (the second largest hydropower facility in the world), reached the lowest discharge levels of the past 90 years. The lowest level last year was seen in August, when hydropower generation fell 25% compared to August 2020. For a country where hydropower accounts for more than 60% of the power sector, this drop had significant consequences. And last December, Brazil awarded in an emergency auction 1.2 GW_AC of capacity over 17 projects, mainly natural gas, revealing that overreliance on a single power source could end up challenging energy security. As such, the federal government is trying to diversify the Brazilian power mix as soon as possible to avoid future risks – queue in offshore wind.

Brazil’s President Jair Bolsonaro issued this year a decree regulating the right to use national space in internal waters for power generation through offshore wind developments. The decree assigns planning and permitting authority to different institutions, mainly the Ministry of Mines and Energy (MME). Although no information has been released on auction timelines and volumes, the industry expects a tender in 2023. A study from the Energy Research Office (EPE), which supports the MME, determined that Brazil’s coastline has a technical potential of 700 GW_AC of offshore wind capacity, with untapped resources especially in the northern states of Rio Grande do Norte and Ceara, and in the southern state of Rio Grande do Sul (where the wind energy density reaches levels above 600 watts per square meter). These parameters are similar to those found in parts of the coast of China – the largest market for offshore wind installations.

South American land drilling rebounds after 2020 slump

The South American land rig market took a heavy hit in 2020 as demand halved from the year before and sent the region’s total rig fleet utilization plummeting to 17%. Activity rebounded strongly in 2021 as the number of wells drilled surged to 1,700 from 1,100 wells the year before, translating into a total demand for land drilling rigs of close to 150 rig years. We expect South American drilling activity to continue recovering in 2022 thanks to a positive short-term oil price outlook, with nearly 1,900 wells on track to be drilled and completed this year.

While activity in the international drilling industry recovered after the 2016 downturn, drilling continued to stall in South America. Land rig demand in the region plunged from roughly 400 rig years in 2014 to around 200 rig years in 2016 (Figure 3a). From 2016 to 2019 demand was relatively stable with total fleet utilization at only 35-40%, propped up by the continued downsizing in rig fleets by the contractors (Figure 3b). We estimate the South American rig fleet to have shrunk by more than 100 units from roughly 610 identified rigs in 2017 to just above 500 rigs in 2021. Utilization levels recovered to 31% last year from 17% in 2020, driven by rising activity from Argentina’s state-owned energy company YPF, Colombia’s Ecopetrol, and Venezuelan state-controlled oil company PDVSA.

Excelerate the first foreign company to operate in Brazil’s gas market

In an unprecedented move, US-based LNG specialist Excelerate has assumed operation of Bahia LNG regasification terminal after signing a two-year lease from December 2021 to end-2023. It is the first time a foreign entity has been licensed to operate one of the country’s LNG terminals and to sell imported gas directly to Brazilian consumers. Until now, state-owned Petrobras has been the sole company able to negotiate Brazilian LNG import volumes, contracts and prices. 

Overview of Brazil gas and LNG market
Brazil consumed a total 94 million cubic meters per day (MMcmd) of natural gas in 2021, 27% of which was met by spot LNG imports, 20% by pipeline imports from Bolivia and the remaining 53% by domestic production. In terms of demand, Brazil’s power generation sector consumed 46% of last year’s total, followed by industry (43%), transport (6%), residential (3%) and others (2%). With no gas storage facilities, Petrobras uses domestic production and imports from Bolivia to meet most of Brazil’s gas needs since these supplies tend to be more stable and at a lower cost than imported LNG. Brazil has five operational LNG import terminals. Two of them, Sergipe and Açu Port, are owned by private companies, are not connected to the national gas grid and are used solely to supply a power station. The other three import terminals at Pecem, Bahia and Guanabara are connected to the gas network and were developed to offset low hydropower periods (Figures 1 and 2). The three have combined usage rates of between 15% and 20% of total capacity and have historically been used to meet spikes in demand caused by fluctuating electricity output from hydropower, which can push regas utilization rates up to between 40% and 50%. Figure 3 shows the difference between a regular year in terms of LNG regas volumes (2019) compared to one in which hydropower output has been particularly low (2021).