Introduction
Last week’s column provided additional data on the first of four features of Guyana’s recent oil and gas discovery; that is, its physical/geological configuration. The column amplified on three attributes: the geological make-up; its location offshore; and, the size or quantum of potential reserves. Today’s column amplifies on the second feature, namely, the project responsibility for transforming the “discovery” into a commercially viable industry.
As indicated, the “consortium” conducting the exploration and development of the Guyana “play” consists of 1) Esso Exploration and Production Guyana (EEPG), a wholly owned subsidiary of Exxon Mobil (a 45 percent stake) 2) Guyana Exploration, a wholly owned subsidiary of Hess Corporation (a 30 percent stake) and 3) Nexen Petroleum Guyana, a wholly owned subsidiary of China National Offshore Oil Corporation (CNOOC), (a 25 percent stake).
What follows respectively, is an assessment of these industry brands controlling the Guyana “play”.
Exxon Mobil
Exxon Mobil is the largest direct descendant of Rockefeller’s Standard Oil, established in 1870. It arose from the 1999 merger between Exxon (New Jersey) and Mobil (New York); headquartered in Irving, Texas. Presently, it is among the top ten publicly traded companies, when measured by revenue. At the end of 2015, its reported revenues were US$270 billion. And, its total assets were reported at US$350 billion, with reserves reportedly standing at 25.2 billion barrels of oil equivalent (BOE) in 2013. It is also credited as the world’s largest refiner of petroleum products.
Despite its humongous size, Exxon Mobil is by no means the dominant global player in the industry. At latest reporting (2014), its reserves were ranked fourth in size. And, its daily output of approximately 3.9 million BOE, approximates three percent of global output. Noteworthy, the world’s largest petroleum enterprises are state-owned, located in the Middle East, Russia, Latin American and elsewhere.
A key observation is that Exxon Mobil, through its subsidiary (EEPG), is the lead Operator for the Consortium. For this function, it brings considerable expertise because its main products are: crude oil, oil products, natural gas, and petrochemicals.
Readers should note that, arising from the “discovery”, Exxon Mobil is not only focused on pursuing benefits for Guyana. As a multinational, the interests of its shareholders, stakeholders and investors must take precedence. The company does however, acknowledge the great potential of the Guyana play; and has already announced the drilling of additional wells in the Stabroek Block, and also the pursuit of its “Ranger prospect” elsewhere.
Industry analysts have observed the Guyana “play” has become a turning point in Exxon Mobil’s fortunes following: “three consecutive years of declining production and slowing reserves growth”, (Bloomberg 2015). Although ranked sixth in Forbes Global 2000 in 2014, and the second most profitable company in the Fortune 500 for the same year, the company has encountered in the recent past, slowing reserves growth. Thus, its exploration failure rate fell to 39 percent in 2014, against 33 percent in 2013!
Hess Corporation
Hess Corporation (established 1969) and headquartered in New York has, through its subsidiary the second largest stake (30 percent). It has described the Guyana “play” as containing “multiple prospects and play types”; announcing a third well to be spud in September “to further appraise the discovery”. Analysts at Bank of America Merrill Lynch report significant upside- potential for Hess Corporation, which is an American Company that emerged out of the British Amerada Hess Company, founded in 1919. Hess Corporation is a Fortune 100 corporation and was ranked number 75 in Fortune 500 in 2013.
In 2014 the Corporation completed a multiyear transformation focusing on oil and gas exploration and production. During this process it had divested much of its downstream businesses, including energy marketing, gas stations, terminals, and refining operations.
At the end of 2015 its revenues were nearly US$7 billion and total assets stood at US$34.2 billion. It presently employs 2,770 persons, less than one-quarter of its earlier levels, prior to concentrating on exploration and production.
While not a “super-major” like Exxon Mobil, the corporation is a significant energy player in Europe, Africa, Latin America, Asia, Australia and the United States.
From all appearances the Guyana play appears to fit well with the Hess Corporation’s strategy of low-risk high-reward ventures that require strong commitment to up front capital expenditures to produce later profits.
Like the lead Operator, (EEPG), Hess Guyana seems well disposed not only to pursue the discovery of the Liza-1 and Liza-2 wells, but to continue wider explorations of the Stabroek Block and the Guyana-Suriname Basin. The company Website notes: “the results of the Liza prospect emphasize the growth prospects of Hess’ resource base and production. The company continues to assess the resource potential of the broader Stabroek block with further exploration planned”.
CNOOC Nexen Petroleum Guyana
Finally, Nexen Guyana is a wholly owned subsidiary of the CNOOC Group through its Nexen holdings. The parent Group, CNOOC, was incorporated in 1999. Based in Hong Kong, it is the largest producer of offshore crude oil and gas in China. It is also one of the world’s largest “independent” oil and gas exploration and development companies. It is state-owned.
And, at the end of 2015, the Group owned net proved reserves of about 4.32 billion (BOE) with average daily production of 1.4 billion (BOE).
With total assets of RMB 664.4 billion and about 21 thousand employees, this company is undoubtedly another quality brand involved in the “consortium” exploring and developing oil and gas in Guyana.
Nexen, a former Canadian petroleum company, started back in 1969, and was acquired by CNOOC in 2013 (for US$15.1 billion).
It is a major subsidiary, which focuses on three areas, namely, conventional exploration and development of oil and gas, oil sands, and shale gas/oil. It operates globally, in Africa, the Americas, Asia and Europe.
Conclusion
Next week I shall appraise the two remaining features of the Guyana “play”: the anticipated cost/price relation and the impact of Venezuela’s border claim.
