Introduction
Today’s column serves three main objectives. First, to address Guyana’s creaming curve, which dramatizes its remarkable exploration successes in locating Guyana’s hydrocarbons resources, found largely offshore to date. This achievement is emblematic of the fourth, and final, reasoning that informs my admittedly “strongly bullish outlook” for Guyana as an emerging Petrostate
Second, I reveal the reasons for my intended upwards revision of my much earlier informed guestimate of Guyana’s volume of conventional recoverable barrels of oil equivalent, boe. This was set at 13-15 billion boe. It is worth recalling that this estimate was greeted with derision by sections of the social and print media as gross over-estimation. Indeed, some are in print during those early days, setting the limit at 600 million boe to one billion boe by 2030!
Third, and finally, I provide a lead in to the start of my wrap-up, beginning next week ,of the significance of this series of columns devoted to my revisit of the Guyana Government Take ratio and the officially Reported Recoverable Petroleum Resources.
Success Rates and the Creaming Curve
For present purposes the simple Success Rate as employed here refers to the total number of oil wells drilled in Guyana that resulted in finds or discoveries of recoverable hydrocarbon resources as a percent of the grand total of all exploration oil wells, which have been drilled in the exploration area. Similarly, for present purposes the simple Creaming Curve refers to the relationship between aggregated discoveries or finds, plotted on the Y-axis and the number of wells drilled over time, plotted on the horizontal-axis. The relation reveals that, the greater is the rate of discovery, the steeper will be the resultant curve.
For the regular reader of this column, the information given in the above paragraph is sufficient for present purposes. In fairness though, I feel obliged to acknowledge at this point that there are several complex statistical and decision-making issues at play. Indeed, the topic is well addressed by B. Kanjan, in his presentation to the 25th Geophysical Conference, entitled: Exploration Choice of Success Predictions Statistical Concepts and Realities, 2016. I recommend interested readers to pursue the literature in the above citation.
The global chance of success [COS] rate is cited in Wikipedia as 30 to 40 percent. The evidence suggests Guyana’s is more than double that, reportedly at about 90 percent
As I had noted five years ago, Kevin Ramnarine, Minister of Energy, Trinidad and Tobago at a Guyana Oil and Gas Association Conference in 2017 had introduced the notion of the creaming curve to local public discourse on Guyana’s petroleum sector. He stated then: “if we believe in the creaming curve, we know that Guyana will find more and more oil and we begin to find more and more oil closer and closer to the shoreline” (my emphasis). I had offered the observation then that, energy economics defines a creaming curve as stated before depicting “a graph showing the relationship between cumulative aggregated volumes of oil reserves growth (on the linear Y axis) and, on the linear X axis, the number of wells dug over time. The steeper the curve, the more rapid is the revealed rate of discovery. And, the flatter the curve the more gradual is that rate and/or the smaller the size or the drier is the wells. ExxonMobil’s public reporting reveals that 17 wells have been dug to date; 12 are recorded as successful”.
I had combined the four cited reasonings given in the recent columns in order to constitute the foundational pillar supporting my original informed prediction. I carry forward these four noted reasonings as I elaborate an updated prediction, which is presented in the next section
Updated prediction
Three observations frame the logic informing my effort to update my original prediction. I believe these warrant a brief indication upfront. Firstly, for starters as I prepare this column ExxonMobil is reporting its highest profitability in its 152 years history.
Secondly, I have in print several times declared an option for the US Energy Information Administration’s long-term forecast of the global energy mix [2018 to 2050]. Over this extended period, demand for global energy is projected to grow by about 50 percent. The growth is led by renewables; followed by petroleum liquids, and then natural gas. Demand for nuclear energy remains flat over this period.
Thirdly, by all accounts, Guyana’s emerging crude sales are rated “excellent light sweet crude”. There have been 35 oil finds to date [nine in 2022], all in the Stabroek Block, yielding a reported total of 11.2 billion barrels of oil equivalent, boe. This total represents 18 percent of all oil finds globally and 32 percent of all global crude oil discovered. The breakeven price of Guyana crude is reportedly as low as US$28 per barrel. And, perhaps more importantly, Guyana’s crude is rated a low carbon emitting oil; [three kilograms of CO2 per boe-better in this regard than 75 percent of all crudes traded globally.
Arriving at my original prediction involved the following steps. First, I acknowledged that the USGS World Petroleum Resource Project used geology-based methodology. Second by focusing on conventional petroleum resources exclusively, I anticipated a report short on speculative content Thirdly, not being formally trained in any of the pertinent science disciplines, I held firmly to the view that world petroleum resources would be conservatively and carefully assessed by the United States Energy Administration, for reputational reasons at the very least.
Based on the above I chose a midpoint [mean] of the two projections provided by the USGS [2000 and 2012] for 5 percent; 50 percent; 95 percent; and the mean likelihood. This was then rounded up to the nearest whole number to arrive at 13-15 billion boe.
Conclusion
It is becoming clearer by the day that, my initial prediction made five years ago is overdue for updating. I’ll attempt this task next week after addressing the Atlantic Mirror Image theory, the second geological feature highlighted as informing my recommendations.
