Introduction
Today’s column reports on the third concept that frames my representation of Guyana as a Petrostate, that is the role of happenstance in the nation’s world-class petroleum finds. Back in January 16 2022, I opted to provide “a general thesis or formularization that offered a satisfactory explanation or reasoned construct, which fairly expresses the ruling or governing dynamic that most fittingly captures the clearly unprecedented historical emergence of Guyana’s world-class petroleum finds/discoveries; starting with ExxonMobil’s announcement in May 2015 and presently projected to last, comfortably, up to the end of Guyana’s first decade of oil and gas production [2025/26]. Despite start-up setbacks, there has been a steadily emerging consensus, backed by finds/discoveries that on its present trajectory, Guyana’s daily rate of crude oil production, DROP, will reach over one million barrels of oil equivalent per day; that is, 1mlnboe/d.
That formulation was happenstance. In other words, I believe the term offers a “general explanation or characterization for the behaviour of Guyana’s creaming curve to date” This curve reveals an unprecedented growth in Guyana’s petroleum discoveries for the period from the First Discovery [mid- 2015] to Guyana’s First Oil [December 2019] and going forward seemingly will maintain its shape to the early 2030s.
Original Resources Prediction
I had opted for a bullish interpretation of Guyana’s first discovery back in 2015. I have explained repeatedly that, the Atlantic Mirror Image theory, along with results of two United States Geological Service, USGS, surveys, 2000 and 2012, formed the basis for my initial prediction of Guyana’s hydrocarbon resources in the region of 13-15 billion barrels of oil equivalent, boe; as against Exxon Mobil’s assertion then of about 600 million boe. By 2021 Exxon Mobil was announcing discovered resources at 11 billion plus boe. In Q1 2022 I updated my prediction of oil and gas finds.
Initially, I estimated likely resources as follows; representing the USGS results on a continuum, I opined that the reported 95 percent confidence value provided reflect what I interpret as a cautious or conservative interpretation of the geological data. And, by parity of reasoning, the 5 percent value represents a more expansive or generous valuation. The middle position on this continuum is represented by the 50 percent value and the mean likelihood, as defined in the USGS Report. Taking the above into consideration I chose the mean likelihood from both surveys and then rounded up to the nearest whole number to arrive at 13-15 billion boe.
Updated Resources Prediction
Going out on a limb, I further assumed this circumstance supported the thesis of asymmetric risk. That is, the decision agents in the sector [both resource Owner and Contractor] vested in the likelihood [thesis] that the reward outcome [resource finds] will be greater or lesser than is the norm depending on the placement on confidence interval. Risk is not assumed to be distributed “as likely or not”, equally along the continuum. The upside risk is therefore, more appealing to both Owner and Contractor.
The USGS reports that their results are based on a probabilistic method where: 1] estimated reserves are fully risked; 2] estimates are confined to conventional resources; 3] on the probability distribution curve Fractiles [ F95, F50, F5 and the mean] reveal the estimated amounts to that value and their chances for the minimum attained. Thus, for example F95 reveals the “at least” amount that is expected with a 95 percent choice of finding.
Extrapolating from the laundry list of considerations cited — namely 1[ the reasoning indicated in the above paragraphs; 2] the lack of a cohesive and coordinated global climate agenda from COP27; 3] a strongly exploration-incentivizing global oil market price for crude oil [in the neighborhood of US$ 100 per barrel; 4] Guyana’s continuing explosive success rate for petroleum exploration from First Find in 2015 to date; 5] its steeply rising creaming curve over the same period; 6] the reported yet-to-explore zones; and 7] indicated Guyana offshore and onshore explorations to come — there is a clear need for me at this juncture to update my prediction.
For this I have embraced greater risk dynamics and therefore move from the search for a mid-point on the continuum, to one closer to the 5 percent confidence value and consequently riskier. My best guess at this point of time is a 10 percent Fractile, yielding about 28-30 billion boe.
Closing Observations
While oil and gas resources are created by natural processes over geological time their use, discovery and finds are determined by social groups. Thus, we know from experiences that governments, skilled workers, entrepreneurs, scientists [from geologists to engineers] businesses, and regulators among several similar groups working together produce and trade oil and gas finds extracted from nature,
As nature’s creation, petroleum resources pre-exist before the groups cited above discover them and by so doing create a social product that can be traded. My argument is that between nature’s creation and the discovery happenstance is the best explanation of the ruling dynamic in the various processes. This does not seek to minimize the indispensable roles of human invention, scientific application, organized R & D, capital equipment, laws and institutions play in the outcomes. Happenstance captures the necessary and interactive roles of plain chance, luck, coincidence and good fortune in shaping successful outcomes.
Next week I offer a few reflections on earlier efforts at framing Guyana as a Petrostate.
