Introduction
Last week’s column wrapped-up a four-column series on the ruling Stabroek PSA [backward looking] and the new Model PSA and its Public Modalities [forward looking]. Today’s topic is the first of a four-column series that focuses on Guyana’s petroleum resources and petroleum reserves. I consider this topic to be a core consideration for any serious task that seeks to interrogate Guyana’s oil and gas sector.
I urge this perspective primarily due to the consideration that, in just five years after First Oil, Guyana has been propelled to what Rystad Energy deems as an outstanding success. I cite this firm here, because it is reputed to be one of the world’s leading independent energy and energy related research and business intelligence firms. [See section below].
My principal aim in this column is to urge readers to keep in mind constantly the need for a clear understanding that there are strong differences in the degree of both risk and uncertainty when economic agents seek to classify an asset as to whether it is a resource or reserve.
In what follows I rely principally on offering to readers some recently published data by Rystad Energy. This is their independent estimation of the status of Guyana’s petroleum resources and reserves. Before addressing this task in the next Section, I make a few observations on the difference between resources and reserves in petroleum studies.
Observations on Resources and Reserves
As indicated above, in this Section I shall offer some additional observations on the relation between the two concepts of petroleum resources and petroleum reserves; bearing in mind that, combined, these two lie at the heart of this Topic, petroleum resources and petroleum reserves. These comments are:
First, the most commonly held view in the industry-related literature is that from a probability stand point, petroleum resources are further down the probability tree, or the likelihood of occurrence column, as far as future production and commerciality are concerned.
Second, the quest for petroleum resources tends to begin with what is typically called a play. A play is basically defined as accumulations of hydrocarbon, either known or postulated. These are also located in similar geologic settings with regard to source rock, its migration, geologic age, and trapping mechanism, among others.
Third, petroleum resources can either be (i) contingent or (ii) prospective. It is usually brought to readers’ attention, however that, the important distinction between the two subcategories is whether the resource is discovered or not.
On the one hand, contingent resources are discovered, but typically, the development of such resources is either (i) pending, (ii) on hold, or (iii) While on the other hand a not viable categorization is bounded by the present technological capabilities.
Prospective resources are typically classed as yet to be discovered. These are based on exploration and preliminary developmental and related studies on a prospect, lead, or play.
Finally, and of serious note, in reality petroleum resources have been deemed unrecoverable due to technological, economic, or various other impediments.
In closing, resources are also categorized on the basis of technical and economic considerations. Thus, technically recoverable resource, referred to as TRR, is termed as the volume of oil and gas that can be extracted by utilizing current technology without any reference to economic feasibility. In contrast, economically recoverable resource, referred to as ERR, refers to the portion of technically recoverable resource that can be extracted economically. With the advancement of technology and favourable economic conditions, the ERR part increases within the TRR.
As petroleum glossaries or other petroleum catalogues reveal, in practice many unconventional resources cannot be readily or easily converted to the proved reserves category by relying on the present-day technology. Examples of such unconventional oil resources include shale oil, extra heavy oil, tar sands, and bitumen, the commercial extraction of which are difficult and cost intensive.
Rystad Energy on Guyana
As indicated above, In this Section I reference Rystad Energy’s reporting on Guyana’s petroleum sector. In a recent Q3, 2024 Report, Rystad Energy has classed Guy-ana as one of the South American ‘front row’ crude oil producers, which has experienced “significant growth”.
In an earlier 2023 Report, it had noted that Guyana had increased its estimated new cumulative recoverable resources by about 1 1.8 Bboe securing Guyana pole position among countries with the highest conventional discovered volumes last year. The “outstanding success” in the country, particularly on the prolific Stabroek Block, has led E&P players to allocate a sizeable portion of upstream spending toward further exploration as well as maturation of discoveries toward development, meaning Guyana will continue to be at the forefront of global upstream activity in 2023,
That, Guyana added about 1.8 Bboe of additional resources in 2022, according to Rystad Energy’s conservative approach, surpassing all other countries in cumulative recoverable resources unearthed in the year. The fresh resources came from 10 new finds, nine of which were on Stabroek and the remaining one, Kawa, on CGX’s Corentyne Block and which added 99 Mboe.
Rystad said these new finds have helped strengthen the already established discovery trend line and have seen the resurgence of a secondary parallel zone. They have expanded the play fairway with fields that are viable for commercial development, strengthening the ambition of ExxonMobil and its partners CNOOC International and Hess of eventually deploying 10 FPSO vessels on Stabroek.
Moreover, Guyana is in talks with Qatar, Britain, the United Arab Emirates and India on the possibility of allocating offshore blocks for oil and gas exploration under a bidding round this year, President Irfaan Ali said on Jan. 23. With more than 11 billion barrels of oil and gas discovered, the country has scheduled an auction of offshore exploration areas and said it would consider government-to-government talks with national oil companies.
Prior to that news, it was announced that Guyana’s revenue from oil exports and royalties this year is expected to climb 31% to US$1.63 billion, Finance Minister Ashni Singh said on Jan. 16, on higher output
Conclusion
Next week I continue with this exploration of resources and reserves.
