The Liza Destiny FPSO on location in Guyana's deepwater sector.
The OPEC coalition via OPEC+, in its early December meeting, agreed to continue for now with its market stabilizing 7.2 million barrels per day in production cuts. But there are some countries, and entire oil regions, that do not follow OPEC+’s quotas. Libya, its oil output impacted by a decade of internal strife, reserves the right to pump as much as it can muster — and recently returned 1 million barrels per day.
And then there is offshore and deepwater. Over the past decade much attention in the oil industry was focused on shale fracking. But there remain oil discoveries left to harvest from deepwater. Off the coast of Norway, Equinor is further ramping up its 500,000 barrels per day (KBPD) at the Johan Sverdrup field, while ExxonMobil envisages that the waters off the coast of Guyana, next to Venezuela will soon be producing over 500 KBPD of barrels from recently approved projects. Brazil also continues its deepwater development.
Will all this non-OPEC+ offshore oil interfere with OPEC+’s best laid plans?
The Offshore Component
In March of this year, prior to Norway participating in the OPEC+ coalition, Equinor’s production in Norwegian waters, was exceeding 430 KBPD at the Johan Sverdrup field. Equinor, last month, announced that they are now nearing the 500 KBPD mark. Phase 2 of this field is expected to increase production to 690 KBPD by 2022. This platform-based development began producing in 2019. It is key to note that the North Sea is a shallow water basin when compared to the U.S.’ Gulf of Mexico (GOM) where deepwater fields produce in water depths more than a mile deep, the subsea wells at Johan Sverdrup are in just 400 feet of water.
Why Depth Matters: The Golden Deepwater Triangle
The Golden Deepwater Triangle touches 3 continents: Africa (western region), the U.S. (GOM), and South America (Brazil and Guyana).
Regarding Brazil, Petrobras’ Búzios field is hovering above the 615 KPBD range by way of 4 Floating Production Storage Offloading (FPSO) units. A fifth FPSO is expected to become operational by 2022, to increase output by another 150 KBPD, with the potential for more FPSOs to be added to this field (the ensuing section will provide an overview on FPSOs). Búzios and Johan Sverdrup—provide a snapshot of Brazil and Norway, respectively—but do not represent the total output for each country.
Historically, Petrobras’ experience with floating production dates back to 1977. Today, the country has the largest concentration of FPSOs in the world, creating a blueprint for Guyana’s FPSO production that began in 2019 (Guyana shares a land border with Brazil).
The geographical layout of the Deepwater Golden Triangle in the Atlantic Ocean.
Guyana and FPSOs
In Guyana, ExxonMobil
ExxonMobil in September announced sanctioning the Payara development and remarked in a press release that the ‘‘$9 billion development will target an estimated resource base of about 600 million oil-equivalent barrels.” Payara will also include a third FPSO that is projected to be operational by 2024, to deliver an additional 220,000 bpd. The commonality that Liza and Payara fields share is the fact that they are located in Guyana’s Stabroek Block.
For context, Liza Phase 1 is located 118 miles from shore, however, the produced oil is not piped to land, instead the FPSO unit receives hydrocarbons from the subsea wells through subsea to topside infrastructure and conduits. Next, the hydrocarbons are then processed by the unit’s topside equipment, and oil is subsequently stored at sea within the FPSO. And with a shuttle tanker on location the FPSO can transfer oil via a flexible conduit, which can then be delivered to the port and region of interest via said tanker.
Suriname Rising
Guyana which shares its southern border with Suriname, is seeing an uptick in deepwater drilling. Albeit Suriname is not a deepwater producer yet, this can soon change, as just yesterday (December 11) ExxonMobil announced a discovery at Sloanea-1 in Block 52. The aforesaid is bolstered by the fact that Total and Apache’s joint venture partnership made 3 consecutive discoveries in 2020 on Block 58 which is next to Block 52. Regarding the latest discovery that was jointly made, Kwaskwasi-1, Apache announced in a September press release that it ‘‘confirms a world-class hydrocarbon resource.’’
Of paramount significance is the fact that Total and Apache’s discoveries in Block 58 are uniquely positioned, as they are adjacent to Guyana’s prolific Stabroek Block. Furthermore, Total counts with deepwater FPSO experience in West Africa, and is equally involved in Brazil’s deepwater sector.
