Turning Guyana block’s oil promise into reality: Two players proclaim potential commercial interest

Joint venture (JV) partners, Canada’s CGX Energy and Frontera Energy, are seeking to undertake additional action to tap into and unleash the hydrocarbon resources on the Corentyne block offshore Guyana, given the potential for a standalone shallow oil resource development across the block, which their exploration results highlighted.

As a result, the JV has submitted a notice of potential commercial interest for the Wei-1 discovery to the government of Guyana, which is said to preserve the partners’ interests in the license, as such a notice is required to secure more time for further evaluation of the discovery’s potential.

CGX and Frontera drilled the well last year as its second one on the Corentyne block, fulfilling the obligation under Phase 2 of the second renewal period of the original ten-year license and served as an appraisal well for the Kawa-1 appraisal program with the government of Guyana.

“The joint venture and the government of Guyana have engaged in regular, constructive and collaborative conversations throughout the joint venture’s tenure on the Corentyne block, including discussions regarding conditions under which further activities could be performed by the joint venture in the Corentyne block. The joint venture looks forward to completing these discussions in an expeditious manner and will provide an update as soon as practicable,” underlined CGX and Frontera.

With support from investment bank and capital markets experts Houlihan Lokey, the joint venture partners continue to actively pursue strategic options to unlock the potential of the Corentyne block. To this end, the duo embarked on pursuing a potential farm-down of interests in the block. Currently, the joint venture has a 100% working interest in the Corentyne block with Frontera holding a 72% stake and CGX the remaining 28%.

Previously, the two players retained SIA, a Subsea 7 – Schlumberger joint venture, to complete a conceptual field development plan for the northern portion of the Corentyne block including subsea architecture, development well planning, production and export facilities, and other considerations.

For some, Guyana’s hydrocarbon potential is a gift that keeps on giving, as hammered home by Rystad Energy’s research in 2022, which forecasted that the Guyana government’s revenue from domestic production would reach $7.5 billion annually in 2030.

While the United States (U.S.) is the alpha among the top countries by gross domestic product (GDP) in the world, based on data from Global PEO Services, a Safeguard Global company, the CIA puts Guyana at the front of the countries with the highest worldwide real GDP growth rates over the past two years. This view is shared by International Monetary Fund (IMF) data, which indicates a projected real GDP growth rate of up to 33.9% for this year.

Given the recent exploration successes that led to a rise in proven oil reserves, multiple international oil and gas heavyweights have decided to dip their toes in the country’s search for more hydrocarbons. The greatest progress in developing Guyana’s prolific oil resources has been made by the U.S.-based ExxonMobil, which took final investment decisions (FIDs), together with its partners Hess and CNOOC, on six projects so far in the Stabroek block. Arbitration proceedings are currently underway over Hess’ proposed merger with Chevron.

Plans to develop Hammerhead as the seventh oil project, outlined by Alistair Routledge, ExxonMobil’s Country Manager for Guyana, a couple of days ago, have taken the global news headlines by storm. If the U.S. player’s environmental authorization application is greenlighted by the Guyanese government, the project is expected to add up to 180,000 barrels per day (bpd) by 2029, raising the country’s overall production capacity bar to nearly 1.5 million bpd.

The oil development will keep the energy giant’s current pace of putting a new Guyanese project into operation every 18 months. The Hammerhead discovery was revealed in August 2018, as ExxonMobil’s ninth oil discovery in the Stabroek block. The Hammerhead- 1 well was drilled in a new reservoir, encountering approximately 197 feet or 60 meters of high-quality, oil-bearing sandstone reservoir. The well was drilled to 13,862 feet or 4,225 meters depth in 3,773 feet or 1,150 meters of water.

After ExxonMobil made its first oil discovery in Guyana’s Stabroek block in 2015, the American energy behemoth has since found over 30 major discoveries, entailing recoverable resources of more than 11 billion barrels of oil equivalent. While six FPSOs with a gross production capacity of more than 1.2 million barrels of oil per day are anticipated to be online on the block by the end of 2027, the firm has hinted at the potential for up to ten such units.