ExxonMobil and partner Hess have made a final investment decision to proceed with a US$4.4 billion first phase of development of the giant Liza field, in the Stabroek block, offshore Guyana.
The firm says it has also had positive results on its latest well on the field, which is one of the largest oil discoveries of the past decade.
The Liza-4 well encountered more than 197ft (60m) of high-quality, oil-bearing sandstone reservoirs, which will underpin a potential Liza Phase 2 development.
Gross recoverable resources for the Stabroek block are now estimated at 2-2.5 billion boe, which includes Liza and other successful exploration wells on Liza Deep, Payara and Snoek.
The Liza Phase 1 development includes a subsea production system and a floating production, storage and offloading (FPSO) vessel designed to produce up to 120,000 b/d. Production is expected to begin by 2020, less than five years after discovery of the field.
Phase 1 is expected to cost just over $4.4 billion, which includes a lease capitalization cost of approximately $1.2 billion for the FPSO facility, and will develop approximately 450 MMbo.
“We’re excited about the tremendous potential of the Liza field and accelerating first production through a phased development in this lower cost environment,” said Liam Mallon, president, ExxonMobil Development Co. “We will work closely with the government, our co-venturers and the Guyanese people in developing this world-class resource that will have long-term and meaningful benefits for the country and its citizens.”
The Liza Phase 1 development can provide significant benefits to Guyana, including jobs during installation and operations, workforce training, local supplier development and government revenues to fund infrastructure, social programs and services.
The development received regulatory approval from the government of Guyana.
The Liza field is approximately 190km offshore in 1500-1900m water depth. Four drill centers are envisioned with a total of 17 wells, including eight production wells, six water injection wells and three gas injection wells.
The Liza field is part of the Stabroek Block, which measures 6.6 million acres, or 26,800sq km. Esso Exploration and Production Guyana is continuing exploration activities and operates three blocks offshore Guyana – Stabroek, Canje and Kaieteur, with 45% interest in the Stabroek. Hess Guyana Exploration holds a 30% interest and CNOOC Nexen Petroleum Guyana holds 25%.
In 2017 and 2018, the partners plan to continue exploration and appraisal of the Stabroek block. There are numerous prospects across multiple play types on the block, representing additional multibillion bbl unrisked exploration potential, says Hess.
Drilling of the Payara-2 well, which will also test a deeper prospect underlying the Payara oil discovery, is expected to begin in late-June, following completion of a drillstem test at Liza-4.
Analysts weigh in
Wood Mackenzie’s Pablo Medina, senior analyst, Upstream, Latin America,says that the short time it took for Exxon to go from discovery to declaring FID for Liza, signals the competitiveness of the project, both within the company's portfolio and globally.
“Liza-Payara has a breakeven of $46/bbl (Brent; using a 15% discount rate), which puts it in a very attractive position compared to other leading investment opportunities such as tight oil or deepwater Brazil,” says Medina. “Very few deepwater projects have been pushed through FID during the oil price downturn. Only the very best projects have been sanctioned and this speaks volumes of Liza's potential.”
“We currently forecast the full development of Liza-Payara will produce over 330,000 b/d of oil at peak, with reserves of over 1.5 billion boe. The successful exploration campaign has also led to the discovery of almost 3 Tcf of associated gas. The full development solution will need to address the challenge of gas monetization, given the field's remoteness from the coast and the lack of a gas market in Guyana,” says Medina.
Accordign to the WoodMac analyst, Guyana will have the task of managing the complexities of developing its first oil and gas field.
“Within 10 years, we expect the Liza-Payara development to produce 330,000 b/d –allowing Guyana to join the ranks of other Latin American producers, where legacy production has been in steady decline,” says Medina.