On March 30, 2017, ExxonMobil (45% and operator) announced its third oil discovery on Guyana’s Stabroek Block at its Snoek-1 well. Wood Mackenzie analysts offered thoughts on the implications of the oil discovery.
The well was drilled to 5,175 meters at a water depth of 1,563 meters. It encountered 25 meters of oil-bearing sandstones of Maastrichtian-Aptian age, similar to the Liza-1 discovery well just nine kilometers to the north. The rig will next drill the Liza-4 appraisal.
ExxonMobil’s partners are Hess (30%) and Nexen (25%, and a wholly owned subsidiary of CNOOC).
Implications
This discovery follows on the heels of the Payara discovery and Liza-3’s discovery of a new reservoir.
Our base case for Liza-Payara is 1.5 billion barrels of oil. Snoek adds another 220-370 million barrels in our estimate.
The partners have identified another five prospects to drill on the Stabroek block through 2018.
ExxonMobil also farmed into and took operatorship of two blocks north of Stabroek, while Hess farmed into Block 42 in Suriname.
In Suriname, Apache is currently drilling the Kolibri-1 well on Block 53, and Tullow will drill in Block 54 later in the year.
A key unknown is whether this Cretaceous fan play extends across the Guyana basin or if it is isolated to this discovery cluster.
The three Stabroek discoveries benefit from close proximity (around 30 kilometers). Economies of scale can be achieved if FPSOs and subsea infrastructure are shared.
With each discovery, the disposal of associated gas (we estimate over 3 tcf) becomes a bigger challenge. Initially, the JV will target low-GOR areas and will re-inject produced gas, but FLNG or a long pipeline may be required as well.
The partners are taking a phased approach to the area’s development. We model two large FPSOs to develop Liza and Payara. We assume Snoek will require another vessel.
We modelled two scenarios for Snoek: a high case with reserves of 370 mmbbl oil exploited by a 120,000 b/d FPSO and a base case assuming 220 mmbbl producing to an 80,000 b/d FPSO. Snoek's NPV10 would vary between US$0.6-1.3 billion, assuming a long-term Brent oil price of US$65/bbl. Under this case, national production will peak at 400-450 thousand b/d in the next decade.
Guyana's fiscal terms were set at a level to attract high-risk wildcatting in a frontier area. When success improves prospectivity, a tightening of fiscal terms may follow as a country's expectations shift.
A forthcoming update of terms for future entrants is likely, given the continuing success of the Stabroek JV.