Hess mulls US$1B investment in Stabroek Block in 2022

– current investment stands at US$780M

Hess Corporation, which is a co-venturer alongside oil giant ExxonMobil in the Stabroek Block, is considering increasing its investment in Guyana’s waters to a staggering US$1 billion in 2022.

This was revealed by Hess’ Chief Financial Officer (CFO) John Reilly, who was participating in a virtual forum hosted by JP Morgan during its recent 2021 Energy, Power and Renewables Conference. While the company is considering increasing next year’s budget to US$1 billion, Reilly cautioned that the ink is not dry.
“We have a rig in the block. So that’s going to add approximately US$200 million to the budget, when you add that rig for next year, that third rig. And then in Guyana, the development budget was US$780 million this year. We think that budget will be around $1 billion next year. Again, nothing exactly fixed, but somewhere in that $1 billion level,” Reilly said.
The CFO also explained that Hess remains focused on servicing its US$1 billion three-year term loan arranged with JP Morgan Chase Bank. In fact, Reilly explained that once the Liza Unity Floating Production Storage Offloading (FPSO) vessel comes onstream, this money will be used to complete servicing of this loan.
“The Liza Unity is a 220,000-barrel (of oil per day) ship and you (Hess) get approximately 60,000 barrels of oil per day when it is up and running at peak. And when this is on an annual basis, you are getting 21.9 million barrels per day,” Reilly said during the forum.
“You can put in different price points with that but if it is a US$60 Brent markup…you are looking at over US$1 billion coming into the portfolio under that scenario. And what we would do is be able to finish paying off the term loan in that year. Following this, excess cash flow would go towards increasing dividend.”
The Stabroek Block is 6.6 million acres (26,800 square kilometres). Exxon, through subsidiary Esso Exploration Production Guyana Limited (EEPGL) is the operator and holds 45 per cent interest in the Block. Hess Guyana Exploration Ltd holds 30 per cent interest and CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds the remaining 25 per cent interest.
ExxonMobil has said it anticipates at least six projects offshore Guyana will be online by 2027, with developmental drilling recently starting on the second one, the Liza Phase 2 project. Back in May 2019, EEPGL was granted approval by the Environmental Protection Agency (EPA) to go ahead with its Liza Phase 2 Development offshore Guyana.
The oil company had said that the project will have the capacity to produce 220,000 barrels of oil per day. Exxon had also revealed that the Liza Phase 2 development was funded at the cost of some US$6 billion, including a lease capitalisation cost of approximately $1.6 billion, for the Liza Utility floating FPSO vessel. For the Phase 2 Development, six drill centres were planned, along with approximately 30 wells – 15 production, nine water injection and six gas injection wells.
The US$9 billion Payara development, the third development, will meanwhile target an estimated resource base of about 600 million oil-equivalent barrels and is considered to be the largest single investment in the history of Guyana.
A fourth project, Yellowtail, has been identified within the block with anticipated start-up in late 2025 pending Government approvals and project sanctioning. This project will develop the Yellowtail and Redtail fields, which are located about 19 miles (30 kilometres) southeast of the Liza developments.
The Prosperity FPSO will be designed to produce 220,000 barrels of oil per day, will have associated gas treatment capacity of 400 million cubic feet per day and water injection capacity of 250,000 barrels per day. They further explained that the FPSO will be moored in water depth of about 1900 metres and will be able to store around two million barrels of crude oil.
The construction of Prosperity’s hull started in January 2019. Prosperity will be Guyana’s third FPSO. The Prosperity FPSO is expected to be deployed at ExxonMobil’s Stabroek Block offshore Guyana, as part of the Payara oil field development.