Exxon’s giant Guyana discovery may be just the start

HOUSTON (Bloomberg) -- Exxon Mobil increased its estimate for a giant offshore oil discovery in Guyana by 25%, but it may just be the beginning.

Some 8 of 10 exploration wells have struck oil since 2015 and Exxon has identified a further 19 targets to drill, according to researcher Wood Mackenzie. The oil giant is so optimistic about finding more oil that it’s running two drill ships purely focused on exploration concurrently off the coast of the tiny South American nation.

“There’s multi-billion barrel potential remaining on the block,” said Ruaraidh Montgomery, a Houston-based analyst at Wood Mackenzie, referring to the exploration area named Stabroek. “It’s such a large block. We’re talking 1,000 times bigger than the average Gulf of Mexico block.”

Even so, exploration is no sure thing. Rivals such as Total, Tullow Oil and Repsol, which are also exploring for oil in Guyana’s waters, have yet to find anything substantial.

The oil major has determined that Stabroek alone holds at least 4 billion bbl of reserves, enough to push Guyana above OPEC-members Equatorial Guinea and Gabon, and about half the level of Angola. Production at 750,000 bpd by 2025 would put Guyana just below Libya’s 2017 output.

Exxon’s Neil Chapman, management-board member, called Guyana a “fairy tale” discovery at the company’s analyst day in March. That’s in part due to timing. In 2015, when the company first struck oil, crude was plunging and reached a 12-year low of about $26/bbl in 2016. Since then Exxon has struggled to grow production, making Guyana essential to reviving the oil major’s fortunes.