(Bloomberg) — Exxon Mobil Corp. took the first step toward its seventh oil project in Guyana, a clear signal the supermajor intends to expand crude output from the South American nation into the next decade.
Most Read from Bloomberg
The Hammerhead project will pump as much as 180,000 barrels a day as soon as 2029, pending Guyanese government approval, Exxon country manager Alistair Routledge said in an interview.
Exxon filed an environmental authorization application with the government Monday for an investment that’s expected to boost the country’s overall production capacity to nearly 1.5 million barrels a day, about the same as OPEC member Nigeria.
Proceeding with an additional investment likely to total several billion dollars underlines the company’s commitment to the sparsely-populated South American nation. Exxon’s aggressive plans have already made Guyana the third-fastest growing oil-producing country outside of OPEC in recent years and a key contributor to global supplies. Guyana has been a vital part of Exxon’s post-pandemic stock revival because its crude is among the most profitable outside of the Middle East, with a break-even cost of less than $35 a barrel.
The push has, however, attracted the ire of environmentalists who accuse Exxon of turning one of the world’s few carbon sinks into its newest petrostate. Guyana counters that it has a right to use fossil fuel revenues to develop its economy and that its rainforest will continue to absorb more carbon dioxide than the country emits despite the rising oil production.
Hammerhead’s capacity will be about 30% lower than the three previous offshore installations and the smallest since the first Guyana project started output in 2019. Exxon tailored the floating production, storage and offloading vessel, or FPSO, to fit the target oilfield’s specific needs, Routledge said. The downsized vessel isn’t a sign that the nation’s resources are in any way diminishing.
“It’s the right solution for the particular resource in this part of the block,” Routledge said. “For other resources, we again expect some larger facilities.”
If approved by the middle of 2025, Hammerhead will maintain Exxon’s record of bringing a new Guyana project online roughly every 18 months, Routledge said.
“The goal we’re working to is to maintain that cadence,” he said. “We think the resource is there. We obviously want to ensure we optimize the development within the block.”
Exxon first discovered oil in Guyana’s Stabroek block in 2015 and has since made more than 30 major discoveries encompassing more than 11 billion barrels of recoverable reserves. The Texas supermajor operates the block and owns a 45% stake. Hess Corp. and China’s Cnooc Ltd. own the remaining 30% and 25%, respectively.
Exxon is currently in arbitration with Chevron over its proposed takeover of Hess, which is driven in large part by the latter’s non-operating stake in Guyana. Exxon claims it has a right-of-first-refusal over the stake. Chevron and Hess disagree, arguing their deal is structured as a corporate merger meaning the right does not apply.
(Updates with environmental concerns in fifth paragraph.)
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.