Emerging Global Offshore Oil And OPEC+
Prior to OPEC+, a coalition of 23 countries, agreeing to continue with production cuts on December 3, 2020—Libya’s oil production shifted market dynamics in 2020—as the OPEC member swiftly ramped its oil output above 1 million barrels per day (MBPD). In parallel with Libya’s output, global offshore production is emerging with a sum of more than 1.1 MPBD—from relatively new fields in Europe via Norway, and in South America by way of Guyana and Brazil.
Moreover, OPEC+ will increase production by 500,000 barrels per day (KBPD) in January 2021 from the previously set production cuts of 2020 made by OPEC+: Libya will remain exempt. However, Norway—who is not part of the OPEC+ coalition—will resume producing without curtailment in 2021, as they initially joined in 2020 to assist in balancing the oil market. What impact can global offshore oil output have on OPEC+ in 2021 through 2024?
The Offshore Component
In March of this year, prior to Norway participating in the OPEC+ coalition, Equinor’s production in Norwegian waters, was exceeding 430 KBPD at the Johan Sverdrup field. Equinor, last month, announced that they are now nearing the 500 KBPD mark. Phase 2 of this field is expected to increase production to 690 KBPD by 2022. This platform-based development began producing in 2019. It is key to note that the North Sea is a shallow water basin when compared to the U.S.’ Gulf of Mexico (GOM) where deepwater fields produce at depths exceeding 8,000 feet, while the subsea wells at Johan Sverdrup are at a depth of approximately 393.7 feet.
Why Depth Matters: The Golden Deepwater Triangle
The Golden Deepwater Triangle is comprised of 3 continents: Africa (western region), the U.S. (GOM), and South America (Brazil and Guyana), and they all share the following in common: prolific oil that is produced from subsea wells at depths surpassing 1,000 feet in the Atlantic Ocean. The U.S.’ Department of the Interior’s deepwater definition is utilized, as the GOM’s Cognac platform set an industry first when it produced beyond 1,000 feet in 1978.
Regarding Brazil, Petrobras’ Búzios field is hovering above the 615 KBPD range by way of 4 Floating Production Storage Offloading (FPSO) units. A fifth FPSO is expected to become operational by 2022, to increase output by another 150 KBPD, with the potential for more FPSOs to be added to this field (the ensuing section will provide an overview on FPSOs). Búzios and Johan Sverdrup—provide a snapshot of Brazil and Norway, respectively—but do not represent the total output for each country.
Historically, Petrobras’ experience with floating production dates back to 1977. Today, the country has the largest concentration of FPSOs in the world, creating a blueprint for Guyana’s FPSO production that began in 2019 (Guyana shares a land border with Brazil).
Guyana and FPSOs
In Guyana, ExxonMobil XOM -0.5% is currently producing in the 100 KBPD mark from the Liza Destiny FPSO (shown in the opening image) that can store 1.6 million barrels at sea. The FPSO is linked to Liza Phase 1 which was an announced discovery in 2015, and reached first oil in less than 5 years: a swift timeframe for a deepwater project. Moreover, 220 KBPD are expected to come online via a second FPSO in 2022 for Liza Phase 2.
ExxonMobil in September announced sanctioning the Payara development and remarked in a press release that the ‘‘$9 billion development will target an estimated resource base of about 600 million oil-equivalent barrels.” Payara will also include a third FPSO that is projected to be operational by 2024, to deliver an additional 220 KBPD. The commonality that Liza and Payara fields share is the fact that they are located in Guyana’s Stabroek Block.
For context, Liza Phase 1 is located 118 miles from shore, however, the produced oil is not piped to land, instead the FPSO unit receives hydrocarbons from the subsea wells through subsea to topside infrastructure and conduits. Next, the hydrocarbons are then processed by the unit’s topside equipment, and oil is subsequently stored at sea within the FPSO. And with a shuttle tanker on location the FPSO can transfer oil via a flexible conduit, which can then be delivered to the port and region of interest via said tanker.
Guyana which shares its southern border with Suriname, is seeing an uptick in deepwater drilling. Albeit Suriname is not a deepwater producer yet, this can soon change, as just yesterday (December 11) ExxonMobil announced a discovery at Sloanea-1 in Block 52. The aforesaid is bolstered by the fact that Total and Apache’s joint venture partnership made 3 consecutive discoveries in 2020 on Block 58 which is next to Block 52. Regarding the latest discovery that was jointly made, Kwaskwasi-1, Apache announced in a September press release that it ‘‘confirms a world-class hydrocarbon resource.’’
Of paramount significance is the fact that Total and Apache’s discoveries in Block 58 are uniquely positioned, as they are adjacent to Guyana’s prolific Stabroek Block. Furthermore, Total counts with deepwater FPSO experience in West Africa, and is equally involved in Brazil’s deepwater sector.