Oil shipments from nascent crude producer Guyana’s prolific Liza field could be affected by a growing storage glut that has contributed to plunging global crude prices, the country’s director of energy said.
A consortium led by Exxon Mobil began producing crude from the offshore field in December after discovering more than 8 billion barrels of recoverable resources together with partners Hess Corp and China’s CNOOC Ltd. The poor South American country had no history of crude production.
But a sharp fall in oil demand due to the outbreak of the new coronavirus has rapidly filled crude storage tanks worldwide, raising questions about Guyana’s ability to continue producing its crude at the same level.
“No shipment from the Liza Destiny has been affected due to COVID-19 presently,” Director of Energy Mark Bynoe told state newspaper Guyana Chronicle in a report published on Wednesday, referring to the respiratory disease caused by the coronavirus.
The Liza Destiny is the vessel where the offshore oil operations take place.
“However, going forward, as entities begin to run out of storage capacity due to an over-supplied market and depressed demand, shipments could be impacted.”
Guyana has no onshore oil storage infrastructure, meaning an inability to find customers or floating storage aboard crude tankers could force a production cut at the Liza project. Exxon has said the price drop has had no impact on its Guyana operations so far, but it could delay further phases.
Bynoe said building onshore oil storage may not make economic sense for the small country.
“For Guyana to consider storage on shore, that would most likely involve bringing a pipeline to shore that will involve billions of dollars as most vessels will be too large to enter our waters if we are to derive scale economies,” he said.
“Any investment will have to look at the relative costs and benefits.”
(Reporting by Luc Cohen Editing by Paul Simao)