Macro

Exxon's $12.7B Whiptail to Boost Guyana Oil, Outdo Venezuela

Exxon's $12.7 billion Whiptail project in Guyana to boost output to 1.3 million barrels per day, surpassing Venezuela.

By Bill Bullington

4/12, 16:17 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Chevron Corporation
Hess Corporation
Exxon Mobil Corporation
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Key Takeaway

  • Exxon's $12.7 billion Whiptail project in Guyana to produce 250,000 barrels/day by end of 2027, surpassing Venezuela's output.
  • Guyana's oil boom, fueled by Exxon discoveries, to elevate daily crude capacity to 1.3 million barrels, impacting OPEC decisions and international crude prices.
  • Chevron seeks entry into Guyana's oil market with a $53 billion bid for Hess Corp., amidst Exxon's arbitration efforts to block the sale.

Guyana's Oil Boom

Exxon Mobil Corp. has officially greenlit its sixth oil development project in Guyana, named the Whiptail project, with an investment of $12.7 billion. This venture is set to elevate Guyana's crude production capacity to 1.3 million barrels per day by the end of 2027, surpassing OPEC member Venezuela's output. This development marks a significant shift in the Latin American energy landscape, as Guyana, a nation with a modest population of 800,000, ascends to become a major oil producer. The Whiptail project alone is expected to yield about 250,000 barrels of oil daily, contributing significantly to this surge.

Economic and Social Impacts

The oil boom in Guyana is poised to have profound social and economic repercussions for the country. The influx of oil revenues is enabling the Guyanese government to launch extensive welfare and infrastructure initiatives, fundamentally transforming the nation's economic fabric. This newfound wealth has also influenced OPEC's strategy, with the organization opting to maintain output caps to bolster oil prices, which have seen a nearly 20% increase this year, reaching around $90 a barrel. Guyana's ascent in the oil market is reshaping regional dynamics, especially in contrast to Venezuela's declining production due to underinvestment and sanctions.

Strategic Developments and Discoveries

Exxon's aggressive exploration strategy includes drilling 48 wells off Guyana's coast, which will feed the Jaguar FPSO, a vessel with a 2 million barrel capacity. The Whiptail discovery, made in 2021, is projected to produce over 750 million barrels. However, Exxon hints at a potential slowdown post-Whiptail, with future projects being more complex. The company is exploring various options, including Guyana's first gas-focused project and leveraging recent discoveries to augment existing production without necessarily commissioning new FPSOs.

Geopolitical Tensions and Chevron's Interest

The burgeoning oil wealth in Guyana has reignited long-standing territorial disputes with Venezuela, with the latter escalating claims over the Essequibo region. Concurrently, Chevron Corp.'s attempt to acquire a stake in Guyana's oil riches through a $53 billion takeover of Hess Corp. has been met with resistance from Exxon, which is seeking to enforce its preemption rights through international arbitration. This legal battle underscores the strategic importance of Guyana's oil reserves on the global stage.

Management Quotes

  • Alistair Routledge, Exxon’s Guyana country manager:

    "Some of it is not quite so easy reservoir-wise, but there’s a lot of resource... We’re working through that inventory and figuring out what could potentially be next in the development."