Summing-up the Metrics informing the Guyana Petroleum Road Map
Introduction
Last week’s column concluded my presentation on the Buxton Proposal. This is the last of the topics identified in the final Part (2) of Guyana’s Petroleum Road Map. Based on several readers’ queries, I believe that, it would be useful if I provided a summary of the petroleum metrics that was earlier introduced, when presenting the Road Map. This summary offers some useful insight into the affordability of the Buxton Proposal.
The detailed petroleum metrics that I had previously introduced, centre on three critical relations. First, there is my projected value of earnings from Guyana petroleum sales. This value is dependent on 1) its projected petroleum reserves 2) its expected daily rate of production, DROP expressed in barrels of oil equivalent, boe, and 3) the price at which each boe is sold.
Secondly, the projected overall profit derived from petroleum sales. Projected total profit obtained on each boe sold, is a function of the volume of sales; the price of each boe; and, the cost of production incurred in producing each boe.
Thirdly, how much of the profit obtained from each boe is expected to flow to the Government of Guyana, GoG? As used in this series, this share of the profit is termed the Government Take. This Take is determined by the terms of the various applicable Production Sharing Agreements, PSAs, governing companies’ allocated successful Guyana oil blocks.
Approach
Going forward, I shall summarize these three relations in the order indicated above. However, I need first to make a few observations. First, I shall present simple Schedules to elaborate these relations and my projections. Second, unless otherwise stated, my projections are based on the “full ramp-up”, level of oil and gas production, as listed below. Third, Rystad Energy has modelled Guyana’s petroleum metrics/revenues; as revealed before in the Road Map. The relevant information from that model is restated, at appropriate stages below. Fourth, I have applied my values to compare with the Rystad Energy model. As to be expected, these values yield different outcomes.
I have utilized both the lower and higher range level. These provide a DROP between 1.5 and 2.5 mboe per day. This range provides my projected Guyana’s petroleum output, and consequently earnings potential for Guyana, at full ramp-up, based on the expected Guyana crude oil market price.
Price
Following on this, I have projected Guyana’s crude oil price at US$70 per boe, at the time of full ramp-up. Rystad Energy’s model for Guyana crude, uses a price of US$75 per boe, at full ramp-up output (all prices are nominal). How my US$70 per boe estimate compares to prices over the past decade, is revealed in Table 2.