The Energy Department announced today that Shell Western Supply and Trading Limited will be buying the Government’s first three million barrels of oil from the Stabroek Block.
In a statement to the press, it was indicated that the selection of the company follows a week-long discussion with companies such as ExxonMobil and Chevron. It was further noted that the selection of the company brings the Phase One of the Department of Energy’s announced two step crude marketing process to a stage of near completion.
The Department of Energy (DE) had previously announced a two-phased approach to lifting and marketing of Guyana’s crude. The first phase being a direct sale process in December 2019 and the second an open market Request for Proposals (RFP) to be launched in early 2020 for a marketing agent to market Guyana’s crude entitlements from the Liza One field on a long term basis. The department had explained that this was necessary to allow, amongst other things, for adequate preparation in structuring and completing the RFP for marketing in early 2020.
In its statement to the press, the department thought it prudent to remind as well that given the accelerated timing of first oil and with Guyana’s first lift expected in February 2020, a short-term phase One process became necessary.
After careful consideration and options evaluated, it said that a select group of nine listed international oil companies (IOCs) were invited to express interest for the lifting and subsequent placement of the first three cargoes of Guyana’s entitlement from the Liza development. The first lifting entitlement has been confirmed for February 2020 and the completion of the three cargoes will be approximately by mid- 2020. By the end of the third lift, the quality of the crude and any operational issues around production are expected to have stabilised the department added.
The companies participating in the phase one process included the three partners in the Stabroek field, ExxonMobil, Hess Corporation and CNOOC/NEXEN. All other participating companies were also International Oil Companies (IOC’s) with integrated upstream, midstream and downstream value chains, global refining footprints and experience in the introduction of new crude grades from and into multiple geographies.
The department further noted that the interested parties submitted their proposals in writing and were subjected to a face to face meeting with the DE, in order to present the full scale of their capabilities. The Guyana Standard understands that the companies were also required to lay out the details of their proposals.
Additionally, the department noted that the face to face presentations, allowed for robust interrogation and lengthy clarifications and questions. It stressed that this was an integral part of the selection process, especially in the context of the nascent nature of Guyana’s experience with this process of crude commercialism, given that the country is now only a few days-old new producer.
Furthermore, the Energy Department said that the decision to go ahead with Shell Western Supply and Trading Limited, was based on a competitive pricing that limits the Government’s exposure to market uncertainty; the size, scale and global reach of the Shell trading operations’; the company’s high level of integration between Upstream, Trading and Downstream; Shell’s strong foothold in the Latin American markets and the size and scale of their shipping and storage operations in the region, allowing for multiple options on the Liza crude commercialisation; the range of new grades Shell has recently introduced into the market and their willingness to share critical refinery information with the DE which Guyana needs in order to understand Liza crude behaviour; and the company’s readiness to support the DE in operating these cargoes, while the DE is strengthening its structures and in-house crude commercialisation human resources.
The Guyana Standard also understands that the sale has been premised on a Dated Brent price basis which reflects the tradable, spot market value of crude oil.
The DE also registered its intention to promote transparency in crude marketing for Liza crude cargoes while disclosing that it will coordinate with the Guyana Extractive Industries Transparency Initiative Secretariat to announce mechanisms and details for allowing the public access to records showing how, when and for how much its crude oil is being sold.
