Delays to Guyana gas-to-power project could cut weeks off oil production

Guyana’s attempts to use its natural gas resources to fuel a power plant that would cut the country’s energy costs are being held up by construction delays and cost overruns while threatening to curtail oil revenues by ~$1B, Reuters reported Monday.

The first phase of a 300 MW power plant reportedly is running six months behind schedule, with full operation not expected until Q4 2025.

Exxon Mobil (NYSE:XOM), which operates all oil and gas production in Guyana, is building a ~$1B, 140-mile gas pipeline from its offshore Stabroek block to supply the government’s project onshore, and the company’s part of the project will be ready by year-end as promised to Guyana, Exxon Guyana country manager Alistair Routledge told Reuters.

The gas pipeline completion will require Exxon (XOM) to pause production during Q3 at two oil production vessels to connect them to the undersea pipeline, Routledge said.

If the tie-in lasts four weeks, Exxon (XOM) and consortium partners Hess (HES) and Cnooc (OTCPK:CEOHF) would need to stop as much as 12M barrels of oil output from two platforms that produce 400K bbl/day at peak levels, Routledge said, which could mean more than $1B in deferred oil revenue.

The executive said the pipeline connection and maintenance works would take “weeks, not months,” and Exxon (XOM) is not concerned about having to shut production this year for a project that will not be ready to accept the gas at least until sometime in 2025.