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Chevron snaps up Guyana deepwater and shale interests in US$60Bn megadeal
Acquisition of US-based oil independent, Hess, will expand multinational’s low-carbon intensity deepwater holdings and shale gas interests
Chevron’s US$60Bn megadeal to acquire oil and gas independent Hess Corp is a massive play on deepwater oil and shale gas in the Americas, with Guyana production the shining jewel in the acquisition.
Through the transaction, the California-based multi-national will acquire a 30% working interest in the deepwater offshore Stabroek block in Guyana, Hess’ tight oil position in the Bakken shale, complementary assets in the US Gulf of Mexico and natural gas exposure in southeast Asia.
Commenting on the move, Rystad Energy senior upstream analyst, Matthew Wilks, says, “Chevron is betting big on the future output of Guyana and Hess’ stake in the offshore Stabroek block, which since 2015 has seen discoveries of more than 11Bn barrels of oil equivalent (boe) of recoverable resources. Thanks to this deal, Chevron will have access to more than 3.4Bn boe of these Guyanese volumes.”
The oil major will acquire all the outstanding shares of Hess in an all-stock transaction valued at US$53Bn, or US$171 per share, based on Chevron’s closing price on 20 October 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The total enterprise value, including debt, of the transaction is US$60Bn.
Mr Wilks notes the acquisition will add 400,000 barrels of oil equivalent per day (boepd) in net production in 2024, of which, almost 50% will come from Hess’ Bakken tight oil operations, 33% from offshore deepwater assets in Guyana and the Gulf of Mexico and the remaining 18% from the offshore shelf in southeast Asia. Hess has interests in the Gulf of Thailand.
“These additions, combined with a full year of production from the corporate buyout of PDC Energy, which closed in August, will increase Chevron’s total output base next year by approximately 25% year-on-year to 3.9M boepd,” says Mr Wilks.
Of note from an environmental standpoint is that Chevron claims its deepwater production in the US Gulf of Mexico has one of the lowest carbon intensities of any offshore oil and gas operation.
ExxonMobil, Hess’ partner in Guyana, reports its deepwater developments in the South American country generate 30% lower greenhouse gas intensity than the average of its other upstream portfolio.
According to Rystad Energy, “Emissions intensity from offshore activity in Guyana is lower than the global average for oil and gas production and deepwater offshore production, further strengthening the country’s position through the energy transition. Upstream emissions from Guyana’s deepwater activities average 9 km of CO2 per boe, comparable to Brazil and slightly higher than Norway.”
Through Hess, Guyana Exploration is a partner with ExxonMobil’s Esso Exploration and Production Guyana (45%) and CNOOC Petroleum Guyana (25%) in the Stabroek Block.
More FPSOs on the way
In mid-October, ExxonMobil awarded a front-end engineering and design (FEED) contract to SBM Offshore design, to build and install its seventh newbuild FPSO at the Whiptail development project in Guyana.
ExxonMobil’s Whiptail development is the US supermajor’s sixth offshore oil and gas project in Guyana and, pending government approval and ExxonMobil’s FID on the project, would be SBM Offshore’s fifth FPSO for the development.
The FPSO will be designed to produce 250,000 barrels of oil per day, will have associated gas treatment capacity of 15.3M m3 and water injection capacity of 300,000 barrels per day. The FPSO will be spread moored in water depth of about 1,630 m and will be able to store around 2M barrels of crude oil.
In a press statement, SBM Offshore said it will “design and construct the FPSO... using the company’s seventh newbuild, multi-purpose floater hull, combined with several standardised topsides modules.”
ExxonMobil has in place a 10-year operations and maintenance (O&M) agreement with SBM Offshore that covers O&M for four FPSOs: Liza Destiny, Liza Unity, Prosperity and One Guyana.
The first two FPSOs listed are in production, Prosperity is on site and expected to come online in late 2023 and the company said FPSO One Guyana’s topsides fabrication is progressing as planned, with first oil expected at the end of 2025.
“Chevron is betting big on the future output of Guyana”
In May 2023, ExxonMobil greenlit a FID at US$12.7Bn for its fifth offshore energy development project in Guyana’s Starbroek block, following government approval and another discovery at the Lancetfish-1 well.
The company said it aims to have six FPSOs online by the end of 2027, which would bring Guyana’s production capacity to more than 1.2M barrels of oil per day.
FPSOs in Brazil
Spending in Guyana will grow year-on-year from US$5Bn to US$7Bn, while spending in Brazil will increase from US$20.5Bn in 2022 to US$23Bn this year.
Brazil state-owned energy giant Petrobras plans to deploy 16 FPSOs across six fields before the end of this decade.
Equinor, which aims to ramp up its production from Brazil, submitted a plan in September to develop two fields in the Campos Basin in water of 2,900 m. Along with partners Repsol Sinopec Brasil and Petrobras, Equinor plans to spend US$9Bn on the development, deploying an FPSO with a production capacity of 16M cubic metres per day (mcmd) of gas.
| OSV and drilling rig utilisation levels | ||
|
US Gulf and South America (Sept 2023) |
||
| US Gulf | South America | |
| OSVs | 69.0% | 86.0% |
| OCVs | 63.0% | 96.0% |
| Offshore rigs | 60.0% | 77.8% |
| Source: Seabrokers, VesselsValue | ||
20-vessel tender
All of this E&P activity in South America has driven vessel utilisation levels for OSVs to 86% and 96% for offshore construction vessels (OCVs) creating a tight supply market, according to VesselsValue data. This could have a knock-on effect on the global OSV market, points out Seabrokers.
“Petrobras is continuing to make waves within the global PSV market as charterers around the globe look on anxiously to gauge whether the Brazilian company might start poaching vessels from other regions to facilitate its extensive fleet requirements,” says the shipbroker.
The latest tender from the Brazilian oil major is requesting the provision of as many as 20 PSVs for contracts commencing in H1 2024. Seabrokers reports both Brazilian and foreign-flagged tonnage can be offered for the spread of contract opportunities. “Four-year firm charters are available with start dates scheduled for either February or May 2024. Petrobras has provided budgetary day rates to potential bidders for various different vessel categories. Those budgets are guiding at rates of around US$31,000 for OSRVs, and between US$26,000 and US$44,000 for PSVs, depending on the vessel specification and scope of work involved,” says the shipbroker. Some 343 OSVs and 89 OCVs are active on the South American east coast, according to VesselsValue.
“Emissions intensity from offshore activity in Guyana is lower than the global average”
US Gulf of Mexico
Oil and gas interests were clearly disappointed in the Biden Administration’s long-awaited five-year federal offshore leasing programme. As announced by the US Depart of Interior, the 2024–2029 National Outer Continental Shelf Oil and Gas Leasing Proposed Final Programme offers just three potential OCS oil and gas lease sales in the Gulf of Mexico (GOM) Programme Area, which includes the Western GOM Planning Area and portions of the Central and Eastern GOM planning areas.
National Ocean Industries Association president, Eric Milito, called the leasing programme “an utter failure for the country”. He said: “President Biden’s approach to severely limit leasing significantly curtails access to a critical national asset at a time when energy inflation is rampant, the likelihood of a national recession looms, and global efforts are intensifying to curb greenhouse gases.”
Meanwhile drilling activity continues to strengthen in the US Gulf. Baker Hughes reported the offshore rig count in mid-October was 24, up nine units year-on-year.
In its latest deepwater development, Shell took delivery of a new floating production unit (FPU) for its Whale project, that will begin producing oil from US Gulf of Mexico starting in 2024.
Built by Singapore’s Seatrium, the Whale FPU comprises a topside module and a four-column semi-submersible floating hull.
The Whale project leverage’s Shell’s previous deep-water development experience in the US Gulf of Mexico which deployed a simplified, cost-efficient host design. The oil giant said Whale “features a 99% replicated hull and an 80% replication of the topsides from our Vito project.”
With eight subsea well connections, Vito began producing oil into Shell Midstream’s Mars Pipeline System in February 2023.
The Whale development will use energy-efficient gas turbines and compression systems to lower its greenhouse gas intensity.
Owned by Shell Offshore (60% operator) and Chevron USA (40%), Whale will connect 15 oil-producing wells to reach peak production of about 100,000 barrels of oil equivalent per day (boe/d) and currently has an estimated, recoverable resource volume of 490M boe.
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