Integrated energy giant ExxonMobil Corporation (XOM - Free Report) has made its final investment decision (FID) regarding the first phase development of the Liza field located off the coast of Guyana, among the largest oil finds of the past decade.
It is to be noted that at the beginning of this month, ExxonMobil decided to double its royalty payment out of its offshore oil production to the government of Guyana.
We would like to remind investors that the integrated player’s current oil and gas output is way below the production levels 10 years ago in spite of its several acquisitions. The company produced 4.2 million barrels of oil equivalent per day (BOPD) in the first quarter of 2017, 4% below the year-ago period. Hence, capital spending on the Liza project is expected to increase the company’s output significantly in the coming years.
Phase 1 of Liza Project
The FID involves completion of a floating production, storage and offloading (FPSO) vessel capable of producing up to 120,000 BOPD. Production at Liza is likely to start by 2020. The company projects the cost of this phase to be slightly above $4.4 billion including a lease capitalization cost of around $1.2 billion for the FPSO facility. The facility is expected to generate approximately 450 million barrels of oil equivalent (BOE) from the Liza field, located at a water depth of1500–1900 meters.
The development of Liza phase 1 can also produce significant benefits for the country in the form of job creation, specialized workforce training, increasing government revenues and others.
The 6.6 million acres Liza field is a part of the Stabroek Block. ExxonMobil holds 45% operating interest here while Hess Corporation (HES - Free Report) and CNOOC Limited's (CEO - Free Report) wholly-owned subsidiary Nexen own 30% and 25% interest, respectively.