Exxon Mobil oil find: Granger says set-up of Sovereign Wealth Fund now crucial

By Alexis Rodney

With exploration company Exxon Mobil announcing that it has discovered oil during its drilling in the Stabroek Offshore Guyana, President David Granger said it becomes even more important for his administration to set up a Sovereign Wealth Fund (SWF)

A SWF is defined as pools of money derived from a country’s reserves, which are set aside for investment purposes that will benefit the country’s economy and citizens. The funding for a Sovereign Wealth Fund comes from Central Bank reserves that accumulate as a result of budget and trade surpluses, and even from revenue generated from the exports of natural resources. The types of acceptable investments included in each SWF vary from country to country; countries with liquidity concerns limit investments to only very liquid public debt instruments. Some countries have created SWFs in diversifying their revenue streams. For example, the United Arab Emirates relies on oil exports for its wealth. Therefore, it devotes a portion of its reserves to an SWF that invests in other types of assets that can act as a shield against oil-related risk.

Reacting to the United States (US) oil firm’s announcement, President Granger said he was elated and vowed that the disposal of any natural resource will go towards benefitting the people of Guyana. He reminded that before assuming the office, he had announced the creation of a SWF which would see that surpluses from exportation of all minerals be paid into that fund so that “children will not have to live in poverty; that no matter what happens to the resources of the country, there will always be wealth to look after their education”.

Exxon Mobil announced on Wednesday that the Liza-1 well has encountered more than 295 feet of high-quality oil-bearing sandstone reservoirs. The well, which began its exploratory activity in early March this year, is first on 6.6 million acre Stabroek Block, and drilled to 17,825 feet by Exxon Mobil’s affiliate, Esso Exploration and Production Guyana Ltd.

Exxon Mobil’s President Stephen Greenlee said he is encouraged by the results of the first well on the Stabroek Block. He assured that over the coming months the company will work to determine the commercial viability of the discovered resource as well as evaluate other resource potential on the block. According to him, the well data will be analysed in the coming months to better determine the full resource potential.

The project is expected to be executed over a 10-year period and has been divided into three sections, including two phases in each section which lasts for one to two years. The scope of operations include a drillship with approximately 200 crew and contractors; helicopter support with two from Ogle, including a utility and a Search and Rescue at all times; four support vessels and two shore bases, running from Georgetown and Trinidad; and a waste treatment facility at the John Fernandes Site at Houston, Greater Georgetown. The total area allotted to Exxon covers 26,806 square kilometres.

Guyana has been receiving sustained international attention from huge companies, especially in the oil sector. The US Geological Survey said in 2000, that the Guyana-Suriname Basin has the second largest unexplored oil potential in the world after Greenland. Guyana first struck oil in the 1980s in the Takutu Basin, and there is much optimism that oil will be found in commercial quantities. ExxonMobil has joined other investors such as CGX Energy, Repsol, Anadarko Guyana Co, and Nabi Oil and Gas in exploring oil in Guyana’s offshore Atlantic basin.