Traders Flock to Burgeoning Petrostate for Taste of Oil Riches
(Bloomberg) -- Oil traders are packing their bags for a trip to the world’s newest petrostate -- a place they know remarkably little about.
At least half a dozen traders from Houston, Geneva and London are set to alight in tropical Guyana this weekend to bid on some of the first oil cargoes produced by the tiny South American nation. Ahead of the journey, the traders wondered aloud if they’re heading to an island (they’re not) and what language is spoken there (English).
Their lack of familiarity with the former European colony is a testament to Guyana’s unlikely emergence as an oil state. Long dependent on sugar plantations and bauxite mining, the country was the site of a major crude discovery by Exxon Mobil Corp. in 2015. Now it’s poised to produce more oil than neighboring Venezuela, a founding OPEC member.
Guyana has no experience in trading oil -- and it’s looking to learn the basics from its very first buyer. The government last week sent a letter to refiners around the globe inviting them to bid for 3 million barrels of Liza Blend crude, the light-sweet oil it will start exporting next year. The catch is that the buyer must take the unusual role of handling “all operating and back office responsibilities” related to exporting the crude, according to a document seen by Bloomberg.
On top of that, the bids must be offered “face to face” -- in the country’s capital of Georgetown -- starting Monday. Such a voyage is rare for traders, who do most of their business on instant-message platforms and by phone.
The oil world is happy to play along. The three cargoes being offered are an appetizer for a bigger prize. After this sale, part of an “incubation and launching” phase, Guyana plans to sell its crude via long-term contracts. The government will load its first cargo in February, but the first oil will be exported in January by Exxon Mobil, which operates the Liza oil field, according to people with knowledge of the situation. Exxon declined to comment on the shipment of the first oil to reach markets.
The Liza field is scheduled to start production this month and will reach 120,000 barrels a day next year. By 2025, it’s expected to ramp up to 750,000 barrels daily. The country, a third of the size of Texas, is poised to produce as much oil as Venezuela in five years. Oil exploration takes place off the coast, in the blue waters of the Atlantic ocean, in ships turned into oil platforms.
Guyana’s output boom comes at a trying time for global oil markets. The U.S., Brazil and Norway are all growing production even as the Organization of the Petroleum Exporting Countries and its allies cut their own output in a bid to curb a global supply surplus. Guyana’s Liza blend has similar characteristics to grades produced by Nigeria and Angola and is also seen as an alternative to U.S. oil.
©2019 Bloomberg L.P.