5 months ago
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The UK company exploring for oil offshore Jamaica has now put a US$70-billion estimate on the value of petroleum reserves likely lying under Jamaica’s waters waiting to be tapped.
Were those numbers to be proved through further exploration and studies, the reserves would be comparable to the finds in Guyana, United Oil & Gas Plc said in its latest pitch to prospective investors. The company, which has offices in Dublin and London, holds a licence from the Jamaican government to explore for oil in the Walton-Morant block.
“Walton-Morant’s monetisation potential is directly comparable to the development of the nearby 11 billion barrel Stabroek resource in Guyana,” United Oil said in an investor presentation last week at the Jamaican High Commission in London. The presentation was released Friday, May 24.
United Oil made its presentation to investors at the High Commissioner of Jamaica in London last week. The meeting also included Jamaican technocrats.
United Oil started hunting for oil in 2020 offshore Jamaica in a zone stretching south of Walton Basin in Westmoreland to Morant Bay in St Thomas, and spanning 22,400 kilometres.
United Oil is seeking a co-investor to drill test the block. It’s already received two extensions from the Jamaica Government to ‘drill or drop’ the licence.
United Oil sees a “huge upside potential” beyond 7.0 billion barrels. Its external consultants Energy Advisors Limited put the estimates as high as 15 billion barrels.
“Walton-Morant has favourable fiscal terms designed to attract investment, with supportive government policy resulting in excellent economic potential, up to US$70 billion,” stated United Oil.
The break-even point for Guyana is US$25 to US$35 a barrel, compared to Jamaica at US$25 a barrel, the company said. Comparatively, oil is currently being sold at around US$80 per barrel on the world market, creating room for oil producers to profit.
Jamaica spends heavily on energy imports, costing over US$2 billion in each of the past two years. However, different dynamics, including market price volatility and energy policy adjustments, has pulled down the country’s spend on crude oil imports over time. For example, nearly a decade ago, the Petrojam oil refinery reported that it spent US$1.4 billion on oil imports for FY2015. The following year the import bill dropped to US$759 million for the same volumes of crude due to market volatility and other factors.
In more recent times, the country’s spend on crude has flirted with the past performance, but has largely fallen relative to those days. In the past three years, Jamaica’s crude oil import bill was just shy of US$589 million in 2021, rose to US$740 million in 2022, but fell back to US$487 million in 2023, Statin data shows.
Some of the decline is related to the reduced dependence on heavy fuel oil to produce electricity and the rise of LNG and renewables as alternatives.
United Oil’s comparison of Jamaica with Guyana was a key focus in the UK-based company’s latest investor presentation. Previous presentations focused on the revenue potential, which was then touted as US$23 billion, but was mostly based on the initial readings in the most promising area of the block, called Colibri, which lies closer to Westmoreland.
Last week’s presentation encapsulated the estimates for all six zones within the Walton-Morant block.
Oil discoveries in recent years resulted in Guyana becoming the fastest-growing country in the world. Half of Guyana’s oil revenue goes to the government.
In Jamaica, proven reserves would result in 42 per cent of oil revenue flowing to the Jamaican government, based on United Oil’s presentation document. It puts the arrangement at the lower end of such agreements. Peru sits at the bottom with a 41 per cent share, while Angola is at the top with 90 per cent of revenues flowing to that government. The size of the take generally relates to government’s direct participation in the oil ventures.
“Jamaica operates a very favourable production sharing agreement regime with no state participation,” said United Oil.
Jamaica is sitting on the sidelines having been burned in the past over its participation in exploration activities. Over time, Jamaica has engaged in several oil discoveries and drills, resulting in at least 11 confirmed oil and gas seeps, but commercial finds have eluded the country.
In the 1980s, through the Petroleum Corporation of Jamaica – a state agency that was folded into the Ministry of Energy a few years ago – the government had set up three onshore wells at Windsor, Retrieve and Hertford, which are now largely forgotten. Windsor in the St Ann holds significance as the first documented location of an oil seep back in 1865.
The current risk-taker, United Oil, is in need of a drilling partner to spread the risk of drilling. It has a “one in five” chance of making a viable oil find, but it hasn’t yet convinced any investor to partner with it.
The 20 per cent chance was the independent adviser’s estimate. However, Energy Advisors also says the chance of a find could improve to “one in three”, or 33 per cent, later this year with further tests. It will cost US$30 million to test those odds with a drill.
On the positive side, “all wells drilled to date have oil shows,” United Oil said. The company now has until 2026 to either find a drilling partner or give up the licence. It will be undertaking additional technical studies, including “piston core sampling and seismic reprocessing”, to better define the prospects.
English (US) ·