this video was brought to you by nebula for the past few months Venezuela has been threatening to Annex esao a sparsely populated bit of jungle that's internationally recognized as being part of Guyana Venezuela's smaller Southern neighbor now Venezuela has always claimed esao but it only started asserting its claim after absurd amounts of oil were found off the Guyanese Coast in the late 2010s however while much of the media's attention has under understandably focused on the tensions between Venezuela and Guyana these enormous oil discoveries have also sparked another dispute one between America's two biggest oil companies Exxon Mobile and Chevron which Spilled Out into the public a few weeks ago after Exxon accused Chevron of trying to muscle in on guyana's most lucrative oil block so in this video we're going to take a look at the ridiculous amount of oil that's been discovered off the coast of Guyana why gon and Exon are fighting over it and how this could reshape Big [Music] Oil if you haven't already consider subscribing and ringing the bell to stay in the loop and be notified when we release new videos so to understand this story we need to go back to the '90s when Guyana started searching for oil in its so-called exclusive economic zone which is defined by the United Nations convention on the law of the sea as the territory 200 nautical miles from a state's Coastline however Guyana is a tiny country with a population of less than a million people and an average wage of less than $400 its oil laws were also written in the 1980s and until very recently the Guyanese Department of energy had an annual budget of less than $2 million the point we're making is that Guyana obviously didn't have the state capacity to develop the oil fields themselves so when they were discovered they basically hired some big American companies to do it for them the way this process worked is that they split their exclusive economic zones into socalled blocks and sold the exploration leases for these blocks to the highest bidder the important block here is the starre block a 6. 6 million acre strip running parallel to the guese coast about 120 Mi offshore the lease of the starre block was sold to Exon Mobile and Royal Dutch Shell all the way back in 1999 but it was sold incredibly cheaply both because as a poor country the guy State desperately needed money and because despite being surrounded by oil producing states like Venezuela Brazil and Surinam previous exploration of the Guyanese Coast had been thoroughly unsuccessful so no one's expecting anything that massive and well originally things didn't go brilliantly for the first 15 years or so nothing really turned up an exploration efforts were hindered by ongoing territorial disputes with both Surinam and Venezuela while the Surinam dispute was resolved in 2007 even before the massive Discovery in 2015 the Venezuelan Navy would periodically hassle exploration vessels and in 2013 they actually boarded a ship contracted by another American Oil Company then in 2014 when the price of oil crashed shell pulled out of the deal leaving it all to Exxon now Exxon didn't want to to plow yet more money into the project given that they hadn't found anything in 15 years of trying and their margins were also being squeezed by low prices so they sold a 30 and 25% stake to the new york-based hes Corporation and China's State back CN respectively under this deal exom remained the operator I. E the company actually doing the exploration but Hess and CN had to put up some of the capital to keep the project going in return for any profits if oil were to be found and well this turned out to be a great deal for them soon after in March of 2015 Exxon discovered 3 billion barrels worth of extractable oil reserves in the block exxon's lease then came up for renegotiation with Guyana in 2016 and they still got a pretty good deal they paid $18 million up front which is pretty trivial when you consider that 3 billion barrels translates to over $200 billion in today's prices and agreed to give Guyana 60% of any future profits which is significantly lower than the international average of 75% for offshore projects then over the next few years another 8 billion barrels worth of extractable reserves were discovered taking the total amount to about 11 billion barrels exom mobile currently expects Guyana to produce 1.
3 million barrels a day by 2027 which could in turn increase the guyane state's total tax revenues by 500% and the fact that Exxon Mobile keeps testing new oil wells suggests that there could be even more to discover perhaps as much as 30 or 40 billion barrels now this won't actually have much of an impact on the global oil markets while 1. 3 million barrels a day will obviously have a massive impact on Guyana it only represents about 1% of Global Production nonetheless it's drawn an enormous amount of attention from the world's oil companies for the simple reason that it's one of the most significant discoveries in the Century the context most of the world's major oil fields were discovered before the 1970s and if we exclude the US Shale boom in the 2010s the frequency and magnitude of new discoveries has been slowly declining ever since and on top of that the oil in Guyana is of remarkably high quality unlike the oil in neighboring Venezuela which is essentially too thick or Shale oil which is essentially too impure to be used in high efficiency engines and this is why in October of last year Chevron the second biggest American super major after Exxon bought the hes Corporation for $60 billion giving it a 30% stake in the starbrook block publicly exom welcomed the deal with their CEO telling Bloomberg we work with Chevron all over the world but privately things weren't so Rosy Exxon secretly sued Chevron claiming that they're entitled to what's known as a right to First refusal I. E that hess's stake should have been offered back to Exxon before Chevron got it now Chevron responded by arguing that this didn't apply because they were buying Hess outright not just its stake regardless this dispute remains secret for months as both companies tried to reach a face saving deal but on March 28th Chevron went public and filed a complaint with the US Securities and Exchange Commission Days Later Exon responded by suing both hes and Chevron at the international Chamber of Commerce in Paris now the case will likely take at least another 6 months so we have a while to wait but its outcome could reshape the American oil industry if Chevron win it will renew competition between the two big American Oil Giants and narrow the lead that Exxon has built up over the last few years on the other hand an Exxon Victory could consolidate their dominance in the industry and possibly spell the beginning of the end for Chevron in much the same way that chevron's Forerunner Texico went bankrupt in the 880s after losing its own multi-billion dollar lawsuit there's definitely going to be new developments with this story though so keep an eye out for future changes actually the best way to stay on top of the news is with nebula news if you haven't heard we've just launched a project alongside our partners at nebula called nebula news where every day the TDR team creates a selection of videos that matter the most in the world right now as you surely already know nebula is the thoughtful streaming service that's pushing boundaries on what independent creators can do with content including nebula news where we handpick a feed of content that should help you keep up to date with everything you need to sound smart and be truly informed we believe that in a confusing and overwhelming news environment knowing what to pay attention to is important you can't track every story so our curation should help to surface what really matters showing you videos from tldr and other superb creators that will help you understand the world around you quickly and easily it's not just the curated news content brought to you directly by us nebula also features loads of exclusive original content that's things that real life Law's brand new series War Room which every month runs you through a whole load of ongoing conflicts to keep you in the loop you can also watch every TDR video on nebula ad free and in many instances before they land on YouTube now if you're already subscribed to nebula then you can find the brand new nebula news section at nebula.
