Guyana’s good fortune in striking oil is among the most compelling business stories in the Caribbean today, not just for the dynamism it promises to bring to the nation’s economy, but for its potential to completely transform the country. As we’ve detailed prior at STAR Businessweek, this transition won’t be easy, owing to numerous competing interests that threaten to place barriers in the path of national progress.
It was always understood by advocates and critics alike that just as it took many years for the nation’s oil to be discovered, there would be many twists and turns as the shift from oil discovery to output began. So how has Guyana fared in the past year? And what is the forecast for its future?
How We Got Here
As of September 2019 it is estimated that Guyana has more than US$ 6bn worth of oil-equivalent barrels within the Stabroek Block. ExxonMobil commenced oil and gas operations in 2008. The Liza-1 well discovery was announced in May 2015, with many other major finds subsequently. The Longtail-1 well in June 2018, the Hammerhead-1 in August 2018 and the Tilapia-1 in January 2019 have added to the stockpile. Now exploration is set to continue, with ExxonMobil moving on from its recent drilling at Tripletail, and searching for reserves in the Uaru-1 well, 10kms east of the Liza Field. The government has also since signed a number of other oil contracts alongside its deal with ExxonMobil.
Where to Now?
The current excitement of the Guyanese people is tempered by a difficult truth – that converting oil reserves into clear-cut financial benefits won’t be easy, especially while balancing competing national interests.
In his 2019 budget speech, Minister of Finance Winston D. Jordan outlined his government’s vision, saying, “Discovery of very significant oil reserves has put Guyana at a critical point in its history, providing us with the opportunity to shift our development path, modernize our economy and transform the lives of our citizens.” Further: “We [Guyanese] are poised for rapid economic expansion, and our government is committed to pursuing economic and social policies conducive to equitable, sustainable and environmentally-friendly growth.”
Jordan flagged the upgrade of road, airport and telecommunications as key priorities in the short term; beyond that, greater investment in education and health. Thereafter, the aspiration to see the newfound wealth from the oil flow down to the Guyanese most in need.
Guyana’s sudden shift from being among the least affluent nations in the Caribbean to predictions it could become one of the richest nations in the world, means there’s an opportunity in the decade ahead to undergo a substantial nation-building project. This is something the Guyanese leaders feel they can and must do if they are to properly seize the opportunities the oil finds have presented, but the past year has proved a rocky beginning to Guyana as a major oil-producing nation.
The Crisis of the Governing Class
Although there is oil and a promising future for Guyana, undoubtedly the nation’s governing class did itself few favours in advancing it over a past year that was replete with political upheaval. The undercurrent of this issue is that the injection of such substantial revenue into the nation means the risk grows that political instability today will generate more woe tomorrow.
June 2019 saw a landmark ruling made in the Caribbean Court of Justice surrounding an appeal to the CCJ after a vote of no-confidence in Guyana’s House of Assembly during December 2018. This appeal followed Guyana missing a legal deadline for elections to occur in March 2019; elections are now set for March 2020. The battle lines for this contest are drawn between the People’s National Congress and the People’s Progressive Party, with the latter flagging a number of oil contracts signed after the ExxonMobil one may come up for review, if it is in government after the election.
Many Guyanese now look back on the contract first formed in 1999 between ExxonMobil and the government – and subsequently modified in October 2016 – as a missed opportunity to negotiate a better deal. Even without any attempt to reopen or renegotiate the deal by the government, ExxonMobil must brace for a tough reception, with a Guyanese government in 2020 intent on seeing the contract performed strictly through every single barrel. There could also be consequences for Guyana’s governing class too. With political instability comes unpredictability; although the nation is an attractive market right now, it’s not invulnerable to competition from elsewhere.
At Home and Abroad
Beyond the domestic turmoil Guyana has encountered, the past year has seen complications arise in its foreign affairs. Some of these could be potentially beneficial. Venezuelan National Assembly speaker and disputed president Juan Guiado has won attention from Venuezelan prosecutors after allegedly negotiating to renounce Venezuela’s claim to the disputed territory. Whether this actually occurred, or Guiado would follow through with a sale upon becoming the unquestioned leader of the nation, is unclear but it creates a new calculation for Guyana in the future relationship between Georgetown and Caracas.
There’s also the matter of climate change. The Guyanese governing class know that in the short term they have strong prospects of growing their oil output while positioning themselves as climate activists, and certainly Guyana isn’t alone in this arena. Canada, under the recently re-elected leadership of Justin Trudeau, has staked a claim as an international leader on climate action, while nonetheless signing up for a US$ 3.45bn tar sands pipeline. A decade from now, when the consequences of climate change in the region could grow even worse and action become far more urgent, Guyana could increasingly find that its oil industry becomes a foreign affairs liability, especially in regional relationships.
