NEW BRUNSWICK, New Jersey — The South American mineral-rich nation of Guyana has a sizeable land area of approximately 214,969 km2, with a population of less than 800,000. The country is home to part of the Amazon forest, as well as an abundance of natural resources such as gold, diamond, aluminum ore, bauxite, sugar and rice. Guyana also boasts a range of climates, with different parts of the country experiencing tropical, hot, humid and moderate conditions, making for a broad scope of potential resource and agricultural cultivation opportunities. With Guyana being predicted to be the world’s next petrostate, we will examine the nation’s economic situation, the discovery of crude oil and leading initiatives and challenges faced in discovering new oil reserves.
The Economic Situation in Guyana
Still, in 2018 Guyana was placed 160th out of 196 economies in the world with a GDP of only $3.88 billion. Additionally, in 2018, the country recorded a trade balance deficit of $2.26 billion. For each $2.21k of exports, there was a recorded $5.12k of imports.
In 2017, more than 36% of the Guyanese population was reported to live below the poverty line, surviving on incomes at or below $1.75 per day, with approximately 20% of the population living in extreme poverty at or below $1.25 per day. Guyana’s poverty is most prevalent amongst its youth, with approximately 47.5% of children aged 16 and below belonging to poverty-stricken families, an indication of an intergenerational poverty cycle. Amongst the rest of the population, more than three of 10 young adults between the ages of 16 and 25 and 24% of persons older than 40 live at or below the poverty line.
Therefore, Guyana has failed to make satisfactory economic gains from its many available natural resources. However, the mainland country has a new and potentially its biggest opportunity to catapult its economic growth and development with ongoing discoveries of large oil reserves by Exxon Mobile and partners. As of October 2020, at least eight billion barrels of recoverable crude oil reserves have been located in the 6.6 million-acre Stabroek off-shore block, making Guyana home to what is being dubbed as “the largest crude oil discovery in recent years,” and potentially the world’s next petrostate.
Crude Oil Discovery
Between 1975 and 2014, multiple oil exploration companies drilled and explored more than 40 wells on and offshore of Guyana and neighbor Suriname. However, these efforts remained futile. Finally, in May 2015, high-quality oil reservoirs of up to 1.4 billion Barrels of Oil Equivalent (BOE) were found.
Since then, an additional 17 more high-quality exploration wells were found, securing at least eight billion BOE of recoverable oil in Guyana’s Stabroek block alone, setting Guyana up as the next petrostate. Some of these wells include the Liza-1, Liza-2, Payara, Liza Deep, Snoek, Turbot, Ranger, Pacora, Longtail, Hammerhead, Pluma, Tilapia, Haimara, Yellowtail, Tripletail and Mako.
- Liza-1: The first discovery of the Stabroek Block, the floating, production, storage and offloading (FPSO) vessel Liza-1 is set to have a capacity of 1.6 billion BOE, producing up to 120,000 barrels each day from its four drilling centers and 17 wells. Completing its first two crude oil exports in 2020, more than one billion barrels have already been exported, securing $60 million in revenue for the mainland country.
- Liza-2: The second phase of the Liza project is set to deliver up to 220,000 barrels of crude oil per day. This project is designed similarly to Liza -1 with six drilling centers and 30 wells. The Liza-2 vessel is set to be in full production by mid-2022.
- The Payara Project: Another pending FPSO, the Payara vessel is expected to produce 220,000 barrels of crude oil per day. Similarly designed to Liza-1 and 2, Payara will begin extraction in 2024.
Additional Economic Growth
Exxon Mobile has designed the “Local Content,” a multi-tier approach to building the Guyanese workforce, supplier capabilities and public service programs. So far, Exxon has already employed and trained more than 1,000 local Guyanese for its operations, as well as opened the “Center for Local Business Development” that has invested more than $60 million in local firms.
Blocks in Development
In a dispute dated back to 1889, Guyana’s neighbor Venezuela staked claims to 40% of Guyanese territory. However, the court settlement favored Guyana. Recently, considering Guyana’s massive oil discovery with the potential to become the next petrostate, and the fall of the Venezuelan economy, the claims have again risen from the Venezuelan government. In 2018, Venezuelan Navy ships were even ordered to intercept seismic vessels working in the Stabroek block.
Poor Political Control and Management
Guyana has experienced great political instability since the discovery of oil in 2015. Leaders have expressed their dissatisfaction with the nation’s deal with Exxon Mobile where they are able to fully cover expenses before taking half of the remaining oil export revenue. With 2020 being the year of Guyanese oil exports, the 2020 mid-year change in government struck conflict in the oil management agreements.
With anticipated production of at least 750,000 daily BOE by 2025, the International Monetary Fund (IMF) has projected growth of 85.6% in Guyana’s GDP in 2020 alone. With such a start and growing resource discoveries, Guyana is set to jump from underdevelopment to abundant riches in upcoming years. Therefore, it is up to the Guyanese government to develop the proper taxation, regulation and environmental controls to ensure the country benefits from these broad oil and energy resources. The actions of the Guyanese government will determine whether Guyana will become the world’s next petrostate.
– Rebecca Harris