Guyana set to become the Region’s new Economic Giant
Earlier this week at an Energy Chamber Conference being held in Port of Spain, Guyana’s Minister of Natural Resources, Mr. Raphael Trotman made the startling revelation that a massive offshore column of oil, which may hold 700 million barrels or more was discovered by Exxon Mobil.
Up to this point, Guyana was a poor nation saddled with a sizable external debt with which it has been struggling. It is still relatively under-developed with over 80% of its land area still under forests. Its GDP has remained positive through the export of: Rice, Sugar, Gold, Timber, Bauxite, Diamonds, Shrimp and Minerals.
As news of this new oil find started to spread last year, Venezuela revived an old boarder dispute with Guyana.
This dispute dates back to 1895 where it became a crisis. Venezuela had a longstanding contention with the United Kingdom about the territory of Essequibo and Guyana Esequiba, which Britain claimed as part of British Guyana and Venezuela saw as Venezuelan territory. As the dispute became a crisis, the key issue became Britain’s refusal to include in the proposed international arbitration the territory east of the “Schomburgk Line”, which a surveyor had drawn half a century earlier as a boundary between Venezuela and the former Dutch territory of British Guyana. The crisis ultimately saw Britain accept the United States’ intervention in the dispute to force arbitration of the entire disputed territory, and tacitly accept the United States’ right to intervene under the Monroe Doctrine. A tribunal convened in Paris in 1898 to decide the matter, and in 1899 awarded the bulk of the disputed territory to British Guyana.
In 2015, Venezuela openly coveted much of Guyana’s territory and began to amass forces along the boarder as it wanted to claim this oil discovery as its own. As long as Guyana remained poor and backward, Venezuela had little reason to risk international condemnation by annexing part of a sovereign rival. The new oil find however made Venezuelan President Nicholas Maduro vocal about Guyana’s oil belonging to Venezuela.
Furthermore, with Venezuela’s own oil production declining slowly since its ill-thought-out seizure of various corporate assets years earlier (including significant seizures from Exxon Mobil), Guyana’s new find could help offset what Venezuela is losing in production declines. Maduro needs all the advantages he can get as oil prices have wracked Venezuela’s economy, and the socialist model trumpeted by Chavez has only led to national decay and rampant inflation. Against this backdrop, in December Maduro and his party lost their majority in Venezuela’s legislature for the first time in 17 years.
Maduro needs any popularity boost he can get. One way to aid that popularity would be a military action against smaller and weaker Guyana. It’s almost inconceivable that Guyana could resist a military incursion by Venezuela, and while Maduro has ruled out using military force, it’s certainly within the realm of possibility that that could change in the future. Venezuela would face some international condemnation for a military action, of course. However, unlike in the past, Maduro now has the approximately US$40 billion value of Exxon’s discovery to put into the equation. So far it has been reported that Venezuela has terminated the importation of rice from Guyana.
Provided that all continues to remains calm, the royalties from this oil find will dwarf Guyana’s roughly $3 billion gross domestic product. The windfall of these royalties as it enters the energy industry, in spite of the present low oil prices, will dramatically transform this nation. For a country of less than a million people, the find changes everything. Within a decade Guyana could be completely upgraded by the find, going from unpaved roads and sporadic power to being a developed nation.
The table below shows roughly how T&T presently stacks up to Guyana
|Population||GDP per capita
|Guyana||83,000||0.75 million||US$8,000||700 million|
|Trinidad & Tobago||1,980||1.35 million|| US$20,400
| 728 million
Guyana will become a significant oil exporter, and Exxon’s proven reserves and production will be greatly bolstered. Guyana’s GDP is therefore expected to rise sharply, and may be the highest in the Caribbean. This is the type of find that also helps bolster the beleaguered offshore drilling industry which has been hammered first by an oversupply of capacity, and then by a glut of oil.
The Stena Carron drillship is on its way to Guyana where it is expected to drill several wells for US oil company Exxon Mobil in the coming weeks. Tracking services showed that the ship, owned by Stena Drilling, a UK company, departed the Canary Islands on Tuesday and is expected to arrive here later this month. According to information on the company’s website, the Stena Carron is a Harsh Environment dynamically positioned DP Class 3 drillship capable of drilling in water depths up to 10,000 feet.
Apart from the potential threat from Venezuela, only corruption and wastage can hinder Guyana’s now very bright and prosperous future. With continued prudent management a very much transformed Guyana will be showcased in the coming years. Mr. Trotman has indicated that where possible, expertise from T&T will be used to accelerate their development plans.