Investors like stability and predictability. Knowing what to expect in the future forms the basis for multimillion-dollar investments in the present, or alternatively, taking those resources to another more favourable destination.
In an article published in Forbes on July 2, it was explained how a lack of predictability, even in the United States, saw the loss of billions of dollars in investment in the US Gulf of Mexico. Predictability, particularly in the realm of government regulation made the Gulf an attractive investment destination. Knowing that the geology beneath the waters was resource-rich, the willingness of companies both large and small to risk millions – and often billions – of dollars in that province was enhanced by their knowledge that they knew what the oversight on their operations would look like for the duration of their projects.
The article went on to explain that the predictability started to shift with the advent of the Obama Administration, which immediately went about seeking major changes to the offshore regulatory structure. The Gulf of Mexico began losing a part of its previous luster as an attractive venue for making major bets, causing new investment and production to plummet.
Multiple offshore discoveries made by ExxonMobil at Guyana’s Stabroek Block since 2015 have served to derisk the basin causing investors to look favourably at this frontier where dozens of wells were previously drilled with no commercial discovery.
But these bets are based on political stability and the ability to plan long-term knowing that the framework on which investments are made are likely to remain constant in the future. Guyana’s political environment has been fraught with uncertainty since the passage of a no confidence motion against the incumbent APNU-AFC coalition in 2018. This environment worsened after the March 2, 2020 elections and now, over four months later with no results, the uncertainty is at an all-time high which in part is contributing to delays in project approvals.
“There is economic detriment to not be able to sanction projects and results in loss of revenue for the operator, but also for the host Government,” Schreiner Parker, Rystad Energy’s Vice President for Latin America and the Caribbean, told OilNOW in a recent interview.
Former Trinidad and Tobago Energy Minister, Kevin Ramnarine says the situation unfolding in Guyana is very unfortunate given that hitherto, project sanction for Liza 1 and Liza 2 was in keeping with expected timelines.
“The situation in Guyana is worrying for all Guyanese, the Caribbean Community and it must be worrying for ExxonMobil, Hess and CNOOC. Political instability increases the risk profile of a country and leads to loss of investment. Capital flows to where it is most efficiently utilized,” Ramnarine said in an OilNOW column in May.
And Guyana is not the only game in town. Recent twin discoveries offshore Suriname are now serving to open up that country’s deepwater. Interest is growing from a range of multi-nationals including Exxon and Total. An election held in Suriname at the end of May, over two months after Guyana went to the polls, is already concluded and that country will be moving to form its next government.
“Wouldn’t it be a crying shame if they hold free, fair and credible elections in a short period of time? With no need for broadsheets, bashing of Observers, and disappearing SOPs?” Nicholas Deygoo-Boyer, President of the Georgetown Chamber of Commerce and Industry in Guyana asked of Suriname, just before its elections.
And so, it did, leaving Guyana behind in a growing cloud of uncertainty.
Recognising the competition for investment Suriname offshore now presents for Guyana, Deygoo-Boyer said it is a stark reminder that “while we fight tooth and nail over perceived spoils, the world is moving on, even without us if we don’t get our act together.”
This week Guyana has another opportunity to pick up the pieces and move on. The Caribbean Court of Justice will pronounce today – July 8 – on elections related matters before it. This could pave the way for the Guyana Elections Commission to declare a winner so that the country, as everyone has been hoping, can finally ‘get on with it’.