(Forbes) As the tiny nation of Guyana sends off its first tanker full of crude, the world welcomes a newcomer to the ranks of high volume oil producers.
With fresh discoveries this month off small nearby countries, this small stretch of Atlantic Coast between Venezuela and Brazil seems likely to soon become one of the world’s newest oil producing regions.
ExxonMobil, the first driller to develop Guyana’s offshore block, has begun pumping the first phase of its projects with daily output of about 120,000 barrels. It expects up to 750,000 per day on multiple phases by 2025, putting this single project above the daily output of India.
Analysts expect there is more to come here off the northeastern coast of South America. Earlier this month, Apache Corp. and Total SA claimed a major discovery off neighboring Suriname.
“Recent deepwater discoveries in Suriname increase the possibility that these recent ExxonMobil finds are just scratching the surface of the region’s potential,” said Mat Youkee, a freelance analyst who spent recent weeks reporting from Guyana.
Tullow Oil also announced a discovery off Guyana this year but found it smaller than initially expected.
Still, Youkee said, drillers are combing the seafloor in search of more likely finds.
Unlike in neighboring Venezuela, rich with heavy crude, the fields off the Guyanese shore hold light crude which fetches more at market.
“The quality of crude is highly desirable,” said Anas Alhajji, an energy expert in Dallas and former Chief Economist at NPG Energy Capital. “It does not compete with Venezuela crude nor with shale.”
All that light crude brings to impoverished Guyana hopes of tremendous economic growth in the years ahead. The International Monetary Fund forecasts 85.6 percent GDP growth in the small nation in the small country of 785,000 people this year.
That influx of wealth is sure to bring upheaval in Guyanese society. The oil contracts have already become a central issue ahead of presidential elections in March, with one popular candidate denouncing the oil contracts as unfair to the country and calling for renegotiation of terms with ExxonMobil.
Alhajji said, “The history of poor developing countries that get suddenly rich from exploitation of natural resources tell us about only two bad scenarios: political instability or dictatorship.”
Youkee, however, said there may be cause for optimism.
For one, all Guyanese production will, for now, take place offshore, with floating vessels loading crude straight from the wells and carrying it to refineries in the US. That will waive the need for more intrusive presence and facilities on the Guyanese shore, though it remains unclear what impact that will have on the industry dynamic.
Moreover, the Guyanese government has taken the opportunity to establish a sovereign wealth fund and a green development plan to make public use of incoming oil funds.
Youkee said, “The current government has taken good measures in that respect which other countries haven’t done in the past.”