By Greg Quinn – OilNOW
I’ve served as a British diplomat in both Guyana and Kazakhstan. There are some interesting lessons to be learnt from comparing and contrasting both countries.
There does not seem to be a natural connection but they both are (and will continue to be) significant oil and gas producers, with troublesome neighbours and technical challenges in producing their oil. They also have similar issues to deal with in protecting the environment and ensuring indigenous groups benefit from oil wealth.
There is, I therefore believe, potential for Guyana to learn lessons from how Kazakhstan has developed its oil industry.
At first glance that might seem a strange comparison. Guyana and Kazakhstan are geographically about half a world apart. Guyana has a population of around 800,000 in a country the size of mainland UK. Kazakhstan has a population of over 19m in a country the size of Western Europe.
Guyana is developing fast. It is particularly (and rightly) eager to build its human capital and people skills. It wants to learn how to avoid the resource curse so many other countries have been affected by. It wants help in developing infrastructure and building what the people need, as well as in developing social and health services.
Kazakhstan has been though a similar journey and, despite being in the oil industry for over 100 years, is still seeking to ensure its population benefits from oil and gas. This shows oil and gas is not an immediate fix to a particular problem and why it is so important to have a long-term strategic plan – and to make sure oil fields are managed in a way that maximises production over the longest period of time.
There may, therefore, be more similarities than you might initially think.
A brief history of oil in Guyana and the current state of play
When Guyana was a British colony there were small-scale oil finds on land. And whilst there was a suspicion there was oil offshore when exploration started in 1950 this was always considered commercially risky. Many big players came and went with no real results to show for their efforts.
It was only in 2015 (after seven years of exploration) that the ExxonMobil-led consortium made an initial find of around 300m barrels of oil equivalent. At that stage it became apparent that there were commercially viable (and significant) offshore fields. I remember thinking at the time that those 300 million barrels were a lot. Little did we know.
Nine years later, Guyana is producing some 645,000 barrels of oil per day (bpd) with confirmed reserves of over 11bn barrels of oil equivalent. Production is expected to grow to 1.2m bpd by 2027 when the sixth offshore oil project (Whiptail) goes into operation. Meanwhile, it seems it is harder for the Exxon consortium (and other explorers) to drill a dry hole than a potentially commercial one.
A brief history of oil in Kazakhstan and current state of play
Oil was first discovered in Kazakhstan in 1899 although production is deemed to have truly started in 1911 when the Dossor Field in Atyrau Oblast was developed by English businessmen.
Production plateaued in the 1960s and 1970s at around 500,000 bpd due to the highly technical challenge of developing deep, high-pressure reserves. This changed in the 1990s when the collapse of the Soviet Union led to Western international oil companies moving into Kazakhstan. Crude oil production was around 1.45m bpd in 2022. In comparison Canada produced 1.23m bpd; Iraq 4.28m bpd; Nigeria 1.27m bpd; Norway 1.69m bpd; the US 11.89m bpd; the UK 723,000 bpd, and Venezuela 730,000 bpd.
As a landlocked country, most of Kazakhstan’s oil is shipped via pipelines or by rail and sea.
The technical challenges of developing Kazakh oil are shown by the Kashagan field in the Caspian Sea. The reserves are about 13,000ft below the seabed at a pressure of 770lbs psi and are high in corrosive (and dangerous) hydrogen sulphide. In addition, producing oil in a variable weather environment creates additional challenges.
How such challenges have been addressed means there is much to be gained from sharing experiences between both countries. Kazakhstan has also had to deal with significant environmental issues (it was the testing ground for much of the Soviet Union’s nuclear weapons and suffers the environmental consequences of that) and also needs to address issues around corporate social responsibility, including ensuring that all parts of society (including how Nomadic tribes, possibly comparable with Amerindians in Guyana) benefit from oil wealth.
Developing oil in the shadow of a noisy neighbour
Similarities also exist between Guyana and Kazakhstan in that they are (or have) developed oil in the face of a troublesome neighbour. In Guyana’s case this is, of course, Venezuela. In Kazakhstan, a former part of the Soviet Union, that is Russia.
In many ways, you cannot compare Venezuela (with its unfounded claim on two-thirds of Guyanese territory) with Russia who have no similar claims on Kazakhstan. Indeed, relations between the two countries are cordial. But the reality is that Kazakhstan will have faced pressure in terms of having to transit oil and gas through Russia and having to listen to the views of Russia. They have walked a delicate line between Russia and the West. They therefore understand the problems of a troublesome neighbour determined to impose its views, no matter how unrealistic and unacceptable they may be.
Lessons for Guyana from Kazakhstan
There are other lessons to be learned. Kazakhstan’s Sovereign Wealth Fund – Samruk Kazyna – is worth over US$70bn. It came into being in October 2008 and is focused on enhancing the competitiveness and sustainability of the national economy as well as preventing and addressing any negative impacts on economic growth of changes in world markets.
Samruk-Kazyna has historically played a leading role in easing the impact of global banking crises and other economic shocks and has helped reduce (if not avoid) how hard such shocks have hit the Kazakh economy.
As a Sovereign Wealth Fund, Samruk-Kazyna has therefore had some significant success. However, it has also faced challenges and has, in the not too distant past, faced reorganisation following protests against falling domestic living standards and the need to address claims of corruption and nepotism.
All Sovereign Wealth Funds have their pros and cons. Considering a wide variety of such funds (and how they operate) from across the globe – including Kazakhstan – will provide a cross-sector panel of evidence which will help Guyana as it develops and models its Natural Resources Fund. No one fund is perfect, and it would be wrong to rely on any one specific fund as a model.
Kazakhstan also implemented a strict local content law in December 2009 which put a high burden on oil and gas companies and on any contracts they may undertake. There was much grumbling about this law, but companies have knuckled down and worked with it. There are many benefits for the local populace. Guyana should consider the impact and implementation of this law as it, rightly, puts in place its own local content provisions. Any company will understand the importance of local content laws but at the same time they should be realistic and proportionate and, in certain circumstances where some jobs are highly technical, for example, to allow appropriate time for local skills to be developed.
Finally, a Kazakh Subsoil Oil Law also establishes the government’s right to pre-empt any sale of oil and gas assets. This was used in 2013 when Kazakhstan pre-empted ConocoPhillips’ sale of its 8.4 per cent stake in the Kasagan Field to India’s Oil and Natural Gas Corporation. Kazakhstan ended up purchasing this stake (at no loss to ConocoPhillips) before selling it on to CNOOC (China National Oil Corporation). Whether, and when, Guyana should consider a similar law is open to debate.
There is therefore a range of potential lessons for Guyana from how a large country with a small population, with highly technical and complex reserves, ensures the country benefits from oil wealth.
A positive picture for Guyana
No one country has all the answers for Guyana. Many have something to contribute. I helped ensure links to Britain’s Oil Dorado – Aberdeen in Scotland – when I was High Commissioner. These links continue to pay off and I encourage them to continue. Canada and others also have relevant experience. But Kazakhstan is in a unique position and one where there are similarities to Guyana. Learning from them has many potential upsides for Guyana.
Taking these lessons on board is vital to ensure oil and gas is the blessing Guyana so deserves and not the curse which has affected others. I remain whole-heartedly positive about the direction of travel in Guyana and have actively disagreed with many naysayers, but things cannot be taken for granted and effort is required. There can, and must, be no assumption of success. There needs to be constant effort, long-term thinking, and a strategic plan if success is to be guaranteed. That will take effort and commitment – on the part of the government, local business, international oil companies and support businesses, and civil society. It is incumbent on all those groups to work together to ensure that success.
Guyana has a once-in-many-lifetimes opportunity. It must not miss it.
About the Author
Greg Quinn OBE is a former British diplomat who was High Commissioner to Guyana and Non-Resident Ambassador to Suriname from 2015-2020. He also spent 2012-2014 in Kazakhstan as Deputy Ambassador. He now runs Aodhan Consultancy. This piece is extracted from the 7th edition of Oil Dorado, edited by John Mair, which will be published in December 2024.
