Recent Atlantic offshore oil discoveries have promised to generate an economic boom for Guyana and its’ citizens, the Extractive Industries Transparency Initiative (EITI) said, pointing out that mainly left unexplored until 2015, the nation is now on the brink of becoming one of the world’s largest oil reserve holders and the 2nd largest in South America.
Since its first world-class discovery in 2015, ExxonMobil has made over 22 discoveries at the prolific Stabroek Block, hitting just three non-commercial wells.
“Exploration results have revealed an unprecedented success rate of over 80% with estimated gross recoverable resources at over 13.6 billion barrels of oil and gas,” EITI said, pegging the discovered resources above the latest estimate put out by Exxon of 10 billion barrels of oil equivalent. This places the South American country in the top 20 list of nations for oil reserves.
“This is higher than the Sudan and India who are currently major global players in the production of oil and gas,” EITI said in an overview of the country’s oil and gas operations. The transparency body said the oil and gas sector would almost double Guyana’s GDP and would contribute to almost half of the total economy by 2030 (IMF 2018).
“This has a strong impact on fiscal revenues that are generated through taxes and royalties,” EITI said.
The country has received well over US$430 million to date from the sale of its share of Liza Crude and natural resources minister Vickram Bharrat has said this could hit US$600 million by year end.
Currently, there are 11 major oil and gas companies such as ExxonMobil operating in the region as well as countless junior players. These companies (Majors and Juniors) represent Canada (CGX), France, China (CNOOC), Africa (Tullow), United Kingdom, United States (Anadarko-Exxon), Israel (Ratio Oil), and Spain (Repsol). Drilling is focused on 8 key blocks each operated by an international company with local affiliates.
The World Bank has estimated that export revenues at US$54/barrel from these initial projects could be around US$72.8. billion and that government revenues could reach around US$45.4 billion over the life span of the projects (or an average of around US$2.1 billion/year). Putting this into perspective it means that Guyana’s total government revenues which were US$0.9 billion in 2017 would see an exponential growth.
EITI said oil and gas will become major economic drivers for the country if managed in a sustainable and transparent manner.
“Afterall a well-managed sector can bring about benefits to all citizens and encourage downstream investment and development,” the transparency group said, pointing out that with such a bounty of wealth Guyana is vulnerable to corruption and the “natural resource curse” (often referred to as “Dutch Disease”). This wealth has seen many resource-rich countries fall victim to mismanagement of wealth, resulting in poor development outcomes and economic growth.
“The Government of Guyana is cognizant of these challenges and recognizes that there needs to be responsive legal, regulatory, and policy framework as well as institutional reform. It has taken positive steps by joining the New Petroleum Producers Group (NPPG), through the Chatham House,” EITI stated.
The NPPG provides voluntary guidance and transparency requirements to help countries manage their commodity wealth in a sound and sustainable manner. This has helped establish Guyana’s Natural Resource Fund. The Government of Guyana has been a participating member since 2018 and is currently an Associate member. It has also instituted the Guyana Extractives Industry Transparency Initiative (GYEITI) which plays an important role in assuring that challenges are addressed and that mechanisms are implemented to improve sector transparency and accountability.