The International Monetary Fund, World Bank, and several other institutions, analysts and experts have all placed Guyana on the road to rapid economic growth and transformation fueled by the massive oil resources discovered by ExxonMobil off the country’s coast since 2015. With the start of oil production in December and the announcement in January of the 16th oil discovery, the small South American country seemed well on its way to prosperity, with some even predicting that it could become the ‘new Qatar’.
Then an unexpected chain of domestic events and a global pandemic alongside an oil price war unfolded, causing many to relook at the country’s prospects with much apprehension.
But all is not lost, at least on the global front regarding the future prospects of the oil and gas industry. Where Guyana will face its hardest challenge is right at home where decisions have to be made that will either see the country emerge as a growing democracy or isolated by the international community.
O&G Global Outlook
The outbreak of the COVID-19 disease has crippled oil demand causing prices to plummet and companies to cut spending and lay off hundreds of thousands of workers.
“Low oil prices are likely to persist in 2021 and could lead to further workforce reductions. But as we move into the second half of 2021, with better market fundamentals and a fading COVID-19, recruitment is likely to pick up in the shale sector and from 2022 will also kick-off in the offshore sector,” says Audun Martinsen, Rystad Energy’s Head of Oilfield Service Research.
Dr. Dean Foreman, Chief Economist at the American Petroleum Institute (API), said despite the current unfavourable market conditions, there is a silver lining.
“The long-run will be resilient under almost any scenario…Take solace in the fact that the global demand for energy is continuing to grow along with the economy, and the global economy will continue to rebound from this,” he said.
Even before the coronavirus appeared, non-OPEC nations including Guyana were expected to contribute a total of 2.5 million barrels per day of new oil supplies in 2020.
“Silver linings that have reinforced market resilience include low prices helping consumers globally; global central bank coordination to stabilize the economy; new U.S. trade agreements with China, Mexico and Canada; and, IMO 2020 regulatory changes since January 1 that have been smooth,” Dr. Foreman pointed out.
A closely contested election to determine who will control Guyana’s oil riches was held on March 2. A multitude of issues regarding the verification of votes by the Guyana Elections Commission (GECOM) for the country’s largest district – Region 4 – has stalled the final declaration of a winner and the swearing in of the President.
A total of 11 political parties, including the incumbent APNU+AFC coalition contested the elections. All the parties, except the incumbent, along with local and international observers have said the tabulation of votes for Region 4 lack transparency and as such the results cannot be credible. Stakeholders accuse Regional Officer for Region 4, Clairmont Mingo – the person responsible for tabulating the votes – of using bogus figures in an effort to arrive at a declaration that favoured the incumbent APNU+AFC coalition party.
President David Granger and coalition party officials have maintained that GECOM is an independent body and they have not interfered with the organisation to influence the outcome of the election.
While regional body CARICOM attempted to supervise a full recount of the votes, a candidate in the coalition party moved to the court to have this blocked.
Several countries including the United States have said any government installed in the absence of a transparent process would be illegitimate and subject to consequences, signaling potential sanctions.
As recent as Thursday the United States summoned Guyana’s Ambassador to the US to make clear its position that it will not recognise a Government which is sworn in using flawed elections results.
“On behalf of the US Government, today I summoned #Guyana Ambassador to the US Riyad Insanally to convey our firm position that any government sworn in based on flawed election results would not be legitimate. Every vote must be counted,” Michael G. Kozak, Acting Assistant Secretary for U.S. Department of State’s Bureau of Western Hemisphere Affairs said.
Mauricio Cárdenas, visiting senior research scholar at the Center on Global Energy Policy at Columbia University points out that low prices and political instability will probably delay investment plans by oil companies operating in Guyana. He said this will result “in lower GDP growth relative to the expected figure of 85 percent, which would have made this very small country the fastest growing in the world this year.”
So far, the COVID-19 global pandemic and domestic political instability have not adversely impacted offshore operations, with oil production continuing on target. While a prolonged shut down as a result of the disease could eventually affect oil operations, it is Guyana’s political instability that poses the gravest threat to the country’s future.