The vast oil fields which have been discovered off the coast of Guyana by ExxonMobil continue to boost the economic outlook of the country even in light of an imminent global recession and growing domestic challenges triggered by political uncertainty.
The World Bank in a report this week said the Latin American and Caribbean region would register a sharp fall of 4.6% this year but noted that Guyana is expected to grow by 51.7% despite the onset of severe economic upheaval due to the impact of the COVID-19 pandemic.
The International Monetary Fund (IMF) has revised Guyana’s Real Gross Domestic Product (GDP) for 2020 to 52.8%, down from a high of 86%, but still way ahead of countries in the region and around the world as global growth is now projected at -3.0% in 2020. The IMF says this is an outcome far worse than during the 2009 global financial crisis.
The vast oil resources that lie beneath the Atlantic Ocean offshore Guyana continue to play an integral role in the country’s economic outlook. Even as the oil industry buckle under enormous strain from a price war and falling global demand triggered by the pandemic, production continues in earnest at the 6.6 million acres Stabroek Block.
The resilience of the ExxonMobil-led consortium in maintaining operational capacity in Guyana as the company and its co-venurers Hess and CNOOC slash spending in response to low commodity prices means that revenues will continue to flow to the country.
For global projects already in the development pipeline, only those companies with the strongest balance sheets — the oil majors — will even consider making Final Investment Decisions, according to analysts with Wood Mackenzie.
“Projects with financially stretched partners and at the higher end of the cost curve will struggle,” Wood Mackenzie said in an April 2 research note, adding that “advantaged deepwater oil” in regions such as Guyana will move ahead.
The World Bank says while the oil resources continue to have immense potential to transform Guyana, there are risks as illustrated by the still incomplete election outcome as well as the COVID-19 pandemic.
According to the Inter-American Development Bank, the ongoing political dispute over the election results hinders the design and implementation of an adequate fiscal policy response to COVID-19 and the country’s access to the recently created Natural Resource Fund.
Schreiner Parker, vice president for Latin America at Rystad Energy, says “if you take the political mess out of this, Guyana is still a very attractive base.”
It therefore remains in Guyana’s best interest to quickly resolve its elections controversy particularly since the threat of sanctions from the United States and isolation from western powers could see the country’s prospects taking a turn for the worse.
What remains working in the country’s favour is the production of crude and the positive spin-off effects the offshore operations continue to have on its economy.