Political uncertainty in Guyana will have a limited impact on the ongoing oil and gas development projects in the South American country although the oil price rout and fall in global oil and gas investments could delay exploration and appraisal projects. This is the view of UK-based Fitch Solutions, a provider of credit, debt market, and macro intelligence information and the primary distributor of Fitch Ratings content.
“In our view, the elevated electoral uncertainty in Guyana will not impact the ongoing development projects carried out by ExxonMobil to the great extent given low risk of potential changes to contracts between the government and the company,” Fitch Solutions said in a report seen by OilNOW. “It appears as if the opposition People’s Progressive Party (PPP) won the most votes in the March election, though the ruling A Partnership for National Unity [+AFC] has yet to concede defeat.”
Fitch said a PPP government may weigh on investor sentiment “given the party’s more confrontational stance toward oil and gas companies operating in the offshore blocks” as compared to the incumbent coalition party. “According to the announcements, the potential renegotiations would exclude contracts between the government and ExxonMobil-led consortium and would impact other IOCs,” Fitch stated.
Turning its attention to neighbouring Suriname, Fitch said the opposition, which has won that country’s election, has vowed to encourage oil investments; “however, at the time of writing there are limited details on the potential regulations that would incentivise oil and gas companies.”
Overall, the political uncertainty is likely to have limited impact on the investment in the frontier markets, Fitch stressed. “However, the oil price rout and substantial capex cuts among IOCs pose significant risks to exploration and development projects globally. Given that in both Guyana and Suriname, the exploration programmes of a number of companies is at early stages or has not commenced yet, IOCs could postpone investments there, channelling spending on the low-cost, high reward operating assets to support revenue stream in times of lower oil prices.”
In a July 13 report, OilNOW outlined crucial aspects of Guyana’s oil and gas development which have been placed on the back burner as a result of political uncertainty. These include operationalization of committees for the Natural Resources Fund, transparency initiatives, and development of key legislation to pave the way for the award of new blocks.
A more than 4-month delay in elections results has thrown the country of just over 750,000 people into a state of uncertainty and is contributing to the delay in government approvals for oil development projects. Norway-based energy research and business intelligence company Rystad Energy has said project approval delays for the Payara development have already removed more than 50 million barrels in production that could have been achieved if the project had been sanctioned in 2019.