[picture: Guyana Petroleum Management Programme website]
[This article was written for the Round Table website. Views expressed in articles do not reflect the position of the Round Table editorial board.]
When Sir Walter Raleigh sought – twice – the mythical City of Gold in Guiana in 1595, little could he have imagined that it would come true but in the form of offshore (Black) Gold – oil – nearly half a millennium later. Guyana today is the new Oil Dorado.
The figures are staggering. Five and a half years after the ‘first oil’ in 2019, the Guyanese economy is growing at the rate of 53% a year: surely the fastest in the Commonwealth.
Oil is gushing from under the Atlantic Ocean into floating oil refineries and off to the market at the rate of 600,000 barrels a day today, and up to a million by 2027. More than one barrel of oil per person per day. Total declared reserves are 11 billion barrels from the current Stabroek field – but that is certainly an underestimate.
Licenses have been granted by Guyana and there is even more oil offshore in Suriname, perhaps up to 25 billion barrels in the Basin. No wonder companies and countries are flocking from all over the world for a piece of the action.
The Commonwealth and Oil Dorado
They include at least three other Commonwealth petro-states: Trinidad, which has run out of oil after a century, Ghana and Nigeria, all keen to lend expertise and share in the boom. The African states bring their own huge finance and corruption problems, with feasting mini-colonies of oil lawyers.
Guyana has much to learn – good and bad – from them.
The Commonwealth as a body has steadfastly backed Guyana and the ICJ [International Court of Justice] process to resolve the long running border dispute with Venezuela. Last December, when tensions were mounting between the nations, the Commonwealth Guyana Monitoring Group issued a statement declaring support for ‘the maintenance and preservation of the sovereignty and territorial integrity of Guyana, its right to self-defence and the unobstructed exercise of its rights to develop the entirety of its territory for the benefit of its people’. What it would offer practically, is rather more opaque.
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Who benefits?
It turns out Guyanese oil is very profitable. Its sweet Brent crude costs less than half the current world price, and is easy to find. The Stabroek field has a 90% hit rate for new wells, compared to a global average of 20%.
The beneficiaries are mainly the original investing companies: two American, Exxon Mobil and Hess (which Chevron is bidding to take over), and the Chinese National Oil Corporation.
Guyana’s own benefits are constrained within limited parameters. In 2016 the previous government negotiated a rather lop-sided production sharing agreement. This was based on a low 2% royalty rate (the world average is about 10%) and 50% of net profits once historic and current costs are subtracted. Big Oil specializes in reducing the profits of others.
Some of that revenue lands ashore and goes in and out of a sovereign wealth fund – the so-called Natural Resource Fund, which has a current balance of around US $2 billion. However, the present government uses the NRF rather like a piggy bank to spend now on roads, bridges, houses and airports.
There is an election coming up in 2025 and this may well become an issue. In my view, such short-termism is bound to bite future generations of Guyanese.
Eye on the Commonwealth columns
The ghost Maduro
This year, though, the election that matters is the one in neighbouring Venezuela due at the end of July 2024. ‘Socialist’ dictator Nicholas Maduro is determined to win that at all costs. He is not known for his love of democracy. Part of his ‘populist’ strategy has been to renew a 120-year-old claim by the Bolivar republic to half of Guyana and its biggest oilfield. The claim has been in and out of arbitration and is currently at the International Court of Justice. Maduro does or does not recognize the ICJ remit, according to whim.
Venezuela itself has the world’s biggest reserves of oil, but is unable to sell except to Russia and Cuba due to strict US sanctions, thereby impoverishing Venezuela. Maduro won a ‘referendum’ to garner popular support for his territorial expansion plan in December 2023.
His armed forces – thanks to Russian backing – are one hundred times the size of Guyana’s. As such, any war between them might last a day or two.
Guyana’s friends
Guyana does have big country support from the USA, regularly sending its Secretaries of State, Mike Pompeo and Anthony Blinken, and CIA Director William J Burns, to visit, backed by pacts and military flyovers.
The UK sent a frigate for a ‘friendly visit’ in December 2023 and a junior Government minister. France too weighed in with a frigate visit of their own earlier this year. Sir Tony Blair is a regular visitor. New UK Foreign Secretary David Lammy is of Guyanese origin and also regular visitor to his ‘homeland’.
There is currently a stasis, negotiated by Caribbean and South American countries and signed in St Vincent in December. Many are clearly conflicted: Trinidad is developing a gas field with Maduro, while small islands like St Vincent benefit from cheap oil under Petrobras from the Bolivar Republic.
The future
The tinder though could be lit at any time.
For now, Oil Dorado is thriving and ‘Drill, drill, drill’ is the current PPP government’s mantra. They are working on the basis of 20 years’ of oil prosperity before the world turns, finally, against oil.
Meanwhile, the government will use the proceeds to industrialize the country using much cheaper electricity thanks to bringing the gas onshore from the oil fields and converting it to power, ammonia and more.
Guyana used to be the ‘bread basket of the Caribbean’, providing sugar and much else. Thanks to the new Black Gold, it is aiming to reclaim that title and might provide future food security to the region.
This could be Sir Walter Raleigh’s Oil Dorado. But the Commonwealth needs to stand by to help one of its own if the threats from its autocratic neighbour turn real.
John Mair is co-editor of Oil Dorado? Guyana’s Black Gold, first published in 2019 and due to go into its seventh edition in 2025. He was born in British Guiana before settling in the UK.
