By some estimates, Guyana is sitting on hundreds of billions of dollars worth of crude oil after Exxon Mobil made one of the largest crude oil discoveries of the decade in its waters in 2015. A series of subsequent discoveries have been made leading to a 2020 assessment that estimates a total reserve of some 8 billion barrels of oil equivalent .
Unsurprisingly, a discovery of this size has got the attention of numerous stakeholders. Not least Venezuela, which has a long-standing border dispute with Guyana over the Essequibo region and now contests that the concession is located in disputed waters.
Another source of contention was the sweet-heart deal that Exxon managed to secure with Guyana which some NGO’s and activists have branded as unfair and exploitative. This was a major issue at the country’s recent elections, but with a new majority government in power for the next few years, should Exxon still be concerned?
Our sources do not see any renegotiation on the short term, the general view is that Guyana needs to strengthen its hand first. At present, there is an extremely limited pool of local industry knowledge, no educational frameworks, weak institutions that are not fit for purpose and no alternatives to Exxon. Quite rightly, the government seems to have concluded there is little point putting such a huge opportunity at risk by squeezing a bit more out of the first contract. The short-term focus must be on education, legal and policy renewal, institutional strengthening and diversifying income streams from Exxon.
An energy services specialist in Guyana commented, “I don’t see the contract being re-negotiated right now, the government is more focused on education and up-skilling the country.” To its credit, Exxon are facilitating this, as one executive commented, “We recently launched ‘Greater Guyana’, with our Stabroek partners, to help fund education projects so the Guyanese can benefit from the sector. We have put a few billion Guyanese dollars [a few million USD] into this fund which also covers business development projects etc.”
“I don’t see the contract being re-negotiated right now, the government is more focused on education and up-skilling the country.”
Energy services specialist, Guyana
A local energy industry consultant agreed that Guyana’s major disadvantage is its lack of industry knowledge, “The Minister of Natural Resources is a case in point, he was a teacher who is now a Minister. He is in control of the gold, timber, bauxite and oil industries and he does not know or understand the details of them. Even Mr. Jagdeo, an astute politician, cannot grasp the technicalities.”
There is a common belief that Guyana is drinking from the fire hose, as one politician confirmed, “Things are happening so fast here. We want the Guyanese to benefit but we have many structural and institutional issues to fix before we can even contemplate any renegotiation. For example, we are discussing local content because as it stands right now anyone can set up a business here and benefit from the sector, it doesn’t necessarily trickle down to the locals.”
“Things are happening so fast here. We want the Guyanese to benefit but we have many structural and institutional issues to fix before we can even contemplate any renegotiation.”
The outcry around contract renegotiation seems to have dulled a little but there are still some holding the line, according to an industry lobbyist, “There are a number of organisations and people still vocal in their concerns around the Exxon contract, including Transparency International, the Oil & Gas Governance Network (OGGN), Kaieteur News [linked to OGGN], Jan Mangal [a former Petroleum Advisor to the Granger government], and Christopher Ram [a lawyer who writes regularly for Stabroek News].”
Even if the contract was to be renegotiated, a regional geopolitical analyst does not believe Guyana would be able to extract much additional value as Exxon’s US relations are of critical importance, “Exxon will use the Venezuela threat as collateral in any negotiation, US protection is important to the Guyanese. Even Mike Pompeo visited Guyana, no US Secretary of State has ever visited Guyana before.”
“Exxon will use the Venezuela threat as collateral in any negotiation, US protection is important to the Guyanese. Even Mike Pompeo visited Guyana, no US Secretary of State has ever visited Guyana before.”
Geopolitical analyst, specialist in South American oil and gas
This is a huge opportunity for Guyana and their partners but there are still many moving parts. If you’d like a closer look, don’t hesitate to get in touch.