In ten years’ time, it is expected that Guyana, a nation of 778,000 people, will become as wealthy as many nations that are currently members of the Organisation of Petroleum Exporting Countries (OPEC).
Oilfields discovered since 2015 in Guyana are expected to generate annual revenue of US$15 billion, of which US$10 billion would be divided between oil companies and the government.
Everyone else but the Government of Guyana, it appears, is worried that the Caribbean country will mismanage its newfound wealth.
News analysts have been quoting Verisk Maplecroft, a global risk and strategic consulting firm based in Britain, which cautioned that the chief challenges to investing in Guyana are political and social.
It said Guyana is a poor country, with underdeveloped infrastructure and sub-par government institutions. Moreover, Guyana is racially divided between blacks and Indians while elections often lead to violence and unrest, as outlined at IBT.com
They cite as examples other nations which have struck it rich and have little to show for the inflow years after access to mountains of cash.
The debate over Guyana’s ability to manage nature’s new bounty began and has intensified since 2015 when Exxon-Mobil discovered a find offshore Guyana at the Liza-1 well with more than 5.5 billion barrels of confirmed oil and gas reserves.
After that, in September 2019 ExxonMobil added the Tripletail-1 well offshore Guyana – a find with more than six billion barrels of oil.
The Caribbean nation will earn an estimated $300 million annually from the phase 1 of daily production at Liza – expected to amount to 120,000 barrels of oil per day. Phase 2 at Liza – which is expected to commence in mid-2022 is expected to produce 220,000 barrels of oil per day.
Research source Rystad Energy estimates that Guyana’s oilfields (including the recently discovered Tripletail-1) will exceed 600,000 barrels per day in total production by the end of this decade.
Analysts note that the country is set to become richer than current OPEC members, pointing out that Saudi Arabia has about 1,900 barrels of offshore reserves per person, while for Guyana the figure will be 3,900 barrels.
Some opposition leaders have asked for the revision of revenue-sharing agreements to get better terms from oil companies. The current contracts include an offer of two per cent royalties for Guyana plus 50 per cent of profits from oil proceeds.
Both analysts and the government worry that changing terms of the contracts might dissuade oil companies from further exploration and development.
Analysts comment that for the government, it is more important to collect revenues and to invest in development. But some are still concerned that increased wealth will serve to foster even more corruption, citing as evidence high rates of poverty and unemployment in a country which is already blessed with resources.
Industry analysts note that the government has considered a sovereign wealth fund, a public accountability board, and a petroleum law which -are yet to be implemented.
Commentators are also concerned about the brain drain which the country has suffered with competent and skilled Guyanese professionals leaving for better-paying jobs and opportunities abroad.
Guyana may have to import management talent, they note.
They also cite the case of neighbouring Venezuela and point to what poorly managed resources can lead to.
It has not escaped many analysts attention that there are countries in the Latin America and Caribbean region that could have benefited and improved both the economy and lives of its people from oil and bauxite wealth but are now in a worse position than before the discovery of precious commodities.
In Jamaica, where the establishment of a sovereign wealth fund for bauxite royalties and levies was touted but never implemented, US$4 billion in earnings from the Bauxite Production Levy garnered over its 40 years was used up without any real legacy projects to show for it. The levy was created in 1974.