After one of the biggest discoveries in recent decades turned Guyana into the world's top oil producer per capita, the South American nation is starting to turn its attention to natural gas.
Guyana's government is on a mission to diversify the country's economy and build up its industrial base with the windfall from the giant offshore Stabroek find that was made by an ExxonMobil-led group just over a decade ago. "We are going to increase our oil output, and increase it at a very rapid pace," President Irfaan Ali said last month at the Guyana Energy Conference and Supply Chain Expo in the capital Georgetown. "But we are also focused on leveraging that increase to expand the growth in the non-oil economy."
ExxonMobil has already completed construction of its first gas-to-energy pipeline, which will lower electricity costs in Guyana when connected to an onshore power plant later this year. "The oil chapter remains very strong, but the next strategic chapter, the one that can broaden the impact for Guyana, is natural gas," ExxonMobil's upstream chief, Dan Ammann, said. The US major is ready to respond with investment, engineering and project execution as soon as the government approves permits and unveils market frameworks. "We are committed to moving as fast as the government of Guyana in doing what it takes to monetise the resource as rapidly, safely and smartly as possible," Ammann said.
Located on South America's northern coast and bordering Venezuela, Suriname and Brazil, Guyana has emerged as one of the world's fastest-growing economies as a result of its oil riches. Output from Stabroek hit a key milestone of 900,000 b/d last year. Production capacity is forecast to increase to 1.7mn b/d by 2030, when eight developments are expected to be up and running. Hammerhead, ExxonMobil's seventh project in Guyana, is being designed specifically with a plan to transport gas by pipeline to shore, in addition to producing oil.
Outside the conference venue, dozens of companies filled booths and advertised everything from heavy machinery to oil field services and even luxury apartments in gated communities available from $350,000 each. In Georgetown, the fruits of the country's construction boom are on full display as roads once pitted by potholes are gradually replaced by widened highways that aim to ease the city's perennial traffic gridlock. Cranes loom over city skylines as new hospitals, schools, high-end hotels and shopping malls spring up. The centrepiece of the infrastructure rollout is a recently opened multi-million dollar high-span bridge connecting the east and west banks of Georgetown, designed in part to speed up industrial expansion.
South American supply surge
That Guyana is becoming a force to be reckoned with in the global oil markets can be seen from forecasts showing that it — alongside Brazil, Argentina and Suriname — is set to be a key driver of non-Opec supply growth in the coming years. The country's emergence as an energy powerhouse has seen its production eclipse that of some Opec nations, and it was no surprise to see Saudi and UAE officials looking to forge closer links with Guyana at the conference.
While Guyana's oil wealth has lifted its economy, neighbouring Venezuela offers a salutary lesson in the perils of the so-called ‘oil curse', with decades of corruption and mismanagement of resources that have wreaked havoc on its economy. Their contrasting fortunes are even more striking when you consider that Venezuela sits atop the world's biggest reserves. "In a country with 300bn bl of oil, seven million people have left over the past 3-4 years in search of a better life for themselves and their families," Guyana's minister of natural resources, Vickram Bharrat, said in reference to Venezuela. "On the other hand, the country with 11bn bl of oil is the fastest-growing economy in the world."
Guyana could be an early beneficiary of regime change in Venezuela after the US capture of President Nicolas Maduro in January. Maduro had revived a centuries-old border dispute with Guyana and threats of annexation combined with sabre-rattling over the oil-rich Essequibo region had heightened tensions with its neighbour and delayed Stabroek drilling. The immediate risks have eased, but it remains to be seen how the issue will be resolved since interim leader Delcy Rodriguez has been a vocal supporter of her country's claims over Essequibo. The region covers two-thirds of Guyana's territory, and Venezuela refuses to recognise the role of the International Court of Justice in adjudicating over the matter.
Bad timing
With some of the biggest oil companies struggling to replenish reserves, the Guyanese discovery has also taken on an outsized influence. It has prompted more than a flicker of regret from European major Shell, which quit Guyana in 2014, just before ExxonMobil struck oil. "I wish we hadn't walked away from Guyana when we did," Shell chief executive Wael Sawan reflected recently.
Inside the conference, Chevron chief executive Mike Wirth addressed delegates after the company became Stabroek's newest stakeholder last year. Its entry had been delayed by a legal wrangle over the future of US independent Hess' 30pc stake in the block. The dispute with ExxonMobil over rights of first refusal strained relations between the US majors and was only resolved after a ruling from an international arbitration panel in Paris. That cleared the way for Chevron to complete its $53bn acquisition of Hess and gain the coveted Guyanese stake. Wirth said that he has never been more excited about the future of Chevron: "Our partnership with Guyana is a big part of that confidence."
Georgetown is eager to show its responsible stewardship of the country's bonanza. While it took Norway two decades to set up a sovereign wealth fund following its first big offshore discovery, Guyana already has its own version up and running. "We have a natural resources fund, while simultaneously we are moving at lightning speed with infrastructure development," said Ali, who won a second five-year term in September's elections.
Plans are in motion to shore up the country's growing financial sector by setting up a local stock exchange and digital payments system. And the government wants to turn Guyana into a regional hub for transport and logistics, and a leader in agribusiness and ecotourism. Still, the manner in which the government has overseen its new-found oil wealth has its critics, and there are concerns that the boom has yet to filter down to much of the population.
"There's nothing particularly transformative about oil, especially for Guyana, especially far offshore, because there's no real technological transformation that will occur within the economy," University of Guyana Green Institute director Thomas Singh told Argus. "The transformative effect of oil that was promised by the cheerleaders for Guyana has not been realised." But ExxonMobil takes pains to point out its contribution to boosting the domestic economy. Since 2015, more than $3bn has been spent with local suppliers in the oil and gas industry, while Guyanese nationals now make up about 70pc of the sector's workforce.
For now, ExxonMobil and its partners — Chinese state-controlled CNOOC, as well as Chevron — are pressing ahead with plans to boost output. And ExxonMobil is happy to lay claim to a unique success. Guyana is perhaps the "most exceptional" energy development anywhere in the world, Ammann said, not only because of the scale of the resource, but how it is being managed and developed.
