While oil was struck right before the 2015 elections, the Exxon/Hess/CNOOC partnership that worked the Stabroek Block concession deep off our Atlantic shores started pumping the “black gold” by the end of 2019, a record in the oil industry. That, of course, means we have now been an oil producer for five years, which is enough time for the initial euphoria to have worn off and for us to start making preliminary assessments on how we have been dealing with the challenges identified at the time.
First, there were the technical challenges to get to the oil itself, and here it was rather serendipitous that, back in 1999, when the first exploration contract was signed, it was with Exxon. They, along with their present partners — Shell had walked away after dry holes were initially struck — not only had the deep pockets, but the technical capabilities to reach the first oil in the 5719-foot ultra deep waters of Lisa 1. The 295 feet of high-quality Brent Light oil – in sandstone reservoirs – had to be reached by drilling through 12,106 feet of the earth’s crust.
The conglomerate has since made 30 strikes, and estimates the petroleum reserves to be in excess of 11 billion bpd.
The second challenge was to negotiate a new contract, since the initial one would have expired in 2016, and this task fell on the APNU/AFC coalition government that had won not just the 2015 elections, but the oil bonanza. ExxonMobil is probably the only entity on the planet that would adjudge the production sharing agreement (PSA) signed by the coalition’s Raphael Trotman to be “good”, since all of the terms are in its favour compared to the industry norms for comparable fields. For Guyana, there was a meagre US$18M bonus; 2% royalties; 75% allowable annual expenses; and a 50-50 split of the subsequent profits, which meant that our share of the revenues was 14.5% overall.
This has led to an ongoing challenge from a segment of commentators, including some elements of the present Opposition which had formed the government that negotiated the contract, for the latter to be “renegotiated”. Government has pointed out that, by the terms of the contract itself, there can be renegotiation only if both parties were to be in agreement. In the absence of such agreement, the international arbitrators to which recourse must be sought do not look favourably on those who violate the “sanctity of contracts”. In the meantime, with the agreement of the Government, the oil operators have embarked on an accelerated development programme such that present production is 650,000 bpd. 500M barrels have been produced over the past five years, to deliver US$5.5 billion to the Government. It is projected that the rate of production would rise to 1.3M bpd by 2030, and then to 1.7M bpd to make us the fourth largest offshore oil producer in the world.
Another challenge identified early on was whether we would be able to absorb such an influx of funds in a country of less than 800,000 inhabitants and a GDP of only US$4.8 billion before oil started flowing. Government created a sovereign wealth fund — called the Natural Resource Fund (NRF) — along the lines that were established by other oil producing countries like Norway to ensure that the funds were used based on agreed-to rules that were also sensitive to the need for the creation of inter-generational wealth. In the case of Guyana, Government embarked on a massive physical infrastructural drive, that focused on roads and bridges that would tie together our massive country and facilitate the transportation of people and agricultural and manufactured goods.
Numerous modern schools and hospitals have been built, and training programmes have been launched to deliver the services to the populace. Directly and indirectly, employment has skyrocketed, and the Government has been forced to give serious consideration to importing labour – even as we have had to absorb almost 30,000 refugees and economic migrants from Venezuela. This is not to suggest that there are no challenges remaining; and for one, inflation – which is a bugbear internationally – has pushed the cost of living upwards.
