Home Letters Guyana’s oil revenues are to support a better future for Guyanese
The International Monetary Fund (IMF), on the strength of the global rollout of COVID-19 vaccines and fiscal stimulus programmes, expects the global economy to post a stronger-than-expected recovery from the pandemic in 2021.
In an updated forecast, it has predicted that oil prices would average just above $50 billion in 2021. If the IMF’s projections hold, each lift of Guyana’s share of crude oil from the Liza Phase 1 Development could be worth around US$50 million.
Last year, Guyana earned almost US$207 million from oil sales and royalties from the export of four million barrels of oil from four lifts. More lifts, likely six, are expected in 2021, with rapid growth to follow in subsequent years, as additional field development projects come on stream.
These revenues necessitate visionary, sustainable and transformative ideas for the use of Guyana’s oil revenues to support a better future for Guyanese and the Caribbean.
The great thing is that the oil price environment has improved dramatically in the past few months, with the price of the US benchmark WTI crude climbing from US$37 a barrel a little over three months ago to US$58 to date. In my view, the strength in oil prices has come on the back of actual reduction in supplies and expected increase in demand.
The commodity’s bullish run came after governments around the world kicked off the COVID-19 vaccination drive, raising hopes of containing the pandemic and increasing energy demand. The rollout of economic packages by some major economies, to stimulate GDP growth during this difficult period, has also helped. The reduction in oil supplies from OPEC+ as well as non-OPEC nations, like the US, has given a boost to oil prices.
Moving forward, I think oil will not only hold the recent gains, but the momentum can also push WTI into US$60 a barrel territory, which means more revenue for Guyana
Guyana’s forecasts average crude production of 109,000 b/d in 2021, 46.7pc above last year, but short of initial expectations because of a recurring technical glitch. However, the glitch is “a temporary, unplanned event, and once repairs are safely completed, Exxon will be able to ramp up and produce at full capacity,” the company said.
Oil revenue drove up Guyana’s GDP by 43.5pc in 2020, and growth is expected to hit 20.9pc in 2021. Government is predicting a 4pc year-on-year increase in the Brent crude price to around US$43.9/bl, Finance Minister Ashni Singh said on delivering our country’s budget plan. The price forecast is well below the current Ice front-month April Brent crude futures contract price of more than US$63/bl.
ExxonMobil is currently producing 120,000 b/d of crude from the deepwater Stabroek block off Guyana’s coast. Around 10,000 b/d of output has been affected by problems with a natural gas compression seal.