- ExxonMobil expects to produce some 2-2.5 billion oil-equivalent barrels from Guyanese waters, which could add up to more than $100 billion.
- Given the fact that Guyana’s Gross National Income is $4,250 per capita, the promises of oil are causing a stir in the political landscape.
- Although the amount of oil that reaches the Guyana coast from a spill may be small, the country’s Environmental Protection Agency notes it would impact marine resources.
GEORGETOWN, Guyana – Venezuela may have the world’s largest oil reserves according to OPEC, but oil experts are looking to its bordering neighbor Guyana as the next big thing. Widely known as an eco-tourist’s heaven, Guyana lays claim to indigenous jaguars (Panthera onca), giant otters (Pteronura brasiliensis), giant anteaters (Myrmecophaga tridactyla) and huge swaths of forest that cover some three-quarters of this South American country.
Promises of oil may seem at odds with a conservationist image, but Guyana is no stranger to extracting natural resources. Gold, timber and bauxite have long been principal exports.
It is not the first time investors have come in search of oil, either. In the interior of the country close to the border with Brazil, wells were drilled in the Takatu Basin back in the 1980s. However, the new off-shore oil discoveries are on a different level.
According to ExxonMobil, which is at the forefront of the new discoveries, it expects to produce some 2-2.5 billion oil-equivalent barrels. In real money, using figures published in Forbes, that could add up to more than $100 billion.
For many in Guyana, news of the oil discovery is a hot topic, with people pinning hopes on the find for everything from increased government spending, to more jobs and personal wealth. Talk of billions of dollars (US dollars, not Guyanese) is causing excitement in a country where the Gross National Income per capita rests at $4,250 – compared to $56,180 in the US according to 2016 World Bank figures.
There is also skepticism about whether the money will trickle down so Guyana gets the best deal. Under its contract with ExxonMobil and partners, the government is set to receive 2 percent in royalties on gross earnings and 50 percent of the profits from the sale of the petroleum. An Economist article in June reflected the concerns of many onlookers when it asked in its headline: “Will oil corrupt a small Caribbean state?”
The politics of oil
ExxonMobil announced its first find, the so-called Liza field, in May 2015 – the same month that Guyana welcomed in a new coalition government after 23 years of the People’s Progressive Party. Since then, the US oil giant has declared four additional wells: Payara, Snoek, Liza Deep and most recently Turbot-1 all part of what’s known as the Stabroek Block. They’re not stopping there.
“The results from this latest well further illustrate the tremendous potential we see from our exploration activities offshore Guyana,” said Steve Greenlee, president of ExxonMobil Exploration Company, in a public statement. “ExxonMobil, along with its partners, will continue to further evaluate opportunities on the Stabroek Block.”
Production of the oil is due to begin in 2020, the year of the next general election. So promises of how the oil revenues will be spent are likely to dominate the campaign trail. The current administration, led by President David Granger, came to power on a platform of change and promising to invest in a green economy.
Combining these promises with oil extraction is a tricky balance.
“The two positions are not incompatible,” N. Johann Earle, Public Affairs and Communications Officer at the Ministry of Natural Resources, told Mongabay by email. “The government of Guyana has developed a green state development strategy that will put Guyana on a low emissions pathway.”
The framework of the strategy refers to the economic potential of oil, yet also outlines an ambitious aim to reduce Guyana’s dependence on fossil fuels and achieve close to 100 percent renewable energy usage by 2025.
ExxonMobil’s local arm, Esso Exploration and Production Guyana Limited (EEPGL) – which is the operator of the Stabroek Block and holds a 45 percent interest (the remaining 55 percent is held by Hess Guyana Exploration Ltd and CNOOC Nexen Petroleum Guyana Limited) – believes an oil spill is “unlikely.” In its official Environmental Impact Assessment (EIA) for Guyana’s Environmental Protection Agency, it notes that, “The modelling indicates only a 5 to 10 percent probability of any oil reaching the Guyana coast.”
However, this figure doesn’t factor in the effectiveness of an oil spill response.
While the likelihood of an oil spill reaching the Guyana coast may be small, the country’s Environmental Protection Agency notes that a spill at a Liza would impact marine resources found near the well including sea turtles and other marine mammals. Air quality, water quality, seabirds and marine fish could also be impacted.
Worries over spills
The very existence of oil drilling is enough to worry some in Guyana, especially given the recent oil spill at nearest Caribbean neighbor, Trinidad.
Annette Arjoon-Martins, president of the Guyana Marine Conservation Society, is particularly concerned about the potential impact on the endangered sea turtles that breed and live along Guyana’s north-west coastal region.
“The oil spill modeling in ExxonMobil’s Environmental Management Plan shows that if there is an oil spill, the current will take that oil right into the northern part of the Shell Beach Protected Area,” Arjoon-Martins said. She added that what’s needed is more funding to beef up the under-resourced Environmental Protection Agency, plus more awareness raising and capacity building among the people living along this section of the coastline. “They don’t really see the indigenous peoples in Region 1 as a big stakeholder.”
Aside from the risk of oil spills, other environmental concerns were raised during public consultations and highlighted in the EIA. These included concerns about potential impacts on fishing livelihoods, the management of waste streams, and emissions.
Organized opposition to extraction on environmental grounds is currently fairly small, and the voices of some of the main conservation groups seem strangely absent from public discourses. A recent talk entitled Oil & The Environment was the first forum, said its organizers, to focus exclusively on the environmental aspect of oil extraction.
A week later, leading non-profit organization Iwokrama International Centre for Rainforest Conservation and Development announced plans to relaunch its Science Programme – with a grant of $300,000 from ExxonMobil.
On a more political front, there is also a call by some – including Bharrat Jadgeo, leader of the main opposition party – for the government to release its still-unpublished production sharing agreement with ExxonMobil and its operational partners. Some details have been released but Minister of Natural Resources Raphael Trotman told local news station HGPTV that the government has been advised not to publish the full contract at present, citing foreign affairs implications, sovereignty and national security.
Guyana’s application to join the Extractive Industries Transparency Initiative was recently approved, so Jadgeo and others may get their wish. According to oilnow.gy, an online news resource on Guyana’s oil and gas industry: “Companies publish what they pay and governments publish what they receive from exploitation of natural resources. Guyana will also be expected to publicly disclose contracts and agreements with companies under EITI requirements.”
This move may also speed up the creation of a special department within the Ministry of Natural Resources focusing just on oil and gas.
“The Petroleum Commission of Guyana [PCG] is not active as yet, as it is dependent on the passage of the Petroleum Commission of Guyana Act in the National Assembly,” explained ministry representative Earle. “The PCG will be empowered by its own act and will regulate the petroleum sector in Guyana.”
While ExxonMobil and its partners may be pinning their hopes on Guyana, Venezuela is still very much in the picture. Part of the Stabroek Block is claimed by Venezuela in a long-running border dispute with Guyana.
In March, Guyana’s government published a public statement citing a report in El Nacional and condemning what it called the “inflammatory” resolution put forward by Venezuela’s Energy and Petroleum Commission calling for “the immediate cessation of on-going offshore oil exploration and exploitation activities under Guyanese license in the Stabroek concession block well.”
ExxonMobil and Venezuela have issues, too. Ten years ago, then-president Hugo Chavez sought to restore national control of the oil industry by taking a majority stake in the country’s oil reserves. Ever since then, ExxonMobil has sought to increase the $1 billion compensation offered by Venezuela for its lost assets. Ironically, ExxonMobil’s CEO during this period was Rex Tillerson, who is now US Secretary of State and waging a different kind of battle with Venezuela over constitutional changes by President Maduro and the impact of economic crises. In August, President Trump imposed financial sanctions on Venezuela – though oil is still being exported to the US.
The stakes are high for everyone involved. ExxonMobil has invested significant money and time during a period of volatile oil prices. Guyana badly needs the jobs and revenues it hopes oil extraction will bring. But times are also changing. With the growing shift towards renewable energy – including among oil and gas giants – Guyana’s oil discovery could mark the last gasp of the fossil-fuel era. Or the beginning of a new, renewable age.
At the Oil and The Environment talk in Guyana, an audience member spoke of the difficulties of explaining the benefits of oil to his indigenous community: “Oil and water don’t mix,” he said.
Whether that’s true of Guyana, the land of many waters, remains to be seen.
Banner image: A turtle at Shell Beach in Region 1 of Guyana. Photo courtesy of Guyana Marine Conservation Society.
Carinya Sharples is a Guyana-based foreign correspondent. You can find her on Twitter at @carinyasharples.
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