Caribbean & Central America - July 2016 (ISSN 1741-4458)

In May last year, Exxon-Mobil announced the discovery of an oil reservoir in waters off Guyana that it said could hold 700m barrels of oil or more. Just over a year later, it has announced an even bigger discovery in the same area, this time holding between 800m and 1.4bn barrels of oil. Guyana’s Natural Resources Minister Raphael Trotman described this latest find as likely to be “explosively transformative for the economic and social development of all Guyanese”. But the discovery seems certain to enflame passions in Venezuela, which claims that the waters in which the discoveries have been made are Venezuelan, and there are also concerns about Guyana’s own readiness to manage efficiently and honestly such an enormous bonanza.

The Liza-1 and Liza-2 wells are both in the 26,800 sq km Starbroek block, situated just under 200km offshore. Venezuela’s claim to these waters is based on its claim to Guyana’s Essequibo Region and adjacent territorial waters. The claim was restated in a decree issued by Venezuela’s President Nicolás Maduro on 26 May last year which, to add insult to injury, happens to be Guyana’s Independence Day.

Given the current high degree of instability in Venezuela, there is no telling how Caracas might react to the prospect of even greater amounts of oil being extracted from waters it claims as its own. At the very least, there could be further provocations such as the 30 May incident in which Venezuelan troops allegedly fired at officials from the Guyana Geology and Mines Commission (GGMC) when travelling by boat on the Cuyuni River.

However, assuming that any reaction from Venezuela amounts to no more than nuisance value, Trotman was not exaggerating when he said that the discoveries would be economically transformative. Already, for instance, plans have been announced for the completion of the modernisation and expansion of the Cheddi Jagan International Airport (CJIA) and there is talk of resurrecting the defunct Guyana Airways. Further upgrading of CJIA is important as currently Guyana-based airlines are prevented from flying to the US because standards at CJIA are not high enough. The huge discoveries of oil are also likely to attract more direct flights from the US to Guyana.

Less positively, the prospect of large quantities of oil money swilling around in the Guyanese economy has raised concerns about corruption. The government is trying to allay these fears, and it is planning to subscribe to the standards on good governance, transparency, and accountability espoused by the Extractive Industries Transparency Initiative (EITI). At a symposium on EITI standards on 29 June, Trotman assured participants that the government was convinced that “transparency, accountability, and good governance are the bedrock of strong economies and strong societies”. But another attendee, Mike McCormack of the Policy Forum, warned: “If we are going to manage extractive resources, there is a whole range of infrastructural changes that have to take place. Our governance arrangements are no way near in place for this projected shift.”

The outgoing deputy chief of mission at the US embassy in Georgetown, Bryan Hunt, made much the same point in a radio interview on 30 June. He said: “I don’t think any country that has not been an oil producer is ever well-prepared for a discovery of that magnitude.” However, he added, there is “still time for the government to do things right”, and he said that he thought that Guyana “can be ready by the time the oil is ready to come out of the ocean floor”.