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

At the end of October, US oil giant ExxonMobil announced a third major oil discovery in Guyanese waters. In May 2015, the company announced that its Liza-1 well could hold a reservoir of 700m barrels of crude. To this, it added as much as 1.4bn barrels with this year’s Liza-2 discovery. Following the drilling of Liza-3 to a depth of 18,100 feet in 6,000 feet of water about 193kn from Guyana’s coast, and about 2.7 miles from the Liza-1 well, ExxonMobil announced: “Based on the positive results of the Liza-3 well, we now expect Liza to be at the upper end of the previously announced estimated recoverable resources.” It added that drilling will now move to a new site 10 miles north-east of Liza where the company is “targeting a similar reservoir package to what was seen at Liza”.

Even before the latest confirmation, Guyana’s Natural Resources Minister Raphael Trotman had described the ExxonMobil discoveries as “explosively transformative for the economic and social development of all Guyanese”. However, there have been some words of caution. Back in July, the outgoing deputy chief of mission at the US embassy in Georgetown warned that no country that has not previously been an oil producer “is well-prepared for a discovery of that magnitude”.

Just a week after the new discovery, the Guyana Guardian published a long interview with a Saudi government oil-market analyst arguing against Guyana seeking to develop refining capacity, on the grounds that it would be too expensive. The interviewee, Michael Boer, told the newspaper that building a refinery on the coast, along with the construction of a kilometre-wide deep-water channel, could cost as much as US$4.4bn, which is nearly three times the country’s foreign debt.

According to this analysis, it would be extremely difficult to find private-sector partners to make such a large investment in the current state of the oil market. The best hope, he suggested, might be China. Other analysts, however, have said that a refinery might be built for as little as US$1bn, depending on the specification.

Another problem that has been raised is the need to manage expectations over jobs in the oil sector. It has been suggested that, because of lack of training, at least 85% of oil-sector jobs will be in foreign hands for 10-15 years.

One organisation that is watching all this with particularly close attention is the opposition People’s Progressive Party (PPP). Guyana’s electorate has a habit of rewarding parties with long periods in power, reflecting no doubt the advantages of incumbency. The People’s National Congress (PNC), which is largely supported by the Afro-Guyanese community, held power for 28 years until ousted by the East Indian-supported PPP in 1992. The PPP then held on to power for 23 years until the PNC returned to power in 2015 as the major component in the A Partnership for National Unity (APNU)-Alliance for Change (AFC) coalition government.

ExxonMobil has said that it will be producing 100,000 barrels of oil per day from 2020, and the PPP’s major fear now is that the traditional power of incumbency will be compounded by the flow of new money from oil, thus enabling the PNC to establish another long period of political ascendancy.