Guyana’s Oil Discovery – Has It Led To Wealth Or Woe?

In May 2015, ExxonMobil, working with international partners, announced significant oil findings 200km off Guyana’s coastline. By 2018, the news got better – more deep-sea exploration heralded deeper reserves. The implications for this small South American nation could be generational defining. But five years on since Guyana’s oil discovery – has it led to wealth or woe?

ExxonMobil declared the oil findings as a “world-class discovery”. One of South America’s smallest nations had been catapulted to international attention. But questions quickly began to be asked on how prepared Guyana was in areas such as distribution and infrastructure. The oil discovery would quickly lead to political upheaval. Within a few years of the first discovery, a no-confidence motion was passed by parliament against the government. What has followed since has driven Guyanese politics close to chaos. This political chaos, triggered by the great oil find, now sees Guyana at deadlock.

Election and counter claims

The elections held on March 2 this year have threatened to send the country spiraling out of control. The incumbent president David Granger, a retired brigadier, leads the coalition government. The coalition is made up of A Partnership for National Unity/Alliance for Change (APNU+AFC). His opponent is Bharrat Jagdeo head of the People’s Progressive Party (PPP). It appeared that the APNU+AFC had won the election at first count, but the PPP cried foul suspecting voter fraud. With the agreement of a recount, the new results have now led to a four-month long stalemate. In the recount, David Granger and the coalition had been defeated.

Not prepared to let go of power easily, and with thoughts of oil floating prominently, the government has refused to accept the recount. They have declared it to be flawed and gone to court to stop the declaration of the results. Adding to tensions has been the racial lines that have been drawn during and post election. Granger’s party appeals and draws support from the Afro-Guyanese population, whilst the PPP is supported by the larger Indo-Guyanese population. In a video release to mark the first oil flow, the President said “the good life for everyone beckons “. In creating a deadlock, the government is now taking the Guyanese people further away from the “good life” that Granger mentions.

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Foreign foes and oil wealth

Amidst the deadlock, the government has indicated that the United States is using Guyana to oust neighbouring Venezuelan president Nicolas Maduro. However, Guyanese interest in warding off their neighbour runs parallel with any wish that the United States holds in regime change. Border disputes between the countries are historic and include the territorial area at sea where oil was found. The resources minister, Raphael Trotman, alluded to these disputes when speaking on the 2016 deal signed with Exxon. As is often the case where oil and money are involved, the government is finding it hard to let go of control just as the oil starts flowing.

The production of oil in Guyana would transform its economy and, crucially, diversify its dependence on traditional products. Gold, sugar, rice and shrimp are some of the key commodities that the country exports. Guyana’s GDP was $3.5b in 2017 and grew to $3.8b by 2018. In 2019, the International Monetary Fund (IMF) projected that Guyana’s economy was set to expand by 86% this year. Although the IMF made clear that this was subject to revisions. Exxon projected that 750,000 barrels of oil per day could be produced by 2025. It’s against this backdrop of tremendous economic potential that Guyana finds itself at the forefront of political turmoil.

The Gross Domestic Product (GDP) in Guyana was worth 4.28 billion US dollars in 2019, according to official data from the World Bank. SOURCE: TRADINGECONOMICS.COM

High stakes

The stakes are certainly high for Guyana and its newfound oil producer status.  Earlier this month, the US Secretary of State, Mike Pompeo, said that “the Granger government must respect the results of democratic elections and step aside”. Pompeo also said that there will be visa restrictions on those responsible for undermining Guyana’s democratic elections. Exxon and the IMF have already revised figures on output and growth, citing the political climate as a major factor along with the global pandemic and economic downturn. Neighbouring Caribbean countries have also hinted of the damage that the Granger government inflicts as long as the deadlocked status remains.

Today, Guyana has managed to pump oil but seems unprepared for where it goes next . The political stalemate now threatens to unravel much of the optimism that existed when oil first flowed in late 2019. Many nervously look at neighbours Venezuela and the political situation that has sent Maduro’s country plummeting. The most imminent and troubling challenge for Guyana has emerged from within. The resources minister, Raphael Trotman, speaking on the oil findings observed “this is all new to us”. “We’re a nation of sceptics. We’ve never had anything good going our way and even the possibility of prosperity scares people.” Unless things change, Guyana’s oil discovery may see more woe before wealth is realised.

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