The average per capita annual income of Guyana is around $4,000 USD, making it one of the poorest countries in South America. However, that could all change within as little as 10 years.
ExxonMobil and its international partners initally discovered vast oil reserves off its Caribbean coast in 2015. Now, recent deep-water surveys estimate these reserves at roughly 2 billion barrels- a number that may not impress its neighbors Venezuela or Brazil, but is more than enough to radically change Guyana’s economy.
By the end of 2018 five new wells will start pumping out 120,000 barrels of crude daily and that’s just the beginning. Exxon plans to drill 17 wells by 2020 at which point oil production in Guyana could rise to as high as 500,000 barrels per day.
As a result of its deal with oil producers the country will receive a 2 percent royalty on gross earnings and 50 percent of oil proceeds. By international standards that may seem like a low royalty- however Guyana with a population of merely 750,000, will be netting $1 million a day in oil earnings.
Doug McGehee, ExxonMobil’s Operations Manager, stated “It will have a positive impact on the economy. The big thing though, is the revenue that comes from the project. When this project starts, the government gets revenue from day one.”
In the meantime, the Guyanese government has an array of numerous energy-related hurdles to overcome.
The biggest of which is an on-going border controversy with Venezuela. The dispute, which dates back 200 years, revolves around Venezuela’s claim of sovereignty to over two-thirds of Guyana’s territory. Guyana is currently pursuing a judicial settlement at the U.N. to resolve the matter.
Additionally, the government is struggling to upgrade inadequate infrastructure which, if not improved, will seriously hinder growth. Guyana has introduced an ambition $164 million plan to upgrade its infrastructure, including the construction of and repair of roads, bridges, ports, telecommunications, and its extensive river transport system. A tall order for such a small nation.
“It’s not often that a country goes from 0 to 60 so fast like this,” said Matt Blomerth, the head of a prominent Latin American consultancy firm. “Guyana is rapidly joining the ranks of serious oil and gas players.”
This find also heralds the increasing role South America is playing in world oil markets. Brazil and Colombia are already major oil producers on the world market, with Venezuela and Argentina taking increasing steps to increase their output in recent investment deals with Chevron and other international oil companies.
Article written by HEI contributor Kevin Abbott.