Unlike Nigeria who squandered its 1981 oil boom, Guyana, South America’s third tiniest oil country, is bracing up for an oil boom that could catapult it to the top of the continent’s rich list and ensure that its newfound riches benefit all Guyanese.
It is no longer a secret that Guyana is one of the most attractive investment opportunities in the world. The country of 780,000 has discovered abundant amounts of natural gas and 8 billion barrels of recoverable oil, and that is likely only half of its total recoverable oil.
But history carries a warning for Guyana. The discovery of big oil in other developing nations like Nigeria has exacerbated existing corruption, leading to the new oil wealth being squandered and stolen. It has become known as the oil curse.
In order to avoid this development, Guyana is doing things differently; Guyana’s Ministry of Natural Resources has announced a 24-month project to review the oil-rich country’s regulatory and legal framework.
The focus of that work is to develop and establish a structure to manage the former British colony’s petroleum industry that is attractive to foreign energy companies and exploits the benefits for Guyana as well as its people.
“The per capita impact of this on Guyana would be dramatic,” explains David Goldwyn, chairman of the Atlantic Council Global Energy Centre’s Energy Advisory Board and an expert on Guyanese politics, told US Today. “The challenge for a country like Guyana, given its state of underdevelopment, is how do you take this money and create the building blocks of development?”
Despite the economic challenges of COVID 19, Guyana’s economy grew an estimated 26.2 percent in 2020, driven mainly by the country’s energy sector and the vast amounts of oil discovered offshore, which made it the country with the highest amount of oil per person in the world.
The inflation rate remained low at 1 percent in 2020, but it is expected to increase to 2.7 percent in 2021 and to 3 percent in 2022, according to the latest World Economic Outlook of the IMF (April 2020).
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In 2021, the IMF expects the Guyanese economy to grow 8.1 percent, thanks to expected growth from its oil sector, which is also beginning to affect other areas of the Guyanese economy. In the transportation sector alone, the government has a pipeline of highway projects equivalent to $1.5 billion, over 25 percent of the country’s 2019 GDP.
More than 1,700 Exxon employees are working on extracting oil from Stabroek Bloc, the oil reservoir, and transporting oil to the Liza Destiny, storage and offloading vessel. About 50 percent of the 1,700 workers are Guyanese.
Exxon was expected to produce 120,000 barrels of oil a day in 2020 and an estimated 750,000 barrels a day by 2025. The 2025 estimated production would position the South American country in the top 30 countries for oil production.
The break-even price for the second Floating Production Storage and Offloading (FPSO) unit at the Liza oilfield is expected to be an incredibly low $25 per barrel, placing it among some of the lowest cost for offshore operations in South America, a development that makes it more attractive for global investors.
Analysts at Rystad Energy predict Guyana’s oil output could reach 1.2 million bpd by 2030, enough to a rival neighbour, and OPEC’s founding member, Venezuela, generating national revenues of $30 billion in the process.
While Guyana, a tiny country of about 780,000 people is not only growing its economy but also making plans to further increase its oil production per person by having a favourable attractive investment condition, Nigeria is still battling insecurities, hostility from host communities, increasing cost of oil and gas projects and unfavourable government policies all of which are making it more expensive for IOCs to operate.
Unlike Guyana, Nigeria remains “Exhibit A” of the so-called resource curse, particularly when you split its oil production across the population.
Niyi Awodeyi, CEO at Subterra Energy Resources Limited, says Nigeria’s oil production per head has been in a miserable state in the last 10 years.
Despite huge oil reserves, Nigeria has the 19th lowest production per capita among top 20 oil-producing countries in the world; the country produces less than a barrel per 100 people, only China produces lower at 1/3 of a barrel per person.
In comparing this to the Gulf States, widely accepted to be the most oil-rich in the world, Saudi Arabia produces about 28 barrels per 100 people, Kuwait produces 60 barrels per 100 people, while UAE produces 32 barrels per 100 people.
Although Nigeria produces the most oil in Africa, it also underperforms against its African peers with regards to per capita production; it produces less oil per person than Angola and Algeria.
“Nigeria is not expanding its oil potentials despite having an expanding population,” Awodeyi notes.
Some experts have recommended that for Nigeria to turn the tide against its declining oil and gas investments there must be deliberate multi-agency efforts to bring about needed reforms. But the efforts must start with bringing credibility to both fiscal and monetary policies.
The government’s many failings with attracting foreign direct investment, most especially in the oil and gas sector, have meant Nigerians have grown poorer as economic growth is slower than population growth.
