Africa’s biggest oil producer is struggling to attract investments into its energy sector whereas Guyana, a tiny South American country, is getting serious investment attention from America’s biggest energy company, Exxon Mobil.
With a population of about 780,000 and less than 1 percent of Nigeria’s GDP, Guyana plans to produce the same volume of oil as Nigeria in a few years’ time, thanks to favourable, attractive investment conditions. Meanwhile, Nigeria has to fight off insurgents, hostile communities, and poor government fiscal and regulatory policies to win the attention of oil majors.
After finding more than 6 billion barrels of recoverable oil and gas resources in Guyana, ExxonMobil and its partners, New York-based Hess Corporation and China’s CNOOC Ltd, expect to produce 750,000 barrels per day (bpd) of crude by 2025. Last year alone, ExxonMobil took credit for five of the six biggest oil finds, all in Guyanese waters.
Though there have been questions asked about whether Guyana is getting a fair share of the deal, the finds are set to transform the country’s economy. Exxon has contracted about 1,900 Guyanese and paid $220 million to hundreds of local contractors there since 2015, according to company statements. That is more than two-thirds of all salaries paid by Guyana’s government last year, according to the International Monetary Fund (IMF).
“We are proud of our work with the Guyanese people and government to realize our shared long-term vision of responsible resource development that maximizes benefits for all,” said Darren Woods, chairman, and CEO of ExxonMobil Corporation.
Several other firms – including London Multinational Tullow Oil, Madrid–based Repsol SA, and French oil major Total – are also exploring off the coast, though none has yet made commercial finds.
Guyana’s government has already begun the search for an oil company or trading firm to market its entitled share of a portion of the light, sweet crude that the consortium led by Exxon Mobil Corp began producing last December after making 15 discoveries in recent years.
Rystad Energy, a Norwegian independent energy research and business intelligence firm, has said that Guyana’s oil production could reach 1.2m barrels per day by the end of the decade, lifting total annual oil revenues well above $20bn at current prices.
The opposition and outside observers have criticised the Exxon agreement, which includes a 2 percent royalty and 50 percent profit share after Exxon recovers its costs, as too generous. But the company and the government argue incentives were necessary to attract investment to a risky play.
Guyana’s oil industry is attracting a significant amount of international interest, and according to Minister of Business, Dominic Gaskin, the country is seeking to partner with reputable foreign companies and wants an arrangement that benefits the country in the short, medium and long term.
“While we recognise that there is a lot that our country can gain from this sudden exposure to international oil companies, we also recognise that there is a lot that we can lose if we do not manage this sector responsibly,” Gaskin said at an event.
The Government of Guyana has also finalised its local content policy for the sector, with focuses on three key areas – employment and workforce development; supplier opportunities and business development, and the transfer of knowledge and technology.
By 2024, oil is expected to constitute about 40 percent of the country’s economic output, according to the IMF, with production growing for years to come.
As a result of all this activity, the IMF has predicted the country’s economy could grow 86 percent next year.
“That’s 14 times the projected pace of China,” Bloomberg reported.
With vast oil reserves, Nigeria is punching below its weight. Foreign investment into Nigeria’s oil and gas hit a low of $10.09 million in first-quarter 2020 which is still a sharp decline compared to $327.30 million recorded in Q4 2016.
Experts say the Federal Government must be deliberate about fiscal and regulatory reforms. Slow reforms in the power sector, absence of full deregulation in the petroleum sector value-chain, the multiplicity of exchange rates, among other factors are key downside risks that constrain investments and long-term growth, according to the global consulting firm, PricewaterhouseCoopers (PwC).
Analysts also blame the decline in investment on uncertainty in the industry following over a 20-year delay in passing a progressive petroleum industry law. The implication is that Nigerians have grown poorer as economic growth is slower than population growth.
