How oil changed Guyana and its role in the world – DW – 03/14/2024

They also call it “Dubai of South America” ​​or “Saudi Guyana”. GuyanaA former British colony located in CaribbeanOne of the poorest countries in Latin America, in 2015, the discovery of a large oil patch off its coast sealed its new fate: Petrostate It has enormous economic potential and the potential to transform global geopolitics.

Almost ten years ago, the American oil company ExxonMobil made one of the biggest oil discoveries in recent history, changing the course of the country forever. The Stabroek block is estimated to have 11 billion barrels of oil reserves. “The amount of resource innovation in Guyana is simply amazing,” Ben Cahill, an energy security expert at the Center for Strategic and International Studies (CSIS), told DW. “Production is bigger and faster than anything we've seen in years.”

Global impact and strategic alliances

The discovery puts Guyana in the crosshairs of interest from multinational oil companies and countries looking for new energy sources after losing Russia as an oil supplier. Conflict in Ukraine.

In addition to ExxonMobil, two major players are involved in the oil exploration consortium: American Hess Corporation and China's CNOOC Limited.

“Guyana has chosen private agencies with broad capabilities to implement these types of projects,” William Clavijo, a doctor of public policy and development at the Federal University of Rio de Janeiro, tells DW. “It's the complete opposite of what's happening in Venezuela,” Clavijo continues. Unlike Guyana, Venezuela Over the past two decades it has faced a decline in key aspects such as regulatory stability, legal certainty and the decline of its state company PDVSA's technological capabilities, which experts say has severely affected its oil production and exports.

Conquer the neighboring country

With a population of 800,000, Guyana already produces more oil per capita than Saudi Arabia. According to data from ExxonMobil, crude oil production in the Caribbean country has increased from 380,000 barrels per day in 2023 to 640,000 in January 2024. Guyanese authorities and oil companies want to reach 1.2 million barrels per day by 2027.

Venezuela currently produces between 700,000 and 800,000 barrels per day, slightly more than Guyana, although this could soon change.

In terms of exports, the former British colony has already surpassed its neighbor: in February, Guyana exported 621,000 barrels of oil, surpassing the 604,000 barrels exported by Venezuela. This achievement is particularly remarkable considering that Venezuela has reserves close to 300 billion barrels, the largest in the world.

The Awakening of an Oil Giant

Guyana's oil boom is changing the rules of the game not only within its national borders, but regionally and globally. “A country completely excluded from regional geopolitics has become a very important actor,” Francisco Monaldi, director of the Latin American Energy Program at the Baker Institute, told DW.

A recently revived regional dispute over relations with Venezuela Essequibo, an area of ​​vast natural resources that covers more than half of Guyana's land area and is claimed by Venezuela. A breakthrough in crude oil production “will encourage Guyana to continue its campaign to reassert control over the territory,” says William Clavijo of the Federal University of Rio de Janeiro.

Western support

This objective is supported Brazil and the United States, motivated by the economic interests these countries have in Guyana.

“The more Guyana becomes a safe, reliable and stable supplier, the more support it will receive from the United States,” Ricardo Salvador de Toma, a doctor of international strategic studies, told DW that, unlike Venezuela, Guyana does. There is no ideological commitment to supply oil to other countries.

The geopolitical scientist predicts that Guyana “could move into America's security orbit, as part of that old security deal in exchange for oil.” De Toma says that Guyana would represent a key option if the United States wanted to establish a military base in the region.

How to Avoid the “Resource Curse”

According to the International Monetary Fund (IMF), Guyana is the country with its economy Fastest growing in the world. In 2022, its gross domestic product (GDP) grew by 62% and by 2023 by 37%. But how sustainable is this growth?

Experts have expressed concern that Guyana's economy is growing beyond its means.

Francisco Monaldi has predicted that Guyana could fall victim to the “Dutch disease”, an economic phenomenon where the discovery of natural resources in a country leads to a revaluation of its currency, making all its exports more expensive to buyers. The country practically only exports oil, ceasing to produce other goods because they are no longer competitive, thus harming other sectors of the economy, especially exports of manufactured goods.

While this would, in principle, damage the economy, “it does not mean that Guyanese will not have a higher standard of living than today,” he adds. “In many countries with abundant natural resources, there is evidence of sluggish economic performance,” agrees William Clavijo.

A promising but challenging future

The key for Guyana is to diversify the economy – which will not be easy for the country, says Francisco Monaldi – and “create a regulatory framework to guarantee the fulfillment of contracts with private companies, to have the ability to properly supervise.” ,” says William Clavijo. The government has already begun work on, for example, the creation of a sovereign wealth fund and investments in infrastructure projects.

Whether Guyana can escape the “resource curse” and sustain sustainable growth remains to be seen. It is clear that the country will change significantly in the coming years.

(CP)