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SPECIAL REPORT - Guyana: Latin America's emerging oil giant

Bnamericas Published: Wednesday, February 06, 2019
SPECIAL REPORT - Guyana: Latin America's emerging oil giant

A big revolution in a small country. Guyana is undergoing a vertiginous transformation driven by its vast oil potential. Having long depended on sugar, rice, timber and gold exports to sustain its economy, the South American country is on track to become the third largest producer of oil per capita in the world within five years, behind only Kuwait and Qatar.

The seeds of change were planted in 1999, when Guyana granted ExxonMobil an offshore block that extends to the maritime borders with Venezuela and Suriname. ExxonMobil's gamble in a hitherto untapped region by oil and gas companies delivered results. Since May 2015, 10 discoveries have been announced. And the success rate is accelerating by the year: half of the country's total hydrocarbon finds occurred in 2018.

With 17 prospects still to be drilled in the Stabroek block alone - where all the discoveries have been made so far - Guyana has made a concerted effort to woo global players. Ongoing and future investments promise to trigger a seismic shift in this country of less than 800,000 inhabitants and a GDP of around US$6 billion.

However expected exponential growth also brings challenges. The Guyanese government is developing a new contractual framework to replace the one that offered hugely favorable conditions for oil companies when there was still no certainty of the existence of hydrocarbons.

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The new model is expected to be more restrictive for companies. The prospect of tax hikes and tighter local content requirements could inflate costs while an ongoing border dispute with Venezuela also implicates security challenges that are not without a financial burden.

Even so, the industry consensus is that such factors will not dent the attractiveness of Guyana for oil and gas investment.

In this report, we will describe the path taken by Guyana's hydrocarbon sector thus far, assessing the magnitude of discoveries the prospects for medium-term production. In addition, we will elaborate on the new contractual framework that the Guyanese government is developing and identify obstacles that may hinder the country's progress. Finally, we will provide a snapshot of present and future investments in the local industry.Ç

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