Guyana tipped for another major oil find
The frontier oil province is set for yet another significant investment opportunity. But political uncertainty is just one of the many myriad challenges the country faces before first oil
Guyana is anticipating the announcement of another major oil find as early as next week, the country’s chief investment official said at the SPE Offshore Europe conference.
“There have been some big discoveries and, by next Friday, we will be announcing another one”, says Owen Verway, CEO of the Guyana Office for Investment, adding that he could not give more detail at this stage. “We are one of the hottest destinations for the oil and gas industry right now and that is set to continue.”
The frontier province has been among the most successful upstream hotspots for the industry. Since 2015, ExxonMobil and its partners have made 13 discoveries offshore Guyana totaling around 5.5bn bl oe.
On 24 August, UK-headquartered Tullow, operator with a 60pc working interest in the Orinduik block, together with its partners Total (25pc) and Canadian independent Eco Atlantic (15pc), spudded the Joe-1 exploration well, saying results could be known in around three weeks. Earlier in August, Tullow announced that the Jethro-1 well in the same block contained more than 100mn bl oe of recoverable resources.
The oil finds are expected to have a major impact on the country of just 770,000, amid ongoing political uncertainty. In December, the David Granger administration suffered a vote of no-confidence but a promised election has been repeatedly delayed by appeals and voter registration issues.
“GDP is going to double in a matter of 17 months,” says Verway. “I do not believe another country in the world has experienced that speed of growth in the last century.” In 2018, the country’s GDP grew by 3.4pc to $3.6bn, according to the World Bank.
“There is a tsunami of cash investment coming into the economy, a huge increase in disposable income created by business activity.”
To mitigate the chances of suffering under the resource curse that has affected other oil-rich countries, Verway notes that the country’s energy officials are meeting regularly with officials from Scotland and the Canadian province of Newfoundland and Labrador to discuss policy, regulation, enforcement and development.
“There is a draft of the local content policy that will hopefully finalised by November, and a sovereign wealth fund draft that should be enacted very soon after parliament is formed,” says Verway.
Commonwealth spirit
Greg Quinn, British High Commissioner to Guyana, says that British investors in particular should look at the country’s potential. “On the fundamentals, Guyana is not only the only English-speaking South American country, it also has an English-language common law system”, says Quinn. “The courts system is therefore very familiar to British companies. ”
While there is bureaucracy and other issues around ease of doing business, for example electricity supply, as a Commonwealth country it shares a lot of values seen in the UK. “As a place for the British to work and do business, it will feel very familiar—apart from the sunny weather,” says Quinn.
Lack of data
The process of legislating for the expected oil boom would benefit greatly from more detailed economic analysis, says Verway. “Decision makers need some critical analysis, projections to seize the strategic opportunities”.
The Jethro discovery is an example of where there was a need for a value-chain analysis that could inform stakeholders. “How have situations like this played out in Scotland, in Newfoundland or in Houston?” asks Verway. “What is the investment required and the returns? That level of analysis still has not been conducted.”
