has generated a lot of news coverage over the past few months and not much of it has been positive. While our political turmoil has been well-documented, concerns that the knock-on impact of this uncertainty is threatening our nascent oil and gas industry has now hit the headlines.
Just a year ago, there was so much optimism as we neared our first oil production. Liza Phase 1 came online at the end of last year sooner than expected and Liza Phase 2 is underway, but it appears that Payara, the third potential development project within the Stabroek block, has been beset by delays. As experts point out, these delays could cost Guyana hundreds of millions in lost revenue and much more in delayed opportunities. Furthermore, the delays could signal to the global investment community that Guyana is not a safe place to invest and do business.
Respected oil & gas consultancy, Rystad Energy, this week released a report into the severe economic costs the ongoing project approval delays could have on Guyana’s share of the revenue, the expected production and the value of the oil. According to the study, the Payara project alone could generate up to $4.4 billion US in oil revenues to the Guyanese government by 2028. But if the approval was delayed 12 months, that figure would be slashed to $2.8 billion, $1.6 billion less. Even a six-month delay would result in a significant $800 million decrease. Rystad estimates the delay in approval has already cost Guyana some $300 million in lost revenues. An untold number of badly needed roads, bridges, hospitals and schools could be financed with that money.
The study also shows that Guyana may lose around 10 million barrels of oil that could be produced from the project by 2030, presuming just a three-month delay, a number which climbs to around 75 million barrels assuming a 24-month delay. The companies involved in the project are also losing money as the approval drags on, a figure estimated in the hundreds of millions.
The world is looking at Guyana and our ability to facilitate investment and trade. Guyana ranked 134 out of 190 countries on the World Bank Group’s Doing Business 2019 report. Further political uncertainty and indecision on projects of this scale and size could see a slippage in that index and render Guyana a pariah state in the minds of international companies and investors.
In October 2019, the International Monetary Fund (IMF) revised Guyana’s 2020 economic growth forecast from 86% to 53% in 2020. That reduction should alarm all Guyanese who believe we can rest on our laurels and wait for investors to come knocking as the global economy and oil markets recover from the COVID-19 pandemic.
The past six months has all but brought the world’s economy to its knees. Guyana is in a better position to weather the storm than most countries thanks to the oil and gas resources that are being developed. We risk blowing a once-in-a-lifetime opportunity if we don’t get it right. History is unkind to countries who squander their blessings and those who stand to suffer the most are the ordinary Guyanese whose very fortunes stand to be vastly improved by the job opportunities, rising government coffers, improved infrastructure and host of other benefits that come with responsible oil and gas resource management.