AT its recently held annual shareholders meeting, it was revealed that ExxonMobil now has a new Board, a development that is likely to lead the multinational company down a path of strategic change, focusing more heavily on an energy transition strategy.

This is in light of increasing global concerns about the impact of climate change and climate-change policies, where the world is now moving to adopt renewable/alternative sources of cleaner energy; in other words, moving away from fossil fuels.

This development is predicted to have serious implications for Guyana’s emerging sector, and the future development of its oil resources.
In 1999/2000, ExxonMobil commenced exploration activities in Guyana, struck oil in commercial quantities in 2015, and commenced drilling/production activities five years after its Guyana find, in December 2019. But shortly thereafter, the global pandemic struck, and this led to oil prices virtually collapsing to zero at the height of the outbreak.

Thankfully, oil prices are now recovering, largely due to the fact that the global economy is grappling with the consequences of the pandemic while some countries remain in lock-down mode, semi-lockdown mode, and a few are reopening their economies in a safe and sustainable manner.

It has been claimed by some that the worldwide refining industry has another few decades in which it can remain commercially viable, and this might well be the reason that Guyana is a key focus for ExxonMobil, in terms of strategic investment. This is also the reason why ExxonMobil needs to ramp up production capacity in Guyana rapidly.

ExxonMobil’s current Production Sharing Agreement (PSA) with the Guyana Government may very well remain as it is, despite a number of inherent weaknesses. However, the government is seeking to maximise value for Guyanese, in the current circumstances, through local content. This, undoubtedly, is a very good strategy on the part of the government, so as to secure more value for Guyanese.

The Guyana Government has made it abundantly clear, though, that future PSAs will be very different, given that the country is now in a better position to bargain, knowing that there’s more than nine billion oil equivalent barrels of recoverable crude.

This means that any new oil company that wishes to enter the Guyana market will be subject to relatively stronger fiscal terms, a higher signing bonus compared to the US$18 million that was brokered by the previous government.

With the expected strategic change that ExxonMobil will be pursuing under its new board, there could be spending cuts on future investments. Should this happen, it could mean some scaling back on investments in Guyana by ExxonMobil. ExxonMobil’s projected investment for Guyana over the 30-year lifespan of the project is about US$60 billion.

Notwithstanding the foregoing, there is an upside to this development. To this end, what ExxonMobil is currently experiencing in terms of its new strategic direction, owing to climate change developments, other global oil companies are seemingly being subjected to the same level of pressure which will ultimately lead to a cut in future investment, thus, a cut in the global supply of crude.

Now, should this happen, while the global economy is unlikely to transition to 100 per cent renewable sources of energy fast enough, there will still be a strong demand for crude. As such, when global supply is reduced and demand remains strong, oil prices may increase to record high levels in the near or medium-term again, above US$50 – US$60 per barrel. This will most certainly be in Guyana’s favour and the oil companies as well.