SPEAKERS at last week’s Trinidad and Tobago Energy Conference highlighted that the future is uncertain for some major oil and gas investments as companies and countries move toward renewable and low carbon energies. Stuart Young, Trinidad’s Energy Minister, warned that the “pace of the transition away from fossil fuels, like oil and gas, to renewable energy like wind, solar, and hydroelectric, has made this country vulnerable,” alluding to the quickening pace of the energy transition.

Although speakers at the conference concurred with the widely held belief among international experts that the world will likely depend on oil to some extent for decades to come, the long lifespan and major capital investments required for fossil fuel projects make it clear that there is no time to waste for countries that are looking to attract foreign investment in oil and gas.

Regional producers in South America and the Caribbean appear focused on making the most out of their oil and gas resources over the next two to three decades, after which many experts believe the demand for oil may stagnate or decline. In the next 12 months, Trinidad will hold three bid rounds for deepwater, onshore, and shallow water blocks, and the government has said that it will continue to negotiate gas supply contracts. Meanwhile, Suriname continues to sign production sharing agreements, most recently to develop block 53 offshore with Apache.

These high levels of activity suggest that regional players are keenly aware that investment dollars are not a given. Oil producers are critically examining their portfolios and declining to invest in new projects that are more costly or emission intensive to prepare themselves to compete in a lower-carbon world.

This impending uncertainty also raises questions of price. Right now, Guyana is riding high on oil prices that are hovering around US$70 per barrel. At that level, reserves should net the government hundreds of millions of US dollars this year and several billions more in revenues over the next decade. But beyond the 2030s, estimating price and demand for oil becomes increasingly difficult. That’s why many experts have questioned the push by some activists to delay production. For many countries, oil increasingly appears to be a “use it or lose it” situation.

Guyana is at least partially insulated from some of the reassessment happening throughout the industry. It enjoys a low “breakeven price,” meaning the cost to produce a single barrel of oil is around US$35 a barrel. That price point is low, and Guyana’s high quality “light and sweet” crude oil is relatively cheap to refine and relatively low in emissions. That makes Guyana’s oil much more competitive in comparison to heavier, higher emission oils from Canada or Venezuela. Such projects may be left behind if investments decline.

Oil companies have publicly made it clear that they will be limiting their investments over the next decades to a small subset of projects – those with the low breakeven costs and the lower carbon footprint.

It’s crucial that the government not take these advantages for granted.

Guyana can ensure that it continues to offer fiscal terms and contracts that are competitive with other regional producers. In 2020, despite historically low oil prices and depressed global investment, Guyana snared US$9 billion in investments for the Payara project, the largest single influx of investment in the country’s history.

Although this was undeniably a win, fiscal terms will continue to be a lynch pin for investors. That’s especially true as regional competitors adjust their own terms to reflect marketplace realities. Brazil recently revised some local content policies and fiscal terms after a bidding round for oil blocks in late 2020 failed to bring in a single bid. Now development is heating up as Equinor and ExxonMobil announced their Final Investment Decision (FID) for the Bacalhau field this month.

Guyana is well positioned against regional competitors to continue to win new investments, but the global investment market is changing over time.