–average foreign direct investments recorded at US$1.2B annually since 2018
SERVING as a magnet for investors, Guyana’s petroleum sector has received the bulk of private investments with a United Nations Economic Commission for Latin America and the Caribbean (ECLAC) report, titled, “Foreign Direct Investment in Latin America and the Caribbean”, showing that some US$3.5 billion was spent by stakeholders between 2018 and 2020.
In the report, which was released recently, ECLAC said major investments have been made since 2018 to exploit the large deep-water deposits discovered by American oil giant, ExxonMobil, in 2015. The company has since made 22 discoveries in the Stabroek Block, offshore Guyana.
“Between then  and 2020, US$3.5 billion was invested in this sector in Guyana, with a peak in 2019 of almost US$1.5 billion,” the UN commission related.
Oil production began in 2020, generating growth of 43.5 per cent in Guyana’s Gross Domestic Product (GDP), while non-oil GDP declined by 6.8 per cent in the wake of the pandemic. The contribution of the petroleum sector to Guyana’s development is also evidenced by Foreign Direct Investment (FDI) inflows, which have been averaging US$1.2 billion since 2018, juxtaposed with an average of US$200 million per year between 2000 and 2017.
“Most of those investment flows are destined for the energy sector, which absorbed 98 per cent of the FDI entering the country in 2020,” ECLAC said.
At the same time, the expansion of oil activities has also fuelled the development of support and service activities. For example, in January 2020, the Danish firm, Blue Water Shipping, which provides shipping and cargo services, announced the opening of a new office in Guyana to support the domestic oil-and-gas market.
Another example is the British marine services firm, Inchcape Shipping Services, which opened a new office in Georgetown, so as to provide support to clients holding permits for geological exploration and offshore oil-and-gas extraction in Central America.
The new office will also provide general vessel maintenance services, crew changes, delivery of spare parts, ship supply and bunkering operations in the dry-bulk and tanker sectors. While a number of investments have been made in the petroleum sector, there is evidence that a number of local and foreign investors are positioning themselves to capitalise on the existing and potential opportunities.
The prospects are quite positive, since there was an increase in the estimate of recoverable petroleum resources, from eight billion to nine billion oil-equivalent barrels, an estimate that had not been adjusted since January 2020. Additionally, ExxonMobil has updated its development plans of having five oil production projects by 2026 to six projects by 2027, which they see could potentially grow to ten production projects in the future.
It was reported that Guyana’s role in the global petroleum industry could be bigger than it appears on the surface, as an analysis done by global energy research and consultancy group, Wood Mackenzie, shows that the country is among five nations which will produce most of the remaining deep-water oil resources.
According to the group’s analysis, oil and gas will play a significant role in meeting energy demands for decades to come, especially with the upstream industry expecting to fill the 450 billion barrels of oil equivalent (BoE) of undeveloped supply needed by 2040.
According to the second largest stock exchange in the world by market capitalisation, NASDAQ, Guyana, with its estimated recoverable resources of about nine billion barrels of oil equivalent, is projected to be among the world’s largest per capita oil producers by 2025.
Already, the nation has been benefiting financially from this progressive sector, as, having earned over US$60 million from the sale of its sixth oil lift, and received US$13.9 million in royalties in the first quarter of this year, it has in its Natural Resource Fund (NRF) over US$344 million.
Specifically, according to the Bank of Guyana, the nation ended the month of June with US$344,161,633 in its NRF at the U.S. Federal Reserve Bank. However, revenue garnered from the recent sale of the seventh oil lift has pushed Guyana’s total earnings to close to US$420 million.
Although the benefits are already immense, Reuters had reported that Guyana is aiming to increase its oil royalties, and revamp other contract terms as part of a new profit-sharing agreement (PSA) for future crude and gas projects now in its draft stage.
The new PSA will be tougher than that negotiated with the Exxon consortium, and could be ready “within six months or so,” Vice-President Bharrat Jagdeo said on the sidelines of the Offshore Technology Conference in Houston, Texas.
“We have made it clear that in any new PSA we negotiate for those blocks, the conditions will be very, very different than the ones from the Stabroek block,” Jagdeo said.
This would be timely, since, according to Westmount Energy, Guyana, with its positive prospects, and vast potential remains one of the few areas of “blue-chip” interest in high-impact exploration. Investopedia defines blue-chip stocks as secure investments, because they pay out dividends, as well as consistently and steadily grow over time.
Generally, despite the lingering adversities, projections for Guyana remain positive, with the country set to record economic growth of 20.9 per cent at the end of 2021, another 26.0 per cent in 2022, and 23.0 per cent in 2023.
The country’s GDP of about $6.8 billion is expected to more than double by 2025, reaching over $14 billion.