THE Russia-Ukraine conflict has shown how fragile the global market for oil can be, with some analysts predicting that, even after reaching a 14-year high of over US$120 per barrel, the price of oil could climb further and eclipse US$200 if Russia’s oil is unable to reach the world markets due to sanctions or supply disruptions. Russia is one of the largest producers of crude oil globally and a key player in the world market.

Guyana, a relative newcomer, is one of few countries with the promise and capacity to quickly ramp up the volume of crude oil available to the world. The current production capacity of just under 350,000 barrels per day could reach up to 800,000 by 2025 and 1.2 million by 2027, if approvals for developments continue to move forward at a reasonable pace. Guyana would become only the 11th country to achieve this milestone, and, importantly, one of few stable democratic countries to do so.

The rapid pace of development from initial find to first oil is a testament to the balance that has been struck between development and safety.

In early February, Vice President Bharrat Jagdeo stated that the government is working to ensure that everything is in place for the approval of the Yellowtail project, which he anticipates will occur “by the end of March [at the] latest.” This approval will boost oil revenues even higher if prices continue to remain high in the near to medium term. This means billions of dollars more for infrastructure and social welfare programmes as well as support for domestic industries like agriculture and fishing.

The Yellowtail development is in the prolific Stabroek Block where some 10 billion barrels of oil have been found since 2015. Once approved, ExxonMobil plans to drill between 41 and 67 wells at the development. At full capacity, this would mean an additional 250,000 barrels of oil per day in production. If the approval processes continue without delay, production at Yellowtail could begin by the end of 2025 and last for 20 years or more. This is good news for Guyana and the world. Oil from stable, democratic countries like Guyana can provide a needed boost to the global economy especially in times of conflict.

If approved, the Yellowtail project would be the country’s largest oil project yet, bigger even than the US$9 billion Payara development. According to research by Rystad Energy, Guyana could earn over US$310 billion at current reserve estimates at just US$80 per barrel. If the price for oil remains at its current premium in the years to come, Guyana could earn much more. That makes expeditious approvals important to capture as much value as possible from the project.

Keeping the approval process as non-political as possible is also vital. As tempting as it may be to place political conditions on project approvals, good regulatory systems are careful to shield regulators from day-to-day political pressures and keep regulatory decisions purely fact-based.

For the Yellowtail approval process, the National Procurement and Tender Administration Board reviewed technical and financial proposals from 12 companies for the review and evaluation of the Yellowtail Field Development Plan and selected the U.K. based consultancy Bayphase Ltd. to review the project. Bayphase Ltd. also evaluated the Liza and Payara Stabroek Block projects. There is also a draft licence already in place and a parallel evaluation process led by the Environmental Protection Agency (EPA) to ensure any environmental impacts are fully accounted for.

The EPA should be finalising the process for environmental authorisation after the period for public comments on the Environmental Impact Assessment ended late 2021. In preparation for approval, consulting firm, Environmental Resource Management, has submitted the EIA and other documents as part of the process and held public consultations. These stepping stones provide the project with a clear pathway to approval as the government collects input and evaluates the project.

As current approvals move forward, investor confidence in Guyana continues to increase. That helps other major contractors expand their operations in Guyana and hire more workers and subcontractors for the industry. SBM Offshore has already awarded conditional contracts to support the fourth floating production storage and offloading (FPSO) vessel for Yellowtail specifically.

Strong investor confidence is vital to building Guyana’s local capabilities, since the companies working to join the industry will need international partners and funding to compete at the highest levels. Delays in the approval processes or perceptions that the process is overly political could spook these investors away or cause demand for local services to dry up just as Guyanese can take advantage of it.

Stability and assurances that the government upholds its contractual obligations is a strong signal to investors of future projects within and outside the oil sector. With an efficient Yellowtail approval process, this sentiment is likely to continue for new projects. Guyana is also already benefitting significantly from the current Production Sharing Agreement, as demonstrated by the hundreds of millions in this year’s budget from the Natural Resource Fund.

Coming just after the start of production at the Liza Unity FPSO, approval of the Yellowtail development will be key to ensuring continued investor confidence, new jobs, and future funding for infrastructure and other programmes in the country.