WITH the staggering series of oil discoveries in Guyana since 2015, it is easy to focus on the short term. But with a growing slate of projects planned for the next few years, it is worth examining the long-term path forward for the rapidly developing energy sector, the breadth of Guyana’s oil wealth, and how key issues all tie together.
First, in the last few years a large number of investments have positioned Guyana as an emerging leader regionally and on the global stage. The oil sector is expected to grow Guyana’s GDP by 57.8 per cent in 2022 alone.
Earlier this year, the Yellowtail development project was approved and financed by a US$10 billion investment from the Stabroek Consortium and is expected to begin production by the end of 2025. This is the largest single investment in Guyana’s history. Other sectors like construction and agriculture are also feeling the benefits from growing demand.
However, while the state of the country, energy sector, and local economy is changing—they won’t change overnight. Oil and gas development has a timeline measured in decades, and it’s critical that oil and gas projects continue to move forward to meet global demand and support burgeoning industries.
In recent months, production has ramped up as the Liza Unity is now producing the lighter, sweeter “Unity Gold” grade of crude oil that improves upon the original Liza grade with a lower Sulphur content. Total production is now just over 300,000 barrels per day with total capacity set to increase to just under 350,000 barrels per day by the end of the year.
This is only the beginning. There are two more projects expected to start production by 2024 and as many as ten floating production storage and offloading (FPSOs) vessels could be operational by the end of the decade.
According to consultancy group, Wood Mackenzie, development in Guyana could reach an output of about 1.1 million barrels per day by 2028, setting Guyana on track to be among a select group of nations in the one million barrels per day club. This would put Guyana alongside established oil powers like Venezuela, a long-time oil producer now averaging about 668,000 barrels per day, or Mexico which produces about 1.5 million barrels per day.
According to Rystad Energy, as more discoveries are being made and developed at the current pace, Guyana could earn a cumulative US$130 billion dollars by 2040 from profit sharing and royalties.
Notably, Guyana already earned over US$96 million from its last oil cargo sale with a total of six expected this year. Guyana has, luckily, been able to take advantage of high oil prices caused by surging demand and geopolitical instability. However, analysts have also noted that Guyana’s production sharing agreement continues to perform well under many different price scenarios.
Notably, Guyana is still in the initial production phase where the costs of the initial exploration and development are still being recouped. As more projects come online and startup costs are paid off, Guyana will be able to reap greater and greater shares of the revenues through profit sharing.
Just recently, a delegation of over 80 investors from Saudi Arabia visited Guyana to discuss investment prospects with members of the government and private sector. This meeting is just one in a series of high-level visits completed or scheduled to Guyana by trade delegations from various countries.
President, Dr. Irfaan Ali, has been focused on establishing a framework for bringing in partners and new investments into the country, and at the forum he declared: “Let me be clear, the only thing that determines who our partners are is very simple: we are not hooked on any ideological partner, we are not hooked on any partner by superiority, we are not hooked on any partner by ethnicity; we are hooked on partners who embrace us with principles and values and who give Guyana the best possible deal.”
As Guyana seeks to reach long-term goals for sustainable economic development and building other sectors beyond energy, overseas investment will be key. The global reach of Guyana’s oil industry is growing as its presence as one of the top global destinations for investments in offshore oil and gas reaches international and regional radars.
Guyana is well on the trajectory that will see it becoming the number two oil producer in South America by 2030.
Oil provides a once in a generation opportunity for the government to be strategic with its new-found revenues and chart a path towards diversifying the economy and provide a sustainable economy of value for Guyanese. The fruits from this investment will not appear overnight. But with continued growth and an investor-friendly climate, every Guyanese man, woman, and child will see the effects of oil and gas wealth in the years to come.