Oil Discovery Could Make Small Country One Of The World’s Richest And It’s Not Ready For It

From The Daily Caller

1:44 PM 02/08/2019 | Energy

Jason Hopkins | Energy Investigator

Another two major oil discoveries have been made off the shore of Guyana, all but assuring the impoverished South American nation an immense flow of wealth.

ExxonMobil announced two big oil discoveries in a region approximately 120 miles off the shore of Georgetown, the capital city of Guyana. The finds were made at the Tilapia-1 and Haimara-1 wells in what is known as the Stabroek Block — a region that is now considered one of the most prolific offshore oil potentials on the continent.

“We expect this area to progress to a major development hub providing substantial value to Guyana, our partners and ExxonMobil,” the president of ExxonMobil Exploration Company, Steve Greenlee, said in a prepared statement Wednesday.

Developers in the Stabroek Block keep uncovering more oil. ExxonMobil, along with U.S.-based partner Hess Corporation, revealed in July 2018 that there was more oil in the region than previously anticipated, announcing an estimate of 4 billion barrels — one of the largest oil discoveries in the past decade.

However, the recent finds at the Tilapia-1 and Haimara-1 wells bring the total number of discoveries in Stabroek block to 12, resulting in a whopping estimate of over 5 billion oil-equivalent barrels of recoverable oil. The Stabroek Block can now potentially hold at least five floating, production storage and offloading vessels, according to Exxon, and churn out over 750,000 barrels of oil a day by 2025.

Development in the region will begin quickly. The “Liza Phase 1” is advancing on schedule and expected to start producing up to 120,000 barrels of oil per day by 2020, with “Liza Phase 2” anticipated to begin halfway through 2022.

The oil discoveries are poised to transform the tiny country of Guyana.

With a population around 780,000 and one of the poorest countries in South America, Guyana is expected to benefit immensely from the dramatic uptick in production off its shores. In fact, experts predict the impoverished nation is poised to become one of the wealthiest countries in the world and the next petro-state.

Workers on an oil rig. (Shutterstock)

Workers on an oil rig are pictured. (Shutterstock)

“This continues to be positive news for the people of the Co-operative Republic of Guyana, but the real substance of these finds will come when all Guyanese are able to benefit from these discoveries, whether directly and/or indirectly,” stated Mark Bynoe, the director of Guyana’s Energy Department. (RELATED: Ocasio-Cortez’s Own Website Features Image Of Offshore Drilling)

If, for example, oil sells at $60 a barrel with Exxon and Guyana splitting profits at roughly 50-50, the South American nation would take in well over $5 billion in annual revenue. If production reaches 1 million barrels a day, Guyana would be raking in somewhere around $10 billion a year.

However, there are concerns that Guyana is wholly unprepared for the rush of money soon to come its way. The former British colony has recently suffered from political turmoil. The country’s parliament ousted President David Granger’s government in December in a vote of no confidence.

“There is no way the explosion of money will be managed properly,” Amy Myers Jaffe, director of energy security at the Council on Foreign Relations, explained according to Axios. “Here you take this poverty-stricken country and make them Qatar in three years.”

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HT/Latitude

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93 thoughts on “Oil Discovery Could Make Small Country One Of The World’s Richest And It’s Not Ready For It

  1. Not to worry, socialistic political greed will screw the average Guyanian and in 10yrs he/she will only be slightly less poor than they are today – only there will be a ton of new buildings and a tripled governmental payroll.

    • Winning the lottery can be really bad luck. It can really mess up your life. Then, after your relationships are totally messed up, your chances of bankruptcy are huge and you’re in much worse shape than before you won the lottery. My guess is that the problem applies as much to countries as it does to individual people.

      Norway did well. The Netherlands got Dutch Disease. The Alberta Heritage Fund, meh.

      • The people who would know how to put a lottery prize to good use, are the same people who wouldn’t be playing the lottery in the first place.

    • IF oil reserves were a clear path to wealth, what happened to Nigeria? Venezuela? Russia? The Stans?

      Oil-rich countries also need good governance, but too often they get a dysfunctional, greedy, criminal aristocracy – an absolute monarch/aka dictator, his obedient civil service and military whose only role is to suck up to the Boss and stay in positions of power.

      That is what happened to Nigeria, Venezuela, Russia and the Stans. The USA dodged a bullet when Hillary was defeated. Canada, on the other hand, got Trudeau – maybe not a King yet, but a Clown Prince with the absolute powers of an ancient monarch.

  2. It all depends on the people running the place. If they are corrupt or corruptable then the wealth will be squandered. If they are not then they could follow Norway’s example and put the revenue in a national trust fund to finance sustained development. Given the example next door I do not hold my breath.

    • you think if Guyana was well managed they would be that poor, Do not expect the average Guyanese to see much change in their prosperity

    • It all depends on the politics.

      -A country can get a lots of things wrong and still have its people prosper. But the political system it adopts is not one those it can get wrong.
      – paraphrasing the late Charles Krauthammer

    • Not to worry. They’ll be fine should they just follow the Canadian example. Newfoundlanders have ridden Hibernia to untold personal riches since its commencement in 1997.

    • The problem is, people are so easily corruptible. Also, can you imagine the immigration problems they are going to have soon? People will pour in from the surrounding poor nations. I don’t expect this to end well for them.

  3. Guyana better watch what’s happening to neighbor Venezuela. The US State Dept. would manage all that money better, right?

      • Considering the current state of Venezuela I wouldn’t be surprised if Maduro did send his army in there to take physical control.

        • The Venezuelan army isn’t about to march into Essequibo, they lack the equipment and logistics. Maduro doesn’t trust them, he’s been jailing and torturing officers and sergeants, and they are kept from rebelling by a spy network, and Cuban military placed in the chain of command

    • Watch for the State Dept. puppet Guaido’s move.
      Have we repeat of Kuwait – where Iraq horizontal drilling was purveyed as the reason for Iraq War 1 by Bush senior?

      • I seem to remember that Iraq War 1 was triggered by the Iraqi invasion and annexation of their neighbour Kuwait.

      • Actually Saddam Hussein’s justification for invading Kuwait was a claim that the Kuwaitis were stealing Iraqi oil. He was not claiming sideways drilling, that was just how some idiots interpreted his statements.

        What George H. W. Bush did was oppose the invasion.

        • Correct. And Saddam made that claim because they also claimed the entire territory of Kuwait. That and he didnt want to repay his loans…

        • The rather expensive oil exploration maps of the region did show provocation with horizontal drilling. Sure Saddam was easily profiled. GHW refused to occupy Baghdad – it took another Bush to do that based on Mr Blair’s dodgy dossier (yellow cake).
          Iraq had nothing to do with 9/11, had no WMD’s. Libya was next on the list, and Syria. Bolton may think Iran is still on the list.

          All of this is a repeat Mackinder policy- geopolitics. Trump will end this, the very basis for the divide and conquer primary concern of Chatham House. Note how the Dems howl for more war?

        • As i remember the invasion never happened. Only proof was some presented satellite photo, which -10 years later- found by a reporter to be fake – photo’s from same moment from other agency didn’t show any Iraqi movement.

          The biggest surprise during that televised invasion was that there was not any resistance, most soldiers being fled already.. ..or maybe just weren’t there at all.

          • And I suppose, in your world M. Hillridge, the moonlandings were fake and 9/11 was a plot of either the US government, the jews, or both working in concert.

      • I didn’t realize horizontal drilling was a euphemism for marching an entire army into another nation and camping out on their streets.

      • Not just paranoid, but utterly ignorant of history.
        PS: I just love the way you skip right over the trivial matter of Iraq invading Kuwait.

    • LOL.
      That’s the lesson you draw from those two examples?
      Chavez runs US and Euro oil companies out and the place can barely produce enough oil now to lubricate a pair of roller skates and the citizenry is eating its pets while Guyana is set to do just the opposite.

    • I think the compunction to feed the socialist beast (rather than invest in sensible diversified development) has a lot to do with that.

        • Both. Gasoline in Venezuela is priced at something like 5 cents per 60 liters (as an example of pandering to the socialist beast), yet his daughter is worth something like $4 billion.

          • Just checked. Price is currently about 1 cent per liter. The 5 cents per 60 liters was in an article by a Russian journalist. Must have been Russian propaganda. Or maybe it fluctuates a lot due to the current economic situation.

          • Nothing new there. Socialism always wrecks a country’s economy and produces starvation. Kind of lets you know what is in store for America if we let the Democrats to gain total control of the government again, doesn’t it.

    • “Countries where the only asset is oil or other minerals seem to not do very well politically”:

    • This is typical of Venezuelan idiocy…

      “More surveys are pending to identify commercially viable options for gas,” said Antero Alvarado, a managing partner at consulting firm Gas Energy Latin America. “Past PDVSA studies ignored identifying gas deposits because the focus was always on oil.’’

      Gas and oil are generally indistinguishable on seismic data. If the rocks are suitable for direct hydrocarbon indicators (DHI), gas anomalies may have a higher amplitude response than oil (depending on the gas-oil-ratio of the oil), but otherwise, they are the same type of seismic anomaly.

      If PDVSA was ignoring gas-prone prospects in the past, and they want gas prospects now, they just need to re-interpret the data… They don’t need a new seismic survey.

      And… If Venezuela thinks that this is a good time to be drilling deepwater gas prospects… their idiocy has exceeded escape velocity.

      • Doesn’t the data from previous surveys still exist?
        Even if you did need different algorithms to search for oil instead of gas, you could just re-run the existing data using the new algorithms.

        (I remember reading about companies re-running existing data after improved algorithms had been developed and finding new places to look for oil.)

    • This is deep offshore work. Only the biggest players, like Exxon can afford to play this game – it’s going to take several billion dollars worth of investment before a single dime is earned. this ain’t the Texas oil boom days!

      and that’s why this claim that Guyana is going to be “overflowing” with wealth is a bit ridiculous – even if everything goes perfectly, and it never does, it’s still going to be at least a decade before any wealth starts to flow through to the locals.

      • Wealth is already flowing to the local population. The way it works, offshore exploration requires a shore base. This includes warehouses and dock facilities, work boats, a heliport, helicopters, a medical facility, offices, a hotel, rental housing, etc. Some companies build camps (Many years ago I supervised the supervisors of a large camp in Russia so I’m a bit familiar with the camp logistics and personnel issues).

        A smart company will start training locals ASAP for as many jobs as possible for three reasons: 1. Quite often a country won’t give a work visa to an expat if a local can do the job. 2. It’s good for relations. 3. It saves money. This can also include taking youngsters abroad to finish high school and study either two year technical degrees or engineering, accounting, etc.

        The amount of money flowing in grows once the development phase starts, because the operator will start training personnel. I assume Guayana will lack the required personnel but they’ll import it from Trinidad. However, those jobs are well paid, pay income taxes, etc.

        Finally, depending on the contract terms, there may be cash payments and bonuses, and a royalty paid on the gross income.

        In conclusion, the problem they face is inflation and how to manage the cash flow properly.

        • Yep… And ExxonMobil goes to great lengths to train and employ locals and do other things to foster good will.

          The big bucks from production-sharing and/or royalties may be a few years down the road, but lease bonuses and all the rest of the front-end investment is already well-underway.

          • unless I pushed the buttons on my calculator wrong, the big bucks (per the numbers in the article) amount to about $10,000 per person per year.

            It is a lot for the average local. And hopefully it can transform the country (1.5% HIV rate; worlds leader in suicide rate; lowest South America literacy rate), but it cannot raise them to the level of wealthy.

  4. A brief excerpt from Bloomberg:
    https://www.bloomberg.com/news/articles/2019-01-07/why-venezuela-is-clashing-again-with-old-foe-exxon-quicktake

    “…What is Venezuela’s interest in Guyana?

    The South American neighbors have been disputing their boundary since the 1800s, with Venezuela claiming everything west of the Essequibo River — about two-thirds of what Guyana considers its territory. In 1899, an international arbitration panel awarded Britain the territory; Guyana gained independence from Britain in 1966. Venezuela says the 1899 decision was invalid and has periodically demanded the area be handed over, in some cases threatening military action…”

    • Venezuela hasn’t paid any of it’s naval forces for several months, they are foraging for food, they rarely can find fuel to leave port, and the few ambitous Venezuelan Navy ships that *do* leave port now act mainly as pirates, halting and looting any merchant vessels that are unfortunate to pass near them.

      They’re not even a real military force anymore. They’re just a gang of thugs who’ve inherited a pile of equipment that they don’t know how to maintain.

  5. “120 miles off the shore of Georgetown, the capital city of Guyana”

    Thar sounds like international waters.

  6. “Amy Myers Jaffe, director of energy security at the Council on Foreign Relations”

    yeah, they need some “freedom” to help manage that oil money

  7. If Guyana is smart, it will allow private oil companies to produce this oil but charge a healthy but not prohibitive royalty which it will use to improve its education, health, and judicial systems — the kinds of polities which will enable its citizens to rise out of poverty. If it’s dumb, it will nationalize these assets.

    • That’s the Socialist way of doing it. It’ll be the Capitalist way, grab the money & share it out amongst your cronies to keep you in power.

      • Some people really have strange ideas about what capitalism is.
        If they are “grabbing the money”, they aren’t capitalists, they are socialists.
        Spreading the money amongst your cronies to keep you in power is what socialists all over the world have been doing for the last 100+ years.

  8. Guyana has a problem with human trafficking. The government promises to clamp down on it but arrests and convictions are almost zero. Mining facilities have been accused of using slave labor. Zika virus is prevalent and a health issue. Guyana has a “brain drain” problem because educated people leave the country as soon as possible.

    • A surprising number of Guyanese expats live in Pickering, Ontario. I think they might consider going back if the money is used honestly.

  9. Nice article, except that the picture on the home page should show a deepwater FPSO (tanker with a deck full of equipment), rather than a bottom-founded floatover production platform.

  10. Yet the Synod of the Church of England is specifically dealing with ExxonMobil to get them to conform to the Paris Agreement- don’t ask me what that means- but surely it should be telling Exxon not to develop there?

  11. Leaders will scam their ways into power and then create corrupt patterns of money management that will finance their own interests, while the commoner continues to struggle. That’s my prediction.

  12. 5 Bbbl is similar in size to the forties and stratfjord fields in the north sea, the east texas oil field and one twentieth of the Ghawar field in Saudi Arabia.

    • World consumption of Oil is running about 93 million barrels per day.

      5 or 8 billion barrels wont go far.

  13. 50% of 750,000 barrels a day at $60 evenly split among 780,000 people is… $30/day.

    No, that can’t be right.

    Call the population in a few years 1 million, revenues of $5 billion per year is… $5000 per year per capita.

    Is this really all Qatar and Saudi Arabia make per person?

  14. Bad timing. Such a shame that they should discover this just when we have decided to give up carbon-based fuels in 10 years.

  15. Most likely, Guyana will go the way of oil-rich Equatorial Guinea: a population that lives half-naked in poverty while the politicos buy Armani suits by the dozen.

  16. Guyana is expected to benefit immensely from the dramatic uptick in production off its shores. In fact, experts predict the impoverished nation is poised to become one of the wealthiest countries in the world and the next petro-state.

    Here’s hoping some people in Guyana have paid attention to what’s happened with Venezuela.

  17. I am sure the UN will be right there to interfere and try to pull it under their control ( think UNESCO). THey will drain the bank and leave the people impoverished.

  18. “The Stabroek Block can now potentially hold at least five floating, production storage and offloading vessels, according to Exxon, and churn out over 750,000 barrels of oil a day by 2025.

    Development in the region will begin quickly. The “Liza Phase 1” is advancing on schedule and expected to start producing up to 120,000 barrels of oil per day by 2020, with “Liza Phase 2” anticipated to begin halfway through 2022.”

    The Prime Minister should be keen to contact the former British colony to make a mutually beneficial bi-lateral trade agreement. She’s probably on the phone right now.

  19. “Development in the region will begin quickly. The “Liza Phase 1” is advancing on schedule and expected to start producing up to 120,000 barrels of oil per day by 2020…”

    Isn’t this defying Special Relativity? Oil production approval by 2020 exceeds the speed of light.

    Let Exxon not forget that the US has placed sanctions on the state-owned oil producer in Venezuela.

  20. “Oil Discovery Could Make Small Country One Of The World’s Richest And It’s Not Ready For It.”

    Well I’m probably not ready to become fabulously rich either. But I promise to do my best, should the burden be thrust upon me.

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