Home Economics Oil discoveries have made Guyana the fastest growing economy in the world

Oil discoveries have made Guyana the fastest growing economy in the world

Oil discoveries have made Guyana the fastest growing economy in the world

In just eight years since ExxonMobil’s first offshore discovery in Guyana, the impoverished former British colony has grown into a major oil producer and exporter. In just four years, Exxon took the 6.6 million-acre offshore Stabroek Block from first discovery to first oil, an impressive feat, especially when considering the complexity of deep-water drilling in a frontier oil basin. The latest discoveries indicate that the Stabroek block contains more than 11 billion barrels of recoverable oil resources and that the Guyana Suriname Basin has a much greater petroleum potential than originally assumed. The fertile Stabroek block has proved to be a gold mine for the government of Guyana in Georgetown, despite the extremely favorable terms granted to Exxon’s leading consortium that operates the block. As a result, Guyana’s economy is growing rapidly and will continue to do so as long as the country’s oil boom gains momentum.

As of February 28, 2023, Guyana, according to the Department of Natural Resources, pumped 383,000 barrels per day. That petroleum is produced from the Liza oil field in the Stabroek block, which has a nameplate capacity of 360,000 barrels per day from two operational floating, production, storage and offloading vessels (FPSOs). It is speculated that by implementing efficiencies and operational improvements, Exxon could increase the output of those FPSOs to more than 400,000 barrels per day. That is all expected Guyana will pump 1.2 million barrels per day by 2027 as more projects in the Stabroek block come online. The next facility to become operational is the 220,000 barrels per day Payara project, which is due to start up later this year. Then there’s the Yellowtail development, targeting a nominal production capacity of 250,000 barrels per day, which is expected to come online in 2025.

The immense oil boom underway in Guyana, which will make the former British colony the world’s largest offshore petroleum exporter in just over a decade, is driving a colossal economic boom. It generates significant revenue for a once-tight government. For 2023 alone, petroleum exports are expected to increase earn more than $1.6 billion for Georgetown, and that’s on top of the received $1.1 billion in 2022. This will bring significant benefits to the country of approximately 800,000, which has long been one of the poorest countries in South America. Both Georgetown and international organizations believe that Guyana’s monumental oil boom, if properly managed, will lift the former British colony out of poverty, making it one of the wealthiest and possibly the richest countries in Latin America and the Caribbean.

According to the International Monetary Fund, the black gold has catapulted Guyana to the position of the fastest growing economy in the world in 2023. The international government organization has predicted that the gross domestic product of the former British colony will increase by a whopping 37.2% this year, which is the highest projected growth rate for a sovereign state worldwide. Amazingly, Guyana’s GDP is also expected to grow by an impressive 45.2% in 2024 as petroleum production and industry investment continue to increase. In a recent interview, Guyana’s former Prime Minister and President Sam Hinds, now the country’s ambassador to the US, stated that he expects GDP to double by 2027. In fact, GDP per capita is predicted to double from $6,000 to $12,000 over that period. , which, based on IMF data for 2022, indicates that Guyana will become the fifth richest country in South America, ahead of Brazil but behind Argentina.

It is possible that Guyana’s GDP will grow faster than predicted by the IMF as investment in the former British colony’s offshore oil boom grows rapidly. That significant investment inflow, which is expected to reach at least $7 billion by 2023, will drive further oil discoveries, the development of additional petroleum projects and ultimately higher oil production. The likelihood of further significant oil discoveries continues to increase as it becomes increasingly clear that the Guyana Suriname Basin contains much more oil than originally estimated by the United States Geological Survey. In a May 2001 report, the USGS estimated that the basin had an average undiscovered oil reserve of 15.2 billion barrels, which is slightly more than the 11 billion barrels Exxon found in the Stabroek block off the coast of Guyana.

Numerous oil discoveries have been made in the basin outside the Stabroek block. One of the most recent is CGX Energy’s Kawa-1 discovery in the Corantijn block. The company is drilling another wild well called Wei-1, which is expected to be completed in May or June 2023. There is speculation from Frontera Energy, which owns 77% of CGX. It has a 93% consolidated interest in the block, which the petroleum waterway that runs through the neighboring Stabroek block passes through Corantijn in Block 58 off the coast of Suriname where Apache and 50% partner TotalEnergies made five high-value discoveries.

In 2019, Tullow Oil announced a discovery in the Orindia Block where it is the operator with a 60% stake, while Eco Oil and Gas controls 15% and a joint venture between TotalEnergies and Qatar Petroleum controls the remaining 25%. That discovery turned out to be heavy acid crude, which was considered non-commercial at the time due to weak oil prices, though the find’s commercial potential was reevaluated in 2022 as petroleum prices skyrocketed. Orindive is estimated to contain 5.1 billion barrels of oil equivalent. Tullow and partners plan to drill another well in 2023 or 2024, with the most likely target being the Amatuk prospect which is said to contain 267 million barrels and has a 28.8% success rate.

A series of wells were also drilled on the Kanuku Block in which Tullow has an unexploited working interest of 37.5%, while operator Repsol holds 37.5% and TotalEnergies holds the remaining 25%. While two discoveries have been made on Kanuku as of 2020, both were considered non-commercial. The latest was the Beebei-Potaro wild well, completed in August 2022, which was especially disappointing. The intended reservoirs were considered to be of good quality but water-carrying, so the well was clogged and abandoned. Repsol is currently mapping its activities in the Kanuku block and incorporating the latest drilling results into the block’s subsurface models before starting another well. There is speculation that Tullow will relinquish his unexploited 37.5% stake in the block.

Investment in offshore Guyana, described as the world’s most exciting oil game, continues to increase. Not only are international energy companies exploring opportunities for farmers, but Georgetown launched the very first licensing round in December 2022, offering 14 offshore blocks, three in deep water and 11 in shallow water, to bidders. The submissions were supposed to close on April 14, 2023, but that has been postponed to July 2023 to give potential bidders more time to prepare their submissions and for Georgetown to implement the new regulatory framework and production sharing agreements. The auction has drawn significant interest from energy heavyweights including Shell, Chevron and Petrobras. Georgetown is reportedly considering another oil auction in 2024, which will encourage further investment.

Guyana is undergoing a transformative oil boom that is lifting the small South American country out of poverty and turning it into one of the continent’s largest oil producers and exporters. In just five years since Exxon’s first discovery in 2015 in the Stabroek Block, Guyana has become the fastest growing economy in the world. In 2020, as the rest of the world struggled with a pandemic-induced recession, Guyana shrugged off the effects and posted annual GDP growth of 43.5%. Since then, the country’s economy has continued to grow at a remarkable pace, growing by 20% in 2021 and then by a whopping 62% in 2022. It is the rising oil production that is responsible for this amazing economic growth. By the end of February 2023, Guyana was pumping 380,000 barrels per day, with an additional 220,000 barrels per day expected later this year. For these reasons, Guyana will be ranked as the world’s fastest growing economy by 2023, with GDP growth expected to be as high as 37%.

By Matthew Smith for Oilprice.com

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