Despite the recent collapse in oil prices and a dim medium-term outlook, there appears to be no end to the intoxicating superlatives which knowledgeable international industry analysts are employing to quantify the extent of Guyana’s oil reserves and potential wealth. At the same time, those analysts are urging Guyana not to look a gift horse in the mouth by going down the same counterproductive road taken by other underdeveloped countries that failed to make the most of the oil wealth with which they had been blessed.
The latest such assessment of the extent of the country’s oil riches and the possibilities that repose therein has come from the United Kingdom-based global energy consulting group, Wood Mackenzie, which says that its analysis “models almost six billion barrels of oil in Guyana’s oil fields and sets a time line of 2028 for the lifting of output to over 1.1 million barrels per day. At that point, Wood Mackenzie says, Guyana will be elevated to the position of being just the eleventh country in the history of oil recovery to reach the 1 million barrel-per-day milestone.
“Untold riches” is what Wood Mackenzie says Guyana can anticipate from its giant oilfields. “The giant oil fields will deliver untold riches to this nation of only 0.8 million people,” Wood Mackenzie declares, adding that Guyana will, as output builds, rise to be king of the heap. Production per capita will eclipse even that of the leading Middle East producers, Kuwait, UAE and Saudi Arabia,” it adds. A significant bonus, Wood Mackenzie explains, has to do with the fact that Guyana’s crude is “mostly light” so that it meets “the market’s increasing need for relatively low-carbon-intensity liquids. They are also low cost – the breakeven of under US$30/barrel (NPV10) competes with the very best new projects, conventional or unconventional,” the UK firm adds.
According to Law Insider, NPV10 means with respect to any Proved Reserves as expected to be produced from the properties of the Corporation, the net present value of the future net revenues expected to accrue to the Corporation’s interests in such Reserves during the remaining expected economic lives of such Reserves, discounted at 10% per annum.
All of this, however, amounts to no more than an objective perspective of where its oil reserves can take this 83,000-square mile republic. Mindful of the examples of other developing countries, notably in Africa, which fell flat on their faces, oil wealth notwithstanding, Wood Mackenzie says that given the likelihood that Guyana may well be “the last new major oil-producing country,” what is important now is that critical lessons are learned from those who have gone before. “There’s a long list of developing countries, including some in Latin America, which have struck black gold and failed to make the most of it,” Wood Mackenzie reminds.
Even so, the UK analysts wax optimistic about the prospects of Guyana ‘getting it right.’ The country’s economy, it says, will be transformed as annual capital expenditure on the project will average US$4 billion a year this decade – the same as the 2019 GDP. “Much will be spent on production equipment outside Guyana, but considerable investment will flow into infrastructure onshore and offshore to support the growing oil industry.” More than that, the firm says, the prospects for immediate positive change are good given that, according to its calculations, “revenue from royalty and tax starts flowing this year and climbs progressively to an annual peak of US$13 billion by 2029.” Annual tax income, Wood Mackenzie says, will average US$7 billion over the next 20 years – almost double 2019 GDP. After averaging 2.9% annually this century, Wood Mackenzie forecasts a 78% rise in 2020; adding more to GDP in one year than the economy has accumulated since 1960.
Extending its optimism beyond its predictions, Wood Mackenzie says that, in time, Guyana’s revenue from the country’s oil & gas industry may be even greater than its analysis suggests. “There’s no sign that success with the drill bit is waning and there are plenty of exploration wells to be drilled,” it says, adding that its fiscal estimates “exclude 2 billion barrels of discovered gas and condensate reserves for which there is no plan yet for commercialization.”
