Interesting Times for Guyana; Curse of the Crude

Guyana holds the status of one of the poorest nations in Latin America and the western hemisphere. With a population of fewer than 800,000 people and a per capita income of a little over 8000 USD, it stands at a crucial precipice.

In 2015, Exxon Mobil; one of the leading oil exploration companies of the world found an estimated 3.2 billion barrels of oil off the shore of Guyana, the site of the drilling has been named Liza-I. Since 2015, with further exploration, it has been evaluated that the oil reserves may be over 4 billion barrels and more such discoveries have been predicted.

The Guyanese crude oil that has been tested is said to be heavier than the light crudes that have been discovered in the United States and of a better quality than that of Venezuelan crude which is said to be heavy and adulterated. The Guyanese oil is said to produce better quality of diesel and petroleum once refined.

The oil discoveries have the potential to transform Guyana. The country is staring at an opportunity worth 20 billion USD. A total of eight oil wells have been located by Exxon Mobil approximately 120 miles off the coast of Guyana. The current Guyanese GDP of a modest 3.6 billion USD stands to quadruple in value by the end of the next decade. The potential windfall could be the principal force behind pushing Guyana out of poverty and placing it on the road to development. The small population of the state also translates to more resources made available to all citizens of the country by the oil boom. Georgetown could see itself as one of the richest capitals in South America

However, oil has a tendency to bring with it as many sorrows as appendage of joy. Autocracies, civil wars, and wars fought to establish democracy in tyrannical states have all been fueled by oil in addition to the destruction of economies and complete failure of states. Discovery of crude oil can easily turn into a curse for a country when it is not equipped to manage the consequences of such a discovery.

The ‘Dutch Disease’ or the further impoverishment of countries fueled by their own natural resources has been a story that has repeated itself around the world. Guyana’s neighbor to its west; Venezuela, is a cautionary tale and the exemplification of the ramifications of maladministration, corruption, and lack of foresight. While Guyana’s coastal seabed maybe gushing with oil, the Guyanese capability to handle the responsibility of this gargantuan financial opportunity that this oil discovery provides, raises more questions than answers. Guyana is far from being politically, educationally, socially, environmentally, economically or in terms of its infrastructure, capable of handling the potential cash inflow that the off-shore crude oil discovery is set to provide.

Guyana is principally dominated by two ethnic groups; the Afro- Guyanese and the Indo-Guyanese. The first group is comprised of the descendants of the slaves that were brought to Guyana by the British who were the Guyanese colonial masters till 1970 and the second group is the descendants of the indentured labor that was brought to Guyana by the British after the abolition of slavery by the British in 1833. The Afro-Guyanese and the Indo-Guyanese are not only the two most populous ethnic communities of the country they are also the two groups that dominate the politics of the country. People from the two communities often tend to mistrust political candidates of the other ethnicity and a general feeling of suspicion arises between the communities from time to time.

The mistrust between the communities has transcended into the country’s politics. With a massive oil-payday on the horizon, the Guyanese parliament has been abuzz with activity. Unfortunately, none of the political enthusiasm is even remotely related to equipping the country for appropriate utilization of the potential oil revenues. The Guyanese Parliament on 22 December 2018 voted against its current government and the no-confidence motion against the David Granger regime has forced an early election cycle upon the country. The elections are set to be held in March 2019 and everyone is strategizing to win the oil lottery. The politicians on two ethnic sides stand to benefit the most from the oil boom. Misappropriation of funds and corruption is widespread in the country and the possible revenue from the oil-fields has the potential to exponentially increase the level of corruption in Guyanese politics.

It would be an understatement to say that Guyana needs to develop its infrastructure. Guyana needs everything from schools to highways to hospitals, and the expected currency gains from the oil would be able to provide it with the capacity to develop those facilities, however, the Guyanese capability to appropriately utilize the windfall is not guaranteed. Guyana does not have the resources or the knowledge to handle the revenue that the oil fields are set to produce. The country neither has the infrastructure nor the institutions to manage the oil revenues. A majority of Guyanese graduates often migrate to countries like the US, Canada, and the UK. The country lacks engineers, architects, oil technicians, skilled laborers and administrators. No potential blueprints have been drawn for oil refineries or energy producing plants.

At this moment only 600 Guyanese citizens would be directly impacted by this discovery of oil, the number is estimated to increase to a thousand. Even in a small population of 800,000 people, a direct impact of the discovery 4 billion barrels of oil on just a thousand people is disheartening to say the least. Guyana has failed to recognize the opportunities that this discovery presents and has found itself unable to look beyond the revenue by royalty.

There is also the question of the environment. Guyana is not equipped to deal with any crude oil-related disasters such as potential oil spills. Guyana is a country of Amazonian Rain Forests and great biological diversity on its beaches. The people living on the coast are predominantly fishermen who are afraid of a potential oil spill and loss of their livelihoods as well as the destruction of their homes. Guyana has not come forward with any contingency plans yet.

Following the observable trend, Guyana is set to make a fraction of its populations exceedingly rich leaving the others in abject poverty, impoverishing them further as the country may find itself in a never-ending cycle of shortages and inflation in the future. If any lessons are to be learned from Venezuela and Trinidad and Tobago, Guyana should focus on building capacity by building infrastructure and institutions, and diversifying and stabilizing its economy. Using the revenues to build infrastructure as well as saving for the future and investing higher-education, health, and sustainable development would help Guyana make productive use of its oil revenue. Norway would be an apt example of successful and appropriate use of oil revenues. As Guyana gets ready to join the legions of oil-producing nations, it cannot be said with certainty what the future holds for the country, but it’s safe to say it has some interesting times ahead.

Image: TUBS [CC BY-SA 3.0 or GFDL], from Wikimedia Commons

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of The Geopolitics.

Creative Commons LicenseThis work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Sikh Diaspora’s Increasing Political Clout

The Sikh diaspora has distinguished itself in different walks of life globally -- business, medicine, law, corporate sector. In recent years, Sikhs have also...

Why Is Japan Boosting Its Military Capabilities?

The second Sino-Japanese war lasted from 1937 until 1945 and was a protracted conflict between China and Japan. When Japan was finally defeated in...

Flying into Uncertainty: The Shadow Cast by Israel’s Drone Strikes

Over the weekend, the Israeli Intelligence Agency carried out an attack on an Iranian missile facility located in Isfahan, Iran. Iranian officials allege that...