With an estimated 8 billion barrels of oil and a projected fiscal windfall of US$49 billion in revenues over the next few decades, Guyana is poised to become a major player in regional and international energy markets.
This is according to a recent report by the Inter-American Development Bank titled “Traversing a Slippery Slope: Guyana’s Oil Opportunity”.
The report which was authored by analysts; Lenin H. Balza, Emily Brearley, Dillon Clarke, and Victor Gauto states that the Stabroek discoveries are expected to place Guyana among the largest oil-producing countries in the region.
“It is undeniable that the fortunes of Guyana’s hydrocarbon discoveries will usher in a paradigm shift that will reshape the country’s development trajectory,” the authors say.
Using a model of five developments which are expected to be in full operation in the Stabroek block by 2025, the IDB report states that Guyana is projected to rake in around US$49 billion by 2054.
It explains that with the progression of Liza Phase 1 into the production phase, the planned development of the other projects requires some extrapolation of the economic parameters given the projected commissioning of 5 projects to achieve a publicized production level of 750,000 barrels of oil equivalent by 2025.
The Liza Phase 2 is planned to commence production in 2022 at a capacity of 220,000 bpd using the Liza Unity floating production storage and offloading (FPSO) facility; Payara also at a capacity of 220,000 bpd is scheduled for 2023, using the Liza Prosperity FPSO. To meet forecasted production levels in 2025, the model assumes two additional projects, projects 4 and 5, which should share similar production profiles to Liza Phase 1 at 120,000 bpd.
Further, the model assumes that each project will have a production life of 20 years with a two-year decommissioning period.
According to the authors, however, the model does not include gas, given the expected use to improve crude recovery in current fields and new projects, and also, the potential for the development of gas-to-shore facilities and associated industries.
They also explain that the model excludes the likely commissioning of other projects beyond the 2025 horizon for the Stabroek license area, as well as, the development activities that may manifest into production from the other license areas.
To date, the Stabroek field is estimated to hold more than 8 billion barrels of oil equivalent after 16 discoveries.
According to the authors, Guyana as a new oil-producing country – despite debates about the ”best deal” – is poised to drastically transform over the near and medium term.
However, they were quick to point out that “the direction and magnitude of transformations will depend on a combination of cohesive policies and strong institutions to ensure the realization of optimal value capture from resource exploitation and mechanisms for benefit transfer to all segments of Guyanese society, for this generation and the next”.
“Thus, the phrase ”if managed well” must be affixed to discussions of how Guyana’s exploitation of hydrocarbons can be a vehicle for inclusive growth and inter-generational wealth creation”.
The authors contend that as a new oil-producing country in a turbulent global energy market, “navigating the challenges and risks associated with overreliance on the petroleum sector should be designed as part of long-term development strategies”.
Meanwhile, they argue that while the likelihood of adjustments to initial contract terms are probable, any improvement in Guyana’s government take for all its active petroleum agreements will translate to greater windfalls to the country and further accelerate the transformative impact of responsibly managed hydrocarbon extraction.
“Thus, the impetus is on policy makers to undertake the necessary internal analyses to determine whether the current PSAs are adequately reflective of the country’s position as one of the newest and largest oil plays in Latin America and the Caribbean.”
Minister Vickram Bharrat was given responsibility for the natural resources sector when the PPP/C Government was sworn in to office in August. He had said that the revenues from oil are expected to assist government in fast-tracking its development objectives which would see Guyanese enjoying a better quality of life.
