May 2022, Vol. 249, No. 5


New Prospects Emerge in Guyana-Suriname Basin

 By Gordon Feller, P&GJ Correspondent 

In 2000, the federal government’s U.S. Geological Survey, based in Washington, D.C., identified the Guyana-Suriname Basin as having the second highest resource potential among unexplored oil and gas basins in the world.

It estimated the “mean recoverable oil and gas reserves” at more than 13.6 billion barrels of oil and 32 Tcf (906 Bcm) of gas. In the next few years, some large investments will flow into Guyana. The primary exploration activities are now being conducted primarily offshore, in the Atlantic Ocean. 

Until 2015, Guyana remained largely unexplored, with no significant oil and gas (O&G) discoveries. Today, it is among the 25 largest reserve-holders in the world. Guyana is on the brink of a major expansion of its O&G sector, to world-class scale, with the first oil flowing in March 2020. Exploration results—with an unprecedented success rate above 80%—confirmed estimated gross recoverable resources of over 5 billion barrels of oil, as of December 2018. This puts Guyana just above Sudan and India on the global table.  

The major size of these discoveries presents a historic opportunity for Guyana to leverage the revenues generated from oil production into sustainable development and inclusive growth. A well-managed O&G sector can bring huge positive and sustainable impacts to Guyana, including socioeconomic growth and positive economic externalities.  

The main economic impact of the oil sector on Guyana is expected to take place through oil revenues. The O&G sector is also expected to impact the economy through the sector’s demand for services and infrastructure, job creation and the potential access to cheaper and cleaner electricity.  

Guyana has never been an O&G producer, and, as such, lacks the policy, legal and regulatory frameworks and institutional capacity needed to maximize the benefits and minimize downside risks associated with the sector.  

The O&G sector affects multiple layers of the economy and impacts the livelihoods of present and future generations, the environment and local communities. If poorly managed, the development of O&G resources can be economically and socially costly for a country.  

Based on experience in resource countries such as Botswana and Canada, positive impacts on overall poverty levels are achievable while mitigating risks with good governance, investing in the quality and capacity of public and private institutions, investing in skills and technological capacities, efficiently and transparently collecting and managing revenue, and soundly managing macroeconomic and fiscal policies.  

The government is keen to follow the example by investing in the strengthening of its institutions and building capacity to manage O&G resources. 

Guyana’s legal and regulatory framework for the O&G sector needs to be reviewed and updated with a view toward  maximizing benefits to the country and affected communities, managing risks (technical, environmental, social, financial) and building capacity to engage effectively with investors.  

Currently, O&G sector activities in Guyana are subject to legislation drafted when Guyana was a frontier oil country. Guyana’s national government intends to modernize its legal and regulatory framework in preparation for developments in the sector.  

Preliminary drafts of key legislation have been prepared and an in-depth review of the legal and regulatory framework is currently on-going with the support from various partners, including the Commonwealth Secretariat, the World Bank and the Inter-American Development Bank.  

Institutional capacity to oversee and manage the O&G sector is limited. There is a large capacity gap at political and technical levels responsible for the management and oversight of Guyana’s nascent O&G sector. This includes a shortage of O&G experts in the relevant ministries and departments.  

The buildup of institutional capacity is crucial to improve the Government of Guyana’s bargaining power vis-à-vis investors in situations of negotiations, oversight and enforcement. 

Guyana has been a natural resources-dependent country for decades, but it never established resource management and planning tools, such as a sovereign wealth fund (SWF). The oil finds, however, have prompted the country to pursue the establishment of a SWF.  

The Natural Resource Fund Bill stipulates that oil resources are to be used to finance public investment and to stabilize public expenditure safeguarded by a SWF for use by future generations. Weak government capacity and governance are key obstacles to a successful implementation of the SWF legislation, which the National Assembly passed in 2019. 

A new World Bank-funded project is being launched to enhance Guyana’s legal and institutional frameworks. The overall goal is to strengthen the capacity of the key institutions that manage the country’s oil and gas sector. The new project will finance technical assistance and capacity-building activities aimed at building the capacity of the government to manage and regulate the O&G sector. Since it will be focused on the central government, activities financed by the project are being implemented in the capital city of Georgetown (with the possible exception of consultations in the coastal regions).  

The project has the following five key outcomes: 

  • Legal and regulatory acts for the O&G sector, prepared under the project and submitted to Parliament  
  • EITI reports published and made publicly available, in accordance with internationally recognized transparency standards 
  • Public disclosure of the results of the project’s Strategic Environmental and Social Assessment (SESA) by the government 
  • Annual reports, compiled by the Ministry of Finance (MOF), to inform the SWF’s macro-economic committee 
  • Annual reports, compiled by MOF, to inform the SWF’s investment committee 

The project has three main components, plus a separate component for project implementation. Discussions have taken place with various stakeholders including government institutions, development partners, private sector and civil society representatives to incorporate their inputs in designing each of the components to be included in this new project:  

Component 1: Enhancement of Legal Frameworks, Engagement – This seeks to support the update of Guyana’s legal and institutional frameworks for the management and oversight of the O&G sector. This component comprises two sub-components:  update the legal and regulatory frameworks for the oil and gas sector and support stakeholder engagement and transparency.  

Component 2: Capacity Building of Key Institutions – More institutional capacity and acquisition of the third-party expertise is needed to enhance the government of Guyana’s capacity to effectively manage its O&G sector.  

This component comprises sub-components, which include the following: support immediate technical and legal needs at key O&G institutions,  support critical training needs at O&G institutions and build up petroleum data management. Strengthen environmental and social management. 

Component 3: Enhancement of Fiscal Management – This intends to enhance the government’s public finance management, macroeconomic and fiscal analytical capacity, and support to the operationalization of the country’s SWF.

Component 4: Project Management – Support the government in managing and coordinating the project and building its procurement, financial management, safeguards management, monitoring and evaluation capacity through the provision of technical advisory services, training, acquisition of goods and operating costs.  

Guyana by the Numbers  

Guyana lies in the northeast of South America. To the south and east, it extends to the North Atlantic Ocean. Forests cover about 87% of Guyana’s total surface area. 

Ninety percent of Guyana’s 758,499 multi-ethnic inhabitants live in a fertile plain along the Atlantic Coast, about 15 miles (25 kilometers) wide and 3.5 feet (1 meter) below sea level.  

Following decades of extensive emigration, the estimated population of the Guyanese diaspora is close to 461,000.  

From a population standpoint, Guyana is a small state, encompassing the largest landmass of all Caribbean countries and only the sixth-largest population in the region.  

Guyana is highly exposed to natural disasters and thus far the country has not been successful in transforming its natural resource wealth into productive capital or financial assets despite international support.  

With an estimated gross domestic product (GDP) per capita of $4,693 in 2017 and a GDP of about $3.6 billion, the natural resource wealth was estimated to be almost $4,000 per capita in 2014, the highest in the Caribbean, even before the discovery of oil.  

Merchandise exports account for 40% of GDP and six commodities—gold, rice, sugar, bauxite, shrimp and timber—account for 90% of exports.  

Despite average growth of 4% during the decade up to 2018, it remains one of the poorest countries in the English-speaking Caribbean. Data on income distribution and the incidence of poverty are outdated, but it appears that years of robust growth did not translate into commensurate levels of human development in Guyana or an improved environment for the private sector, including as it relates to delivering essential infrastructure and services for both.  

Guyana is a multiparty democracy. Elections in 2015 brought back a coalition, led by David Granger, with a slim majority of one seat. Currently, the country is in unchartered political territory following a no-confidence vote on Dec. 21, 2018.  

Since the discovery of significant offshore O&G resources in 2015, the government has been preparing for the country’s anticipated structural transformation.  

Major political forces and stakeholders seem to be united in recognizing the importance of building up the country’s institutions and capacity to meet the challenges and maximize the opportunities arising from this new sector. 

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