French Guiana is racing against the clock to cash in on its oil windfall

  • About 11 billion barrels of oil and gas discovered off Guyana
  • The country wants to accelerate production to develop the economy
  • Hopes to negotiate more favorable contracts for the next phase
  • New offshore oil blocks proposed from September

GEORGETOWN, July 18 (Reuters) – For the small, impoverished South American country of Guyana, there’s no better time than the present to reap the rewards of its offshore oil jackpot.

With sky-high oil prices, a transition to renewable energy on the horizon and 750,000 citizens desperate for a better life, Guyana is stepping on gas to exploit its vast oil reserves, even if it means sacrificing some gains longer term.

Already locked into contracts with oil companies criticized for being too one-sided, Guyana hoped to create a state-owned oil company to handle the next phase of development and conduct its own seismic surveys of unexplored fields – all with the aim of getting the best potential yield.

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But those plans have been shelved as the government faces the reality that Guyana lacks the skills or resources to deliver them quickly, and is banking on speed rather than certainty, senior officials told Reuters. .

“We don’t have the money or the capacity,” Vice President Bharrat Jagdeo said, speaking for the first time about the decision to scrap the state oil company’s plans. “A model where the government puts in the money and operates the asset is not an option.”

In a series of conversations with Reuters, Jagdeo also said the recent decision to drop the idea of ​​Guyana doing its own surveys of unexplored blocks to attract higher bids from oil companies was also driven by the time and capacity.

“We want to accelerate exploration so we can develop the economy as quickly as possible,” said Jagdeo, who previously served as president and is arguably the country’s most influential politician. “We’ll probably get less, but maybe we can get faster development.”

Since its first discovery in 2015, a consortium led by US oil major Exxon Mobil (XOM.N), with partners Hess Corp (HES.N) and China’s CNOOC (0883.HK), has discovered around 11 billion barrels of petroleum. and gas in a large block covering 6.6 million acres about 120 miles (190 km) off the coast.

Based on current expansion plans, the group expects to pump 1.2 million barrels of oil per day from its holdings in 2027, putting Guyana ahead of neighboring Venezuela in terms of production, along with all oil producers. in Africa, with the exception of Nigeria.

It would also give Guyana the highest per capita oil production in the world, ahead of wealthy Gulf states such as Kuwait, Qatar and Saudi Arabia.


As Exxon pumped its first oil from Guyana in 2019 and is ramping up production, the government that came to power nearly two years ago with a slim majority in parliament is under pressure to accelerate economic development.

Production-sharing agreements signed by the previous administration in 2016 split oil profits 50/50 between the Exxon Group and Guyana, but 75% of revenues go first to cover oil company costs.

This leaves Guyana with just 12.5% ​​of production plus a 2% royalty. Its take will increase as development costs come down – which could take several years.

The split is not so different from deals in African countries, for example, which had no prior oil industry or oil legislation, according to Theodore Kahn, a principal analyst at security consultancy Control Risks.

But that’s no comfort to residents of the capital Georgetown, who are still waiting for oil to improve their lives.

“The deal is unfair from the start,” said Michael James, a fruit vendor in Georgetown.

His nephew, a taxi driver, makes a living ferrying oil executives to meetings, he said, but the rest of his family struggles with a lack of affordable housing, healthcare or education. .

“The oil companies make all this money, the government gets paid, but I don’t see much difference in my life,” James said.

This year will be the first time the government has used oil revenues to fund new schools, roads and a power station. But it will operate with a deficit of around $470 million in 2022 – a move the International Monetary Fund has warned against.

“We want to avoid the oil curse and build a resilient economy that brings prosperity to all,” Guyanese President Mohamed Irfaan Ali told Reuters in a separate interview. “But like any developing country, we face many challenges.”


That’s why Guyana is keen to revive exploration and production in untapped offshore blocks outside Exxon’s domain – potentially on better terms. The shift to renewable energy and the desire to reduce fossil fuel emissions are also concentrating minds.

“It is important in the net zero environment that reserves are explored, discovered, proven and developed as quickly as possible,” Vice President Jagdeo said.

However, Guyana has never held a drilling rights auction and lacks the skills to hold one without an outside firm to manage the process, he said.

The current goal is to start offering new blocks in September this year. Establishing a state oil company or carrying out investigations would have pushed back the timeline, officials said.

An alternative to an auction that is still under consideration would be to choose an outside partner to fund and operate a business in which the Guyanese government has a stake, Jagdeo said.

Exxon’s more than 30 exploration successes to date have attracted several offers from other companies to invest in unexplored areas, he said, declining to cite examples.

“We allowed blocks on a first-come, first-served basis. Now it’s a totally different situation,” he said.

Earlier this year, Jagdeo told Reuters Guyana was in talks with companies in the Middle East about a potential partnership. Read more

A delegation of around 40 representatives from Saudi Arabia was in Georgetown last week for an investment conference and the Gulf kingdom’s state-owned oil giant Saudi Aramco (2222.SE) was awarded a one-year contract in September to market Guyanese oil.

Two candidates for additional contracts are Qatar Energy (QATPE.UL) and the National Oil Company of Abu Dhabi, said Arthur Deakin, co-director of consultancy Americas Market Intelligence. The companies did not immediately respond to requests for comment.

Signs of Guyana’s newfound wealth appear in the seaside capital. A new 12-storey hotel built by local group Pegasus is due to open soon – and it’s now the tallest building in a former British colony that has long depended on agricultural crops such as sugar, rice and nuts of coconut.

Other hotels will follow, although the capital is still plagued by power outages and telecommunications are spotty.

Officials have agreed to Exxon building a 227 km (141 mile) pipeline to bring natural gas ashore to fuel a new power plant for the capital. Exxon will be able to deduct the cost of the project from oil revenues.

Jagdeo, who criticized the former executives for their unpreparedness to negotiate with the Exxon team, defended the decision by saying the American company was in the best position to deliver the pipeline on time.

The new $100 million power plant will reduce the cost of electricity and provide a more reliable supply in a country that has long been entirely dependent on imported fuel, although its commissioning date has been pushed back by one year. year to 2025.


Offshore, Exxon and its partners have big plans. More than 300 workers are on board the first two of what could be up to 10 floating production vessels. Taller than the new hotel in Georgetown, the ships cost around $2 billion each and are equipped with accommodations, gyms, restaurants and entertainment venues.

Guyana’s non-oil economy will see healthy growth of 7.7% this year, according to estimates from business consultants Ernst & Young Services, though that’s far behind the 47.5% growth it projects for the Guyana’s gross domestic product, including oil.

The consortium was pumping 120,000 barrels of oil per day (bpd) at the start of 2022 and expects to reach 360,000 by the end of the year. It is preparing a third vessel which will add 250,000 bpd by the end of 2023 – six months ahead of schedule – and has launched plans to spend $10 billion to develop a fourth offshore area with another vessel.

Hess estimates that production from the four ships will break even with an oil price of $25 to $35 a barrel. Brent crude surged to $139 a barrel shortly after Russia invaded Ukraine and is currently hovering around $100.

Combined, the four ships are expected to produce around 800,000 bpd by 2025, more than the annual production of Venezuela, which has the largest oil reserves in the world. The group aims to have six vessels delivering 1.2 million bpd by 2027.

Alistair Routledge, Exxon’s top executive in Guyana, said seven out of ten oil rigs are now confirmed. This could nearly double the $30 billion budget that Exxon, Hess and CNOOC have agreed for the first four ships and other infrastructure.

John Hess, chief executive of Hess, said last month he believed there were many more billion barrels of oil equivalent offshore Guyana – on top of the 11 billion estimated so far.

“We’re in the first innings,” he said.

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Reporting by Sabrina Valle; Editing by Gary McWilliams and David Clarke

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