The last hurrah? Guyana rides the oil wave

Dr Carole Nakhle

There is an alternative universe sitting on the northeast shoulder of South America. As the global economy shrank 3.3 percent in 2020, with nearly every country dipping into negative territory, Guyana recorded economic growth of more than 43 percent.

The force behind this result? Oil. Although the COVID-19 crisis forced many oil producers to scale down on their production, Guyana joined the club of oil exporters in 2020, shipping its high-quality crude to global markets. That came more than 70 years after the country’s earliest exploration attempts, and after the development, in record time, of its very first discovery in 2015: the ExxonMobil-operated Liza field, among the world’s biggest discoveries of the past decade.

Present value of oil reserves, as a percentage of 2018 GDP

While oil companies are still cautious about their capital spending, Guyana is expected to see a busy 2021, with companies such as American Hess allocating most of their budget for this year to the South American country thanks to attractive project economics. Guyana, the world’s newest oil-producing nation, is also expected to be among the significant contributors to non-Organization of Petroleum Exporting Countries (OPEC) oil supply growth, at least for the next five years.

This dramatic turn of good fortune raises several fateful questions. Will Guyana’s government maintain investment-friendly policies? Can its economy escape the resource curse that has blighted so many other developing countries? Might it be tempted to join OPEC? And how much will its oil outlook – and therefore its economic prospects – be spoiled by the climate agenda? These outcomes will have a significant impact on the country’s outlook and role in global markets.

Non-OPEC oil supply growth, 2019-2025

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