December 20th marks a historic milestone for Guyana, the small South American country that is soon to become the fastest growing economy in the Caribbean. Late in the evening, ExxonMobil and its partners announced that it had produced the first commercial crude from the Liza field, located in Guyana’s offshore Stabroek Block. The output from the first phase is expected to reach capacity of 120,000 gross barrels of oil per day (bdp), utilizing the Liza Destiny floating production storage and offloading (FPSO), and the first cargo is set to be sold within several weeks. Stabroek Block is expected to produce 750,000 bpd by 2025.
Guyana President David Granger declared December 20 as “National Petroleum Day” and said that the revenues from oil would be “transformative” for the Guyanese economy. The international community agrees – the International Monetary Fund has predicted the country’s GDP could grow 86 percent next year. “That’s 14 times the projected pace of China,” according to Bloomberg. The IMF further projects that the country’s current $4 billion annual gross domestic product will grow to $15 billion by 2024.
Granger took the occasion to announce the government’s “National Decade of Development” plan, which will prioritize reforming the public education system and providing free schooling for all Guyanese. The “Petroleum production has brought the prospects of a higher quality of life closer to our households and neighbourhoods. It is a momentous event,” Granger said. “Every Guyanese will benefit from petroleum production. No one will be left behind.”
Recent months have seen a flurry of activity as the government takes steps to prepare for the first oil production. As I noted in September, The Ministry of the Presidency’s Department of Energy has been established to manage the country’s resources and build the institutional, legislative and regulatory architecture to manage the sector effectively.
Head of the Ministry of the Presidency’s Department of Energy Dr. Mark Bynoe cautioned that “Guyana’s future is bright, but we can only secure that future by strengthening legislation, conducting due diligence, emphasizing education, following a balanced development paradigm and utilizing the best skills in the industry through partnerships.”
According to the government, local content policy is in its final stages of being reviewed by experts with the Local Content Unit to be set up by the end of the year. The draft has received mixed reviews, and will likely be a crucial issue in the lead up to Guyana’s next general elections in March 2020. The Guyanese government is also conducting a process to find buyers for the first three cargoes of the oil it is entitled to under the contract with the consortium, which is led by ExxonMobil with Hess Corp and China’s CNOCC.
But first oil was not all that December had in store for Guyana. Just three days later, ExxonMobil announced that it had made a new oil discovery at the Mako-1 well southeast of the Liza field, marking the 15th discovery on the Stabroek Block. The successful Mako-1 adds to the previously estimated recoverable resource of more than 6 billion oil-equivalent barrels in the Stabroek Block.
Amid the excitement surrounding the first oil milestone, the discovery at Mako-1 emphasizes the long-term nature of production in Guyana. With discoveries continuing to mount, ExxonMobil and its partners have sought to maintain a steady pace of development and approvals for future phases of production. Liza Phase 2 is already well underway, and the third phase, Payara, is expected for early 2020.
The 800,000 or so citizens of Guyana are about to experience a very significant change in their standard of living due to the ongoing development of their nation’s offshore mineral resources. The crucial challenge for the government there will come in properly managing the new wealth. Granger’s government has taken several key initial steps towards that goal, and March’s national elections will help determine what that management will look like heading into the future.
