Oil in Guyana: Black Gold or the Devil's Excrement?
In 2015, Exxon Mobil found enormous oil reserves off the Guyanese coast. By the start of February 2020, Guyana had exported its first 1 million barrels of oil… but then came March. A democratically opaque election, to which there is still no resolution, and the oil price crash due to coronavirus have shrouded the fledgling oil sector in uncertainty. Has the “resource curse” struck before Guyana has reaped even the slightest reward?
Over 40 years have passed since Venezuela’s Oil Minister, and OPEC co-founder, predicted that crude oil would be the “ruin” of Venezuela. Juan Pablo Perez Alfonzo believed Venezuela’s oil was the “devil’s excrement”. Now, with the country suffering one of the world’s worst humanitarian crises, sadly, he was right, and similar challenges await Guyana.
The Resource Curse
Since the end of the Cold War, academics have noted the paradox that many of the poorest countries have some of the greatest natural resources. In some of these countries, as resources are exploited and GDPs increase, conditions have regressed rather than improved.
Guyana, therefore, is at a crossroads. The IMF predicted Guyana’s GDP would grow 86% in 2020. But, even if production had carried on as forecast, this might not have been a blessing after all. In many cases, nations with sudden discoveries of mineral wealth fail to translate meteoric GDP and GNI rises into genuine quality of life gains for their populations.
Potential for unrest
Part of the “resource curse” is the erosion of democracy following the striking of gold, be it yellowy-brown, black, or cobalt. Venezuela isn’t the only example: Angola, Azerbaijan, and, notably, Iraq are among many countries who have struggled to maintain stable democracies since becoming net exporters of oil. Not to mention the dozens of oil-rich nations in the grip of authoritarian regimes that existed long before the oil booms.
For Guyana, with so much more cash now available to governing parties, the final result of the recent election is likely to become one of the most critical in Guyanese history. When repressive governments become flush with oil money, it is easier to suppress social unrest and tighten their hold on power. So, although Guyana has thus-far enjoyed respectable levels of democracy, it’s possible that developing their oil industry could lead to power struggles and political unrest. Hopefully the ongoing legal challenge over the recent March election isn’t a bad omen.
Another element of the “resource curse” is the destabilising effect of multinational companies’ presence in many oil-rich nations. It’s been shown that the more a nation’s mineral wealth is owned by multinationals, the more likely it is that social dissent will arise. In February, a report suggested that Exxon’s deal with Guyana is exploitative, and that Guyana is missing out on up to 55 billion USD. For perspective, Guyana’s annual budget is 1.4 billion USD.
The future of oil in Guyana
It doesn’t have to be this way for Guyana. For those of us with environmentalist leanings, it’s confusing to desire the end of fossil fuels at the same time as hoping a nation can benefit from them. But there is real promise in the sectors of eco-tourism, with some of the most wonderful biodiversity found there. Guyana also has a track record in progressive renewable energy schemes such as solar, biomass, and hydroelectric. Investment in sustainable industries such as these isn’t just crucial for conserving the vital Guyanese ecosystem, but for the diversification of their economy too.
Coronavirus and the oil glut present massive challenges to Guyana’s early days of oil production. But with a diverse, sustainable economy, sensible governance, and multinationals kept in check, Guyana stands a chance of delivering progress to its citizens.