By Mike Jarrett

A significant oil potential, it has one latent concern: it could be too much, too suddenly.

The series of successful finds since 2015, from the Liza prospect on the Stabroek block, by US major, ExxonMobil, will begin to be realised in March 2020 when the company begins production of 120,000 barrels per day (b/d).

With a tenth exploration discovery in December last year, the company lifted its estimate of resources on Stabroek to five billion barrels of oil equivalent. This, it said, promises output of 750,000 b/d by 2025, a production level that would put Guyana among the world’s major oil producers.

There could be more oil and significant natural gas. ExxonMobil’s successes have led to a prospecting frenzy offshore, involving others such as Total, Tullow,

Repsol, Chevron, ENI, DEA and CGX Energy. Guyana’s offshore territory is part of the Guyana-Suriname basin that US Geological Survey said contains an estimated

• billion barrels of oil and 32 trillion cubic feet of natural gas.

Retained earnings from ExxonMobil’s projected output by 2025 could lift Guyana’s per capita income to five times current levels. Managing this could be a problem. It could present the country with a resource curse, often called Dutch disease, that has plagued other oil producers.

Dutch disease describes the potential for a strengthening of the local currency from a sudden overwhelming inflow of revenue from one economic sector. The resulting currency appreciation then undermines other parts of the economy, drives up imports and generates unemployment. These problems overtook the Dutch economy soon after that country discovered significant gas reserves in the North Sea.

The Guyana government is aware of the danger and has moved early to protect the national economy. Plans including establishment of a sovereign wealth fund that will manage the income from oil.

“Stabilization is particularly important for resource- rich countries, dependent on natural resources,” the Guyana government has stated. “A key function of our sovereign wealth fund is savings to ensure the equitable distribution of assets from the extraction of non-renewable resources across current and future generations. This will allow for the transformation of a depleting asset base that is oil, to a permanent asset base.”

Conflict with Venezuela

The government has also established an energy department to take charge of the oil sector.

Warding off Dutch disease is not the only problem faced by the emerging oil producer. ExxonMobil said, in late December, that it had suspended seismic surveys on the Stabroek block after a research vessel  it had contracted was approached by a Venezuelan navy ship. That incident is the consequence of a (more than) century-old dispute in which Venezuela claims sovereignty over Guyana’s western Essequibo province. The dispute has prevented the countries from agreeing to a maritime border.

Guyana claimed the survey vessel was on  its territory. Venezuela contended that it was in Venezuelan waters. Up to the end of December ExxonMobil had not indicated when it would resume survey work but said this incident would not interrupt its production targets.

This was not the first interruption of seismic work by Venezuela. In October 2013, the Venezuelan navy seized research vessels that had been studying the Roraima block on behalf of US independent Anadarko. The vessel and the crew were released after a week but Anadarko has not restarted work on the block.

Guyana rejected a call in April 2018 from Venezuela to resume talks for a diplomatic solution to the dispute over Essequibo. This followed a January 2018 United Nations request for the International Court of Justice to settle the dispute, after the UN had failed to mediate an agreement.

Guyana’s impending arrival among the world’s top oil and gas producers has tended to overshadow other developments in Caribbean region’s oil and gas sector, which include the following:

• Suriname is hoping that it can replicate Guyana’s offshore promise, through the work of a consortium led by ExxonMobil, which has a contract for an offshore block. The consortium includes the US’s Hess and Norway’s Equinor.
• Suriname hopes this and other projects will yield “Liza’s mother,” according to state-owned oil company Staatsolie that signed a contract for another block with Equinor.
• There is no production yet from off shore Suriname.
• Trinidad and Tobago has started recovering from a crippling seven-year decline in natural gas production that suppressed output of liquefied natural gas (LNG), ammonia and methanol. Natural gas production in January to October 2018 was up 9% on the previous year. The government has forecast an end to the curtailments in 2021 through production from several local projects and imports from

Venezuela. However, the government has had to dissolve state oil company Petrotrin and close the 168,000 b/d Pointe-a-Pierre refinery.

• Petrotrin’s viability had been undermined by falling domestic crude output and the need for increasing volumes of imported

feedstock. Trinidad is exporting all its crude and importing products that were once delivered by the refinery.

• Grenada is hoping an agreement between prospectors in its waters and the Trinidad state oil company NGC will lead to fruitful drilling close to the Patao/Dragon fields in Venezuela and North Coast Marine Area fields in Trinidad.
• Barbados is awaiting the start of exploration work on three offshore blocks it earlier awarded to UK-Australian resources firm Billiton and Spain’s Repsol.
• Aruba hopes to replicate some of the geological success of nearby Venezuela´s giant Perla offshore gas field, which Repsol

operates in partnership with Italy´s Eni. Repsol is the operator of a deepwater exploration well off Aruba.

• The Dominican Republic plans to restart a search for hydrocarbons that was suspended in 2015. It will launch a bidding round for several

  onshore and offshore blocks. There are already ‘strong indications of interest’ from several companies, the government said, without naming any.

  • Cuba also plans an April 2019 restart of a deepwater drilling campaign that lost steam in 2012 after foreign companies found no commercially exploitable deposits. However, companies that will take part in the planned tender will have to take into account the USA’s economic sanctions.
  • Jamaica has Tullow Oil concluding seismic work on some of the 11 blocks offshore, for which it signed production sharing agreements with state oil company Petroleum Corporation of Jamaica (PCJ) in 2014. UK independent United

  Oil & Gas (UOG) has taken a 20% stake in Tullow’s licences, with PCJ describing the blocks as ‘highly prospective’.

  Caribbean refineries

  It has been an uncertain period for the Caribbean region’s refineries. The decommissioning of Trinidad’s refinery coincided with the collapse of the government-owned 335,000 b/d Isla refinery on Curacao where Venezuela’s state-owned PdV (that operates the facility under lease) has stopped providing feedstock. PdV’s lease expires at the end of 2019, and the Curacao government has selected Saudi Aramco’s US refining subsidiary Motiva Enterprises as the preferred bidder to take over the facility.

  Prospects are brighter for the mothballed refinery on St Croix in the US Virgin Islands. British major BP and the refinery’s owner, Limetree Bay Refining, concluded an agreement in November 2018. Beginning in late 2019, BP will supply crude and market the refinery’s output (200,000 b/d) of low sulphur products.

  Cuba’s 65,000 b/d Cienfuegos  refinery suffered from a decline in feedstock from Venezuela, but the facility ended 2018 with increasing throughput as PdV delivered higher volumes from its own production and from other sources. This was supported by supplies from Russia and Algeria.

  The Dominican Republic’s Refidomsa refinery and Jamaica’s Petrojam are both suffering from Venezuela’s economic problems. PdV has a 49% stake in both refineries, but has failed to deliver on promises to expand and modernise the plants. Both the Dominican Republic and Jamaica said separately in January 2018 they intended to take over PdV’s interest in the refineries so they could move ahead with upgrading the facilities. Jamaica’s prime minister has suggested that Petrojam could be shut down if it were not upgraded.

  *Canute James, PhD, Adjunct Senior Lecturer and former Director of the Caribbean School of Media and Communication (CARIMAC), Mona Campus, University of the West Indies, was a reporter for the Financial Times of London andradio reporter, presenter and producer in London, England for the BBC.