Exxon in Guyana: Politics is on Oil’s Side
No one is going to rock Exxon’s boat seriously in Guyana. Not with 16 discoveries and stellar first production that went online way ahead of schedule - a feat almost unheard of in the deep offshore waters and their tricky geology.
Still, investors will be concerned, and we know because hedge funds are asking us whether they should be or not.
It’s always best to be cautious; but in this case, it’s important to understand the political dynamic in Guyana. Yes, Exxon got a wonderful deal for Guyana’s first oil. That’s how these deals usually work out for country’s that haven’t produced any real oil before. Good deals bring in the biggest E&P companies to get things off the ground.
On the eve of critical elections in Guyana, and as first production has launched, a report by Global Witness accuses the government of cheating the public out of $55 billion in the 2016 deal with Exxon. The timing of the report will play into the hands of a polarized society that will choose between two parties whose chief ambition is to control the use of those brand new oil revenues, making this election the most critical in Guyana’s modern history. Guyana’s two-party system is entirely based on ethnicity, with the current ruling party being the Afro-Guyanese ANPU-AFC and the opposition People’s Progressive Party being Indo-Guyanese. The 2016 deal…