Is This The World's Very Last New Oil State?

In late March, the president of Guyana, Irfaan Ali, lectured-in his own words-the BBC's Stephen Sackur, who tried to suggest during an interview that Guyana would do better to think about protecting its environment than developing its oil resources.

Ali's lecture went viral as he slammed Sackur and the West for benefiting from the advantages of oil and gas for decades and now having the hypocrisy of trying to lecture poorer countries about their own plans for using oil and gas to their advantage. Guyana's oil wealth is also, in a sense, going viral.

The tiny South American state that borders Venezuela has so far discovered around 11 billion barrels of crude oil off its coast in the only block currently being developed: Stabroek. The partners in the Stabroek Block, Exxon, Hess Corp., and China's CNOOC just this week said they'd booked net income of $6.33 billion from their Guyanese business last year.

That's certainly not too shabby for a country that did not even have an oil industry before Exxon and its partners struck some in the Stabroek Block. Production began in 2019, which was quite unfortunate given what happened to oil demand during the following year as whole countries went on lockdown. Even so, output of crude from Guyana rose at an annual rate of about 98,000 barrels daily, bringing the total to 645,000 barrels daily last year.

By 2027, this should have hit 1 million barrels daily, according to Exxon's plans. Per Guyana's government's plans, production should rise further to 1.64 million barrels daily by 2030. Because Guyana is eager to make money from its oil and gas before someone forces it to stop-or before the energy transition succeeds, which is what most forecasts are saying. Indeed, President Ali said last year that "time is not on our side," speaking to the BBC again, but he added that "to say we are racing against time is stretching it."

According to the latest Statistical Review of World Energy, that would indeed be stretching it. Global oil demand is still on a strong rise, driven by the developing world, especially in Asia. Thanks to that demand growth there, slight demand declines in North American and Europe were more than offset by the growth in Asia. The IEA is predicting that oil demand growth would peak before 2030, but this prediction is questionable as global oil consumption tops 100 million barrels daily for the first time despite the massive transition push.

Guyana may not be joining the oil world at the best possible time, at least from a public relations perspective, but it is certainly joining the oil world at a time of strong and still growing demand. It may be argued that time is actually very much on Guyana's side because oil companies are getting careful with their investment decisions and prefer to bet on high-probability finds than risk money and time on high-risk exploration.

This has made the South American nation a very attractive destination for oil investment. Last year, the government in Georgetown held its first-ever oil block tender, offering 14 blocks in total. Eight drew winning bids, with Exxon, Hess, and CNOOC expanding their presence in Guyana's offshore oil space, and TotalEnergies, QatarEnergy, and Petronas joining them.

Guyana is clearly paying no heed to climate doom predictions and lectures about how much better it would be for the world-and Guyana itself-if it kept its oil in the ground, or under the seabed, as it happens. This has been a positive for the world and specifically end consumers of oil products, meaning all of us. As a major new source of oil supply, Guyana has played a part in global oil prices, even if its share of global production is a fraction of that generated by the U.S., the world's top producer.

The very fact that Guyana has a booming oil industry is enough to affect price perceptions, even if the effect is only present on a broad, general level. The country has the potential to become a major oil producer, and it is pursuing this goal with enthusiasm, not paying attention to doomsayers talking about the resource curse.

Exxon's Guyana president, Alistair Routledge, recently told the Financial Times the Stabroek Block project could generate $100 billion for the Guyanese state. This is a lot of money, and the burden of using it responsibly falls on current and future governments. President Ali has big infrastructure, education, and healthcare plans. Perhaps his government has learned from the resource curse of other big oil producers and will not make that mistake.

That, however important for Guyana, is less relevant from a global oil supply perspective. From that perspective, what matters is that there is a new, potentially big source of new oil supply that will help keep the most traded commodity in the world affordable-and available-for longer.

By Irina Slav for Oilprice.com

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