The Economy – Guyana’s emerging Oil & Gas Sector: current trends and future outlook


Guyana is about three years away from becoming an oil producing country. Policy makers are seemingly deeply engaged in ensuring the right ‘oil management’ and/or fiscal management frameworks are put in place. In this regard, the government must be commended for their engagement of the International Monetary Fund (IMF) to lend their expertise in this area.

With respect to Guyana’s oil reserves, we know that drilling is ongoing and a few major discoveries have already been made. In this respect, gross recoverable resources amount to 2.25 to 2.75 billion oil-equivalent barrels to date and with the recently announced discovery by Exxon in the Turbot-1 well in the Stabroek block, gross recoverable oil-equivalent barrels could potentially surpass the 3.0 billion mark.

The good news is that, Guyana has uncovered a relatively huge oil find in South & Latin America and the Caribbean region and more so, according to Exxon’s Country Manager in Guyana, in a recent interview he stated that “Guyana is blessed with a relatively light crude”, suggesting that it is not considered a heavy oil. In essence, this generally means that it will cost less to refine and will also carry a higher price given that it is of a better quality. However, the quality of Guyana’s oil will vary according to Exxon’s Country Manager, to some extent from across the various reservoirs where discoveries have so far been made, but “in general the Guyana crude is a nice crude.”

Based on information that is in the public’s domain thus far as it relates to the contract between the Government of Guyana (GoG) and Exxon – the oil revenue that Guyana will earn constitutes 2 percent royalty per each barrel of oil sold, 50/50 profit sharing and withholding tax.   In the interest of absolute clarity, nonetheless, in terms of the 50/50 profit sharing, as disclosed, it is actually 50/50 of the gross revenue and not actual profit. Also, according to the arrangement between Exxon and the GoG, again, 75 percent of the gross revenue earned by Exxon will be utilised for recovery costs of the company’s investment.

This means that the remainder which is 25 percent is what will actually be shared 50/50 and so effectively, Guyana will receive 12.5 percent of the oil revenue. This will therefore increase only when Exxon has fully recovered its investment costs, bearing in mind that this may take a few years, possibly five or ten or even longer (depending on production capacity and the magnitude of investment cost to be recovered which is so far, more than US$4 billion), before the full effect of the 50/50 model of revenue sharing is realised.

With a production capacity of 100,000 to 120,000 barrels per day (bpd) and current world market price for oil which is hovering between US$50 and US $48 per barrel, Guyana’s annual projected revenue from this should be about US$250M or GY$51.5B – in a best-case scenario excluding projected earnings from tax. This amount represents 20.6 percent of the nation’s annual budget, using the last budget for 2017 which was set at GY$250 billion and 7.2 percent of GDP (Gross Domestic Product – total (market) value of all the goods and services produced in the economy).

Further, the IMF had advised the GoG of their projections of the amount of oil revenues Guyana should earn in the first three years, which is some US$380M. This projection, however, included revenue from tax; an assumption the first scenario did not consider in the computation, in addition to the 2 percent royalty and the 12.5 percent revenue from the sale of oil by Exxon. Thus, the IMF’s projection which is set at US$380M or GY$78.3B represents 31.3 percent of the nation’s annual budget and 11 percent of GDP.

The table below shows foreign exchange earnings from the other key economic sectors and the projected earnings from oil. You will observe that gold is currently the highest and the projected earnings from oil would be the second highest based on current projections.


Foreign exchange earnings from other key sectors


G$ Billion

Sugar 15
Rice 36.8
Gold 171.1
Bauxite 19
Timber 8.3
Other (fish & shrimp, beverages, foods, re-exports, vegetables, rum & spirits) 46.3

Projected Oil revenues (Best-case #1)


Projected oil revenue (best case #2 – IMF)



Yet, of paramount importance, an essential factor that will have a strong influence on the projected revenue, is the world market price per barrel of oil. It is, therefore, worthwhile to examine the possible movements in the oil price and those other elements that would be a contributory factor that will affect the oil price in the future.

With this in mind, if one were to observe the trend in the last decade with regards to the movements in world market price for oil, during this period oil price reached a record high of US$140 per barrel in 2008 and a record low of just above US$32 per barrel in 2016. In fact, that was described as a 12 year – low as cited by CNN Money). That outcome was driven by fears of slowing demand in China’s stock markets, which is considered the world’s second-largest economy and one of the largest consumers of crude oil.

Now, putting these into perspective, or rather from the basis of a critical analytical standpoint; the dynamics, in its broadest sense of the Global Economy, is ever changing and this evolution is occurring quite rapidly on account of a diverse set of factors. With regards to the changing global oil industry, one of the biggest issues dominating the global stage is climate change and its effects on the global economy and with this comes – climate change policies that are receiving serious global attention and countries are treating this issue with a heightened degree of urgency and importance. In its simplest sense, these policies are changing the world –  the manner in which the world does business and the manner in which economies are managed as evidenced by the birth of the new universal concept of a ‘green economy’.

The irony of these changes and the most practical and realistic future outlook for the oil price is that – it is unlikely to advance an upward trajectory; at least not significantly.   Perhaps it is more likely that the price may pursue a downward movement; even below US$45 per barrel would not be surprising by the time Exxon is ready with their first production slated for 2020. This inference is premised on the fact that India and China are two of the largest consumers of oil in the world apart from the U.S, and both of these countries have undertaken climate change policies that would reduce their consumptions of fossil fuels dramatically by 2020-2023 onwards.

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