From Trinidad and Tobago it is about one hour flying time south to Georgetown, the capital of the Republic of Guyana, and another hour flying south to Paramaribo, the capital of Suriname.
These two new emerging oil-rich deep-water provinces now have joined Trinidad and Venezuela which have been oil producers and exporters for 118 years. The Guyana Suriname Basin (GSB) is the Holy Grail of new oil province discoveries. Oil energy experts predict that during 2021 there will be a major increase in offshore drilling activity in the southern Caribbean and northern South America led by Guyana, because of recent global increases in the price of crude, and because the oil and gas companies are searching for discoveries that can be quickly monetised for higher and faster returns.
ExxonMobil has found approximately nine billion barrels of oil-equivalent resources offshore Guyana since 2015 and had its first oil lift in December 2019. It is expected that during 2021 the company will expand its exploration in the Canje Block and prepare for drilling in the Payara project in the Stabroek Block. Suriname also hit pay dirt following its block 52 discovery in 2020. Deep water exploration in Suriname in 2021 will be led by the International Oil Companies (IOCs) Total, Shell, and Tullow. They will begin exploration drilling in 2022. There is no announced deep water drilling in Trinidad following the failure of the BHP Broadside well to forecast commercial quantities. But there is renewed activity onshore Trinidad where Canadian oil and gas company, Touchstone Exploration, experienced a windfall in 2020 as a result of its drilling and the signing of a five-year supply deal last December with the National Gas Company worth between US$1.6 and US$2.2 billion.
But Trinidad is facing the reality that its current deep-water and onshore wells are more natural gas than oil-prone. Perhaps given the global thrust toward renewable energy, and the use of LNG as a transition fuel, that may be a blessing in disguise. At the other end of the spectrum, Venezuela’s oil industry has been moribund and in a state of near collapse because of decades of bad management, politisation of the industry, and international sanctions against the Maduro regime. But the government is once more trying to attract the IOCs and some other National Oil Companies (NOCs) in efforts to revive the industry.
The oil in the GSB is the fluid substance that motivates Trinidad, Venezuela, Guyana and Suriname to further explore and drill. It is now the Holy Grail for abundant fossil fuels. They all want a piece of the action, and actions speak louder than words. Reportedly the government of T&T is approaching the responsible global maritime jurisdiction bodies for approval to push its Exclusive Economic Zone (EEZ) to the borders of the GSB. Suriname, although it is part of the GSB, intends to move its offshore exploration closer to the lucrative Stabroek fields of Guyana.
Not to be outdone, the authorities in Caracas last year ordered the Venezuelan navy to re-define the nation’s maritime boundaries and its EEZ. The seizure and subsequent release of 12 Guyanese fishermen and their boats by the Venezuelan navy last month, in what the Guyanese assumed were within their own national maritime boundaries, but the Venezuelans said no, served to forcibly emphasise the point. Now that the International Court of Justice (ICJ) has agreed that it can hear Guyana’s objections to Venezuela’s claim to two-thirds of the territory of Guyana, because of dubious Treaty obligations signed almost a century ago, several independent Caribbean island states may also have to fight legal battles to maintain their maritime sovereignty.
Decolonisation in the Caribbean after World War II forced Venezuela to negotiate its maritime boundaries with several neighbouring states including former colonial territories. For example, Great Britain ceded the Aves rock to Venezuela, now called Isla de Aves (Bird Island) off Dominica in the Eastern Caribbean. Will Venezuela now push its territorial claims based on this almost submersible strip of land?
While both incoming governments in Guyana and Suriname are enthusiastic about their oil and gas future, the history of their separate approaches to contract negotiations with the IOCs by their predecessors have differed greatly. But that is only the bare surface of the emerging above-ground issues. Yet to follow are others such as responsibility for oil spills, local content policies, corruption in the oil sector, and climate change.
Suriname has been successful in getting the parent oil and gas companies, not their subsidiaries, to take full responsibility for possible oil spills. In Guyana the operating companies have committed to cover any amount above what the local insurance covers, and the newer environmental permits for the Liza 2 and Payara fields include commitments to unlimited liability for the parent company for all costs related to oil spills or any other such incidents.
The President of Guyana Dr Irfaan Ali, in launching the first round of consultations on Guyana’s draft Local Content policy this month, stated that the essential hallmarks of the policy must be accountability, realistic targets, opportunities for capacity building, and incentives that allow Guyanese to benefit the most from their oil wealth. He also emphasised that certain services should be reserved for Guyanese procurement. The vice president of Guyana, Dr Bharrat Jagdeo, also stressed that the bulk of the benefits cannot just go to the investors, and that the people of Guyana must be given ample opportunity to share in the prosperity.
The new governments of both Guyana and Suriname are also trying to address the importance of accountability. Dr Jagdeo has indicated that the government is moving to put in place a new PSC for ongoing and future negotiations, but that old deals would not be re-negotiated out of respect for the sanctity of contracts.
Corruption is also on the agenda of the new administration in Suriname where in the past administrations dispensed political patronage in all sectors and the oil industry became the primary employer of ruling party partisans. In both countries, the provisions of new local content policies should not open doors to further patronage and corruption.
Finally, the major challenge. The common thread in global energy policy in the 2020s will be climate change. The challenge for finding more fossil fuels lie in global environmental opposition to big projects as in the GSB, and the growing competitiveness of alternatives like wind and solar power that are often the cheapest sources of new electricity generation and a major employer in many countries.
Oil and gas will be around for several decades. But even if there is industry ability to produce sweet crude and cleaner fuels in the transition toward a lower carbon world, will fossil fuels in the GSB and elsewhere eventually still become stranded assets?
So far, the developments in Guyana have managed low break-even points that should protect them even in a lower carbon world, but it will not be enough forever. Guyana and Suriname must endeavour to use their new wealth in ways that prepare them for a more diverse economic future, or they run the risk of repeating Venezuela’s mistakes.
It should be an interesting 2020s. The devil is in the details. But the business of oil and gas extraction should continue apace until it’s no longer profitable or feasible to so do. Our four countries and the IOCs interested in the cutting-edge GSB will demand as much.
