With the production of 500,000 barrels a day for 300 days a year at US$40 a barrel, the annual income would be US$6 billion. The cost of production of oil varies widely, depending on whether it is onshore or offshore and if offshore, how far away and how deep. To give some idea North Sea oil was produced by BP in 2014 at US$30 a barrel. It went down to US$15 a barrel in 2017 and is expected to go down to US$12 a barrel by 2020. The estimated cost of production in offshore Guyana has not been made known by either the Government or ExxonMobil. We are therefore left to speculate.
Assuming that a maximum of about half of the income would be deducted as production costs, US$3 billion would be deducted as production costs from an annual income of US$6 billion. Guyana would earn 50 percent of the profit, that is, US$1.5 billion plus 2 percent of US$6 billion as royalty which would add another US$120 million. At minimum, therefore, Guyana’s economy would double. More likely than not, Guyana’s economy would grow to three times its current size and even more, if the price remains around US$60 per barrel and if more discoveries are made resulting in higher production. ExxonMobil has drilled only eight wells in seven of which oil was discovered. It plans to drill another twenty. There are also other blocks to be explored by other oil companies and other blocks yet to be given out for exploration.
The spectacular discoveries of oil in offshore Guyana, with promises of a glowing future, must be tempered with what that future really means and with the realities of today. It appears that Guyana stands to receive $US300 million a year for the first five years after production commences and a little over that sum for the twenty years thereafter. The size of Guyana’s economy is $US1.2 billion. This means that Guyana’s economy will increase by one-fifth as a result of oil revenue. This will be a significant boost but by no means a spectacular transformation. This figure is probably based on production of 100,000 barrels a day. It may well be that Exxon will produce far more than that amount for various economic reasons. While all of this is in the future, Guyana has pressing economic and political problems that require immediate solutions.
The dismissal of thousands of sugar workers will intensify poverty and crime across Guyana, particularly in the areas affected by the closures. Communities will deteriorate, drug taking and alcohol abuse will intensify and the economy will suffer from reduced spending. All of this will impact negatively on economic growth for 2018. By the time divestment concludes and some job opportunities emerge, the damage to the communities and their inhabitants would already have occurred. There is no immediate potential investment in Guyana’s economy on a scale large enough to absorb the dismissed sugar workers, or even a portion of them, that will make a difference to their dire situation. Any impact that a new oil industry may have is at least ten years away. By this time, an entire generation of workers and their children will be lost to productive labour by a decade of deprivation.
The official information is that Guyana’s petroleum deposits are estimated to be equivalent to 800 million to 1.4 billion barrels of oil from the results of two wells. Many more wells are expected to be drilled by Exxon in the future and no one knows how much more oil, if any, would be discovered. The US Geological Surveys has long estimated that Guyana’s offshore reserves are between 15 and 30 billion barrels.
With increasing exploration activities, if anything close to the lower figure of 15 billion barrels are discovered, for most Guyanese the future would be beyond contemplation. With reserves of only between 800 million and 1.4 billion barrels, poverty would be eliminated in a short period and Guyana per capita income of US$3,600 would rise rapidly.