Promise of an oil bounty has hopes up in Guyana
South American country is an unlikely setting for the next big energy boom
GEORGETOWN, Guyana — Guyana is a vast, watery wilderness with only three paved highways. There are a few dirt roads between villages that sit on stilts along rivers snaking through the rain forest. Children go to school in dugout canoes and play naked in the muggy heat.
Hugging the coast are musty clapboard towns like Georgetown, the capital, which seems forgotten by time, honeycombed with canals first built by Dutch settlers and African slaves. The power grid is so unreliable that blackouts are a regular plague in the cities, while in much of the countryside there is no electricity at all.
Such is the unlikely setting for the world’s next big oil boom.
In the last three years, Exxon Mobil has drilled eight gushing discovery wells offshore. With the potential to generate nearly $20 billion in oil revenue annually by the end of the next decade, roughly equivalent to the revenues of the much-larger Colombia, there could be enough bounty to lift the lives of almost every Guyanese.
Suddenly the talk of Georgetown is a proposed sovereign wealth fund to manage all the money, as if this were a Persian Gulf sheikhdom.
But there are obstacles. If history is any guide, countries that discover oil often waste their opportunity, as the resource blends seamlessly with corruption. Countries with weak political institutions like Guyana are especially vulnerable.
“You have an alignment of money and power in the hands of the state, so the party in power controls the resources,” said Floyd Haynes, a Guyanese-born finance professor who is a consultant to Business Ministry. “And the money is usually squandered, misapplied or downright stolen.’’
Senior government officials here have little experience regulating a big oil industry or negotiating with international companies. The civil service is corrupt, and the private sector is slow to innovate, businessmen and aides to senior officials acknowledge.
Still, there is cautious optimism.
“We see this oil discovery as almost like providence,” said Raphael Trotman, the natural resources minister. “We’ve been given a second chance to get things right.”
The first chance was independence from Britain in 1966, and that chance was blown. A plague of ethnic tribal politics has produced a fragile state with an economy propelled by drug trafficking, money-laundering, and gold and diamond smuggling. A vast majority of college-educated youths emigrate to the U.S. or Canada, while those who stay behind experience high rates of HIV infection, crime and suicide.
Can oil wealth help Guyana overcome its history, or will the windfall that will flood government coffers merely turn the page to a new tragic chapter?
“The challenges are enormous and shouldn’t be underestimated,” said Lars Mangal, president of Total tec Oilfield Services, a Guyanese company seeking to train local workers in safety and basic oil operations. “We have to overcome nepotism, entitlements, corruption, cynicism and skepticism.”
The Guyanese government, under its agreement with Exxon Mobil, will receive roughly half the cash flow from oil production once the company’s costs are repaid. Economists say that will mean the country’s current gross domestic product of $3.6 billion will at least triple in five years.
But with exploration out of sight 120 miles offshore, and no refinery planned, the economic benefits for the population have been limited so far, making some cynical. Only about 600 Guyanese have found direct employment on the drill rigs, shore bases and offices, and that number may increase only to about 1,000, oil executives say.
“We see this oil discovery as almost like providence.” Raphael Trotman, natural resources minister