Oil puts Guyana in political crisis
The discovery of an enormous oil deposit off the coast of Guyana was meant to catapult this tiny country into the top echelons of petroleum producers and put its citizens on the path to better lives.
Instead, it has deepened the historical tension shackling the nation, leaving some Guyanese afraid that the newfound wealth will subvert the country’s fragile democracy and wipe out other industries, as happened in neighboring Venezuela.
The tension surrounding the elections for president and members of the National Assembly this week may be a sign of trouble to come.
The contest will determine the politicians who will be in charge when the oil money begins to flow this year.
It was a hotly disputed race between leaders representing each of the country’s two main ethnic groups: the Afro-Guyanese and those of Indian descent. Voters were split almost perfectly along ethnic lines.
Since the election Monday, public debate has descended into a cycle of historical grievances. Both parties fear that if they concede, the opposing party would use the oil wealth to shut them out of government for years to come — and deprive their constituents of their fair share of revenue.
So, without official results, both sides are claiming victory, threatening to hamstring the economy of Guyana, already one of the poorest countries on the continent, and plunge it into a prolonged political crisis.
“We’re an ethnically riven society,” said Winston DaCosta, the country’s finance minister.
“It’s a rare incidence,” he added, to expect to see “money bringing people together.”
The Guyanese recognize that overcoming long-standing divisions is a challenge. But the discovery of 8 billion barrels of oil off the coast of Guyana by a consortium led by ExxonMobil could have been a powerful enough incentive for the country’s 750,000 citizens to overcome mutual suspicion and unite around the promise of an economic bonanza that could benefit all.
The start of oil production in December is expected to nearly double the country’s gross domestic product in 2020, according to the International Monetary Fund, and multiply in years to come.
Instead, the winner-takes-all attitude that has marred the elections is weighing heavily on Guyana’s economic prospects as it enters the oil age, said Ralph Ramkarran, a prominent local statesman who led a largely quixotic campaign for a small multiethnic party.
“The thinking here is, ‘Why share when you’re winning?’ ” he said. “Until that’s fixed, it will remain a place of suspicion and economic underdevelopment.”
The stakes could not be higher. Exxon started production in December. Although the payoff in 2020 will be a trickle relative to what will come, it is expected to elevate oil income this year to a third of all government revenue, surpassing all of the country’s traditional exports combined, according to the IMF.
By the end of the decade, the country’s output will reach 1.2 million barrels per day, according to estimates by oil consultancy Rystad. That would mean Guyana’s production would overtake the current output of its neighbor, declining oil giant Venezuela.
The economic decisions taken by the next government largely will determine whether the former British sugar-growing colony is able to harness its oil wealth for national development. But neither major party has offered a plan for the nation.
Guyana’s tiny civil service and outdated laws have not kept up with Exxon’s breakneck development.
The company began exporting crude from Guyana’s first deepwater well, 120 miles off the country’s coast, in January, five years after making the initial oil discovery.
The revenue from the government’s first load is expected to fall into the country’s coffers within the next few days.
The country’s mining and environmental laws, which also regulate the oil industry, are outdated and don’t even mention petroleum.
A tentative deal between the government and Exxon to use the natural gas associated with oil production to provide Guyana with cheap electricity, a major voter demand, has gone nowhere because there are no laws or state agencies that can guide such a project, Guyanese officials said.