Happenstance and its role in Guyana’s world-class petroleum finds

Guyana’s Emergent Oil and Gas Sector:

Introduction

Today’s column will advance the notion of happenstance, which I had introduced in last week’s, as representing the most apt explanation for Guyana’s revealed creaming curve of world-class recoverable petroleum discoveries. Mathematically, this curve has been comfortably set at more than 80%; that is, over four times the historical global average of 20% for oil finds!

Searching the literature, I have discovered that, there have been several broad attributions directed at accounting for such an occurrence. However, quite a few of these attributions go directly to a variant of spiritual cum religious invocations, including Acts of God. Several others seem to rely on veiled assertions of deep nefarious human-directed collusions between, elements of big oil [ExxonMobil]; the United States Geological Services, USGS; and private business/state/political elites in Guyana.

I strongly disagree with these and have introduced in the next section my own thesis that explains these occurrences as pure happenstance. After that, I shall provide pertinent details on the data points marking the discoveries.

What is happenstance?

Simply put I am arguing here for the hypothesis that happenstance, in its standard meaning, is the most apt explanation for Guyana’s explosive and still unfolding oil and gas discoveries, especially between the First Find [mid -2015] and First Oil [December 2019; details are provided in the next section]. I do not claim this is by any metric the only explanation, but I do believe it provides the best data fit.

Happenstance is not recognized as a standard economic term. It is being applied here directly from its standard English meaning. In that ordinary meaning, happenstance combines happenings and circumstances. I therefore apply the word here as referring to economic outcomes [of a beneficial type] largely due to chance. In other words, circumstances that are due to pure chance. For statistical applications, happenings are events and as such countable. This feature distinguishes happenstance from several of its cited synonyms. A good example is serendipity, which does not have the feature of countability.

Happenstance captures the sense of randomness in the initial exploration, development, and later emergence of ExxonMobil, its partners, as well as a bunch of foreign and local investors resident in, and/or operating from, every major region on Planet Earth. It stands in opposition to deliberately constructed or designed, planned, certain, programmed or in any way assured economic outcomes.

I have searched the social studies literature and came across only two references to happenstance as a theoretical concept; both are tangential to mainstream economics and development theory. One of these refers to Prof. Humboldt’s work in the late 1990s on learning theory and career development. This work posits that people follow different tasks over their lives and careers; chance changes based on their experiences can benefit their cognitions and capabilities. Interested readers can google to find out more.

The other work by Imre Szabo is, for our purposes, suggestively entitled Classical Economics and Happenstance [see Economy and Finance, June 2020]. The article, however, seeks to demonstrate that classical economics has steered clear of a full-hearted embrace of uncertainty and risk and, therefore, happenstance in the ordinary meaning of this notion. Thus, he correctly observes that classical economics is “built on a deterministic world view and culminated in the general equilibrium theory [as such] its mathematical apparatus is a set of tools of optimum calculations.”

From this perspective, it logically follows that Imre Szabo arrives at the determination: “a major problem with classical economics is that random chances and risks are not considered, or are not managed according to their weight.” Clearly this article digs deep into the limitations of classical economics in dealing with what happenstance constitutes in its ordinary meaning rather than an exploration of the economics of happenstance.

To repeat, therefore, I make bold to assert here that: happenstance has played an outsized role in events leading up to Guyana’s First Oil. In 2008, ExxonMobil initiated exploration and development. Its first well, Liza 1, was spud in 2015 and announced as successful in May of that year. The early announcement cited resources of approximately one billion barrels of oil equivalent, boe.

These details are captured in the next section.

First Find/Discovery to First Oil

This section puts together the finds/discoveries ExxonMobil and its partners made between the First Find [May 2015] and First Oil [December 2019]. In this period the dynamic of happenstance ruled, even though as First Oil approached the leverage of ExxonMobil and the Authorities over events or happenings grew. In that brief period, 15 discoveries were made, accounting for 8.8+ billion BoE. All the finds were made in the Stabroek Block. These data are captured in Schedule 1 below. One discovery was made in 2015, four in 2017.and five each in 2018 and 2019.

Conclusion

Next week I discuss Pillar B as outlined at the start of this series. That column develops the second theoretical construct, which is based on viewing ExxonMobil as a zombie company or firm, with all that connotes.