Caricom could soon have a new energy champion
Within 24 hour Mike Pompeo made history by becoming the first US secretary of state to visit Guyana and Suriname. he arrived and left both countries on September 17, announcing bilateral agreements to develop infrastructure, combat the movement of illegal drugs, and strengthen trade and investment.
More importantly, the fundamental reason behind Pompeo’s visit was to shore up support against the dictatorial Nicolas Maduro regime in Venezuela. As the United States elections surface on the horizon, President Donald Trump is trying to narrow Joe Biden’s lead in key battleground states with large Hispanic electorates. In addition to recent Cuban sanctions, Trump knows that most Hispanic voters will approve of a tighter noose around Maduro’s Administration. His strategy appears to be working. Compared to 2016, Trump has reduced the democratic lead among Hispanic voters by 11 percentage points in Florida.
Guyana, who has a decades-long unresolved border dispute with Venezuela, is happy to comply with the US’S wishes by jointly cracking down on Venezuelan narco-traffickers. Despite Venezuela’s inability to mount a serious military offence to contest the shared border, their unwillingness to participate in the border case being discussed in the International Court of Justice is frustrating the Guyanese Government. Suriname, on the other hand, has a more fraternal relationship with Venezuela, serving as a route for illegally mined and smuggled Venezuelan gold. Suriname’s reliance on those illicit funds, and their tight relationship with the Chinese, may strain their cooperation with the US.
Pompeo also made the trip to Suriname and Guyana to ensure that US companies benefit from the up-andcoming energy sectors in both countries. Despite Suriname being in the exploration phase, US oil company Apache, in collaboration with France’s Total, has had three major offshore findings in Block 58. In the recent Caribbean Oil and Gas Conference, Sonya Boodoo, with consultancy Rystad Energy, estimated that Suriname has 1.4 billion in recoverable barrels of oil. If the projects in Block 58 are approved, peak capacity could reach 450,000 barrels per day.
In Guyana, the picture is much more advanced. Led by US oil giant Exxonmobil, the country has unveiled 8.3 billion barrels of recoverable oil, and counting, off the coast of Georgetown. At peak capacity, Guyana will produce 1.4 million barrels of oil per day, making it the 18th largest oil producer in the world. If oil continues to be priced at U$40 a barrel, Boodoo estimates that the profits distributed to the Guyanese
Government will reach U$96 billion, over 20 times the size of its gross domestic product (GDP) in 2019. These oil findings are astronomical for a country of 780,000 people.
The increasing oil production in Guyana has led the World Bank to estimate that Guyana’s economy will grow 51 per cent in 2020, compared to a -5 per cent decline for both Suriname and regional neighbour Trinidad and Tobago. Suriname does not have oil production to offset the losses brought on by the pandemic, while Trinidad and Tobago’s production has been mostly declining since the 1980s. Trinidad’s over-reliance on oil and gas to balance its budgets is reflected by a consistent decline in GDP since 2016, when the price of global commodities dropped. Both Guyana and Suriname can avoid some of Trinidad’s mishaps by strengthening their institutions, improving their regulatory frameworks, and developing traditional sectors such as mining and agriculture. Less traditional sectors, such as construction, tourism and real estate, should also be fostered.
Guyana is already learning that oil can’t be its sole economic driver. Some 15 per cent of Guyana’s recently found resources at the bottom of the ocean will be natural gas, which can be compressed, transferred, and used to power thousands of homes onshore. By introducing a gas-to-power project to the energy grid, the Irfaan Ali Administration in Guyana will get closer to its target of cutting energy costs by 60 per cent. A petroleum task force is being established to explore the possibilities of bringing natural gas to shore as the Government seeks to diversify and expand the grid’s capabilities.
The energy framework around both Suriname and Guyana also needs to be improved to attract additional capital investment and transparently manage the upcoming billions of dollars in oil revenue. The Inter-american