Guyana: Ethnic Politics and a Coming Oil Bonanza
Guyana Election
Guyana’s president David Granger on Wednesday announced that the earliest day for the delayed parliamentary elections will be 2 March 2020, around the time that ExxonMobil plans to launch offshore oil production which will transform the country’s economy.
The ruling People’s National Congress (PNC) party faces a tough challenge from the main opposition People’s Progressive Party (PPP), which runs on a platform that promises to toughen the terms of the large oil production contract.
The PPP argues that the terms of Guyana’s oil Production-Sharing Agreements (PSAs) are “too generous” and should have given the country of 780,000 people “a fairer share.”
The two parties both claim to be pro-business, and are divided more by the ethnic origin of their supporters then ideology. The PNC’s base of support consists mostly of descendant of black slaves, while the PPP I mostly supported by descendants of migrants from India.
Stabroek News reports that the election, based on traditional voting patterns, will be tight.
The PNC had a 1-seat majority in the 65-seat assembly, but the party lost its slim majority in a December 2018 confidence vote, after one member of the PNC voted with the opposition.
In 2015, ExxonMobil discovered substantial offshore oil reserves in the country’s territorial waters. These reserves are estimated to be of more than 6 billion Bl of oil equivalent (boe). The Granger government has signed PSAs with several oil companies, among them Chevron, France´s Total, Spain´s Repsol, Italy’s Eni, the U.K.’s Tullow, and Germany’s Dea.
ExxonMobil and its partners – U.S. independent Hess and Chinese state-owned CNOOC unit Nexen – said they would start production around March 2020 at a rate of 120,000 b/d, ramping up to 750,000 b/d by 2025 — a level comparable to that of neighboring Venezuela (before the gradual decline of Venezuelan production under the regime of Nicolas Maduro).
Stabroek News reports that PPP officials say that the party is “uncomfortable” with the terms of the PSA with ExxonMobil, but that if PPP wins the election, it would not change the terms because the company is in the final stages of pre-production preparations, “and any interruption of the schedule to deliver first oil would be damaging to the national economy.”
The PPP, however, will insists on opening contracts which were signed with other oil companies after the deal with ExxonMobil was finalized.
The contracts with these other companies “were poorly negotiated,” the party said.
“We have made it clear that we intend to review every contract that was signed after ExxonMobil’s,” PPP leader and the country’s former president Bharrat Jagdeo said in July.
“The contract terms were agreed in good faith, and should be respected.,” the president’s office told Stabroek News.
In April 2018 the International Monetary Fund (IMF) reviewed the country´s PSA model, and concluded it was “relatively favorable to investors by international standards.”
In November 2018 the government suspended further licensing until 2020 so it could update future contract terms, the Energy Department said.
The revised PSAs will be more attractive to oil companies and will increase the country’s returns, the government said, but current contracts will not be affected.
The PNC and the PPP are united in rejecting one threat to offshore exploration in Guyana — a nineteenth- century territorial claim by Venezuela on Guyana’s resource-rich Essequibo province, where Stabroek is located.
The ongoing dispute has so far prevented the two countries from agreeing on a demarcation of their maritime boundary.
