Guyana: Impact of COVID-19 on Anticipated Wealth from Oil

I last wrote about Guyana back in November 2019. At the time, they were about to start pumping out oil and gaining the corresponding wealth that was to come to the nation. In that post, I highlighted an article that provided recommendations on how the country could make sure that the wealth benefited the country as a whole. Unfortunately, the virus hit the globe and oil demand sunk. What is the current situation?

The Conversation (Sep 22) discusses this:

Guyana’s new president, Mohamed Irfaan Ali, finally took office in August.

Ali campaigned on the issue of oil governance. Asserting that his predecessor David Granger had agreed to overly generous contracts with foreign oil investors, he promised to get Guyana its fair share of oil revenues.

. . . Though its crude has barely left the ground, Guyana was counting on oil revenues to plug its budget deficit this year. That may now prove impossible given the damage COVID-19 has done to its economy. But if Guyana can resist the urge to pay today’s costs by borrowing against future oil receipts, it could yet ride out this crisis.

President Ali has promised to create a petroleum commission to ensure transparency for how Guyana’s oil revenues are spent and to prevent undue political interference in the oil and gas sector. 

That's a solid recommendation: don't borrow for today against the future. Though based on the quote, it does appear that Guyana made certain budget assumptions based on oil revenues. I'm assuming they decided to increase spending based on that expected oil revenue. I'm sure in the future there will be other articles on if the country decides to cut spending or borrow.

If the oil markets improve, Guyana will be in a good spot, because ExxonMobil keeps on finding oil.

Oil Price (Sep 8) reports:

ExxonMobil said on Tuesday it had made its 18th oil discovery offshore Guyana, which adds to its previous estimate of more than 8 billion barrels of discovered recoverable resources in the area.

. . . Earlier this year, Exxon revised upward its estimate of recoverable resources offshore Guyana by 2 billion barrels of oil equivalent to 8 billion oil-equivalent barrels, as it announced its 16th oil discovery on the Stabroek Block.