Lecture Notes: The Oil Discovery in Guyana

Overview of Guyana

• Small, poor country on the northern coast of South America
• Borders:
  • West: Venezuela
  • South: Brazil
  • East: Suriname (smallest country on the continent)

Historical Context

• Guyana largely ignored by global companies until recent years
• ExxonMobil made a significant investment in the region in 2013
• Initially, a 20% chance of success for oil discovery
• Presently:
  • Controls oil reserves worth approximately $1 trillion
  • Expected to produce more oil per capita than Saudi Arabia or Kuwait by 2027
  • Fastest-growing economy in the world

Key Players and Discoveries

• ExxonMobil's Involvement:
  • Major investment began in 1997
  • Largest oil discovery in the last 20 years
• Initial Discovery:
  • 1928: Villagers in Suriname discovered oil while digging a well
  • Accidental find led to significant interest in the region

Geological Theories and Exploration

• Rod Limbert's Theory:
  • Proposed the La Luna Formation extends to Guyana
  • Faced initial rejection but persisted
• Exploration Rights:
  • Limbert secured drilling rights in Guyana, leading to a lucrative contract for Exxon
  • Stabroek Block:
    • Over 1,000 times larger than Gulf of Mexico fields
    • Exxon retains 50% profits after costs; 1% royalty to Guyanese government

Challenges and Developments

• Operational Challenges:
  • faced military opposition from Suriname for 8 years
  • Exxon considered selling exploration rights due to seismic study costs
• Partnerships:
  • Exxon partnered with Shell, Hess Corporation, and CNOOC to share costs
  • Successful drilling in the Lisa Formation in 2015 revealed 11 billion barrels of oil

Economic Impact on Guyana

• Rapid GDP growth:
  • Average annual growth rate over 42% from oil boom
  • Per capita GDP rose from $6,477 (2019) to $18,199 (2022)
• Challenges for citizens:
  • High poverty rates, limited infrastructure and healthcare access
  • Unemployment issues despite oil sector growth

Environmental and Geopolitical Considerations

• Environmental Concerns:
  • Low deforestation rate but vulnerable to flooding
• Border Disputes:
  • Ongoing tensions with Venezuela over Essequibo region

Conclusion

• Guyana's oil boom presents both opportunities and challenges
• Discussion Prompt:
  • What lessons can be learned from ExxonMobil's partnership with Guyana?

Additional Information

• Membership details for "Economic Informant" will be launched soon.
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