Guyana to remain ‘low risk’ as forecast oil, gas spend tops US$60bn

Guyana is expected to maintain a low level of risk for the coming years, but challenges exist, according to Arantza Alonso, senior analyst at consultancy Verisk Maplecroft.

“The government enjoys the support required from a legal and procedural perspective,” Alonso said at the GIPEX Guyana oil expo.

The analyst highlighted that President Irfaan Ali’s party holds a slim majority in the national assembly.

“However, there are key challenges to this stability that must be taken into consideration. For example, it is our view that ethnic divisions remain a leading driver of political risk for investors as these types of divisions prevent consensus building,” she added.

“Lack of consensus has been a driver of delays in preparations for oil revenue, delays in formulating the petroleum commission bill and certain constitutional reforms needed for the sector.”

Alonso said the country needs better sector legislation and enforcement as well as more transparency, particularly related to licensing and contracting and ahead of the government’s planned launch of a licensing round this year.

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Among required actions are updates to the petroleum act, such as addressing issues related to government take and tendering processes, having a specialized and independent regulator, and reforming the environmental agency act.

Last year, Guyana's Environmental Protection Agency withdrew revised environmental impact assessment guidelines to “facilitate broader consultation” and said that in the interim documents from 2000 would be in effect until further notice.

Nevertheless, “important progress” has been made and the current administration recognizes reforms are needed, according to the analyst, who pointed to the recent approval of the local content and natural resource fund bills.

This week, Pipe Coating Guyana, comprised of local firm S. Jagmohan Hardware Supplies and international partners Patagonia Shale Services and Wasco Energy, launched operations of a US$40mn facility, and the government made the first withdrawal from the natural resource fund.

Another area of concern highlighted by Alonso is corruption, but this is not an “insuperable” challenge, she said.

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INVESTMENT

Guyana’s low risk operating environment is one of the factors underpinning the build-out of the oil and gas industry.

A presentation by event participant Sofia Forestieri, a Latin America analyst for Rystad Energy, shows projected 2021-30 sector investment in the country of US$64.7mn.

ExxonMobil leads forecast spend with US$33bn, followed by Hess (US$20.5bn) and CNOOC (US$16.8bn), all partners in the flagship Stabroek offshore block.

Other planned spend will come from CGX Energy (US$1.7bn), Frontera Energy (US$0.9bn), TotalEnergies (US$0.5bn) and Tullow Oil (US$0.3bn).

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Source: Rystad Energy