One of the poorest countries in the Americas may become the world's largest oil producer per capita, disrupting its relationship with its neighbours.

Promising oil discoveries in Guyana's waters augur greater regional relevance for this small and poor South American country. Territorial disputes between Venezuela and its neighbour, over the Essequivo territory that Caracas has historically claimed (more than half of Guyana's surface area), may be exacerbated by the opening of wells in deep waters that Guyana administers but over which Venezuela is seeking fair international arbitration.

Image created by ExxonMobil about its exploration in Guyana's waters.

article / Ignacio Urbasos Arbeloa

ExxonMobil has discovered oil deposits 193 km off the coast of Guyana that could completely change the course of Economics and its international influence. After several decades of failed attempts to search for hydrocarbons in its subsoil and an exhaustive search since 1999, in 2015 the Liza field responded positively to seismic analysis, subsequently showing abundant oil reserves at a depth of 1,900 metres. At the moment, estimates speak of 3.2 billion barrels of recoverable oil to be found in the Guiana Basin, which extends to Suriname, another country with a promising oil future. Companies such as Total, Repsol and Anadarko have already obtained exploration rights in the different blocks offered so far by the Guyanese government, but it is the Stabroek Block, exploited by Exxon (45%), Hess (30%) and China's CNOOC (25%), which will be the first to start producing in 2020.

Expected to reach 700,000 barrels per day by 2025, this is the largest deepwater global deepwater finding of the decade and one of the most valuable additions to conventional oil production. The crude is Pass for middle distillates, precisely what Gulf of Mexico refineries are looking for in a market saturated by light crude from fracking. If agreement is to optimistic estimates, by 2025 this impoverished country of about 700,000 people would surpass OPEC member Ecuador in oil production, making it the world's largest producer of barrels per capita (ahead of current leader Kuwait, which produces 3.15 million barrels per day and has a population of 4.1 million). Production costs per barrel are estimated at $26 per barrel considering taxes, so profits are expected to be plentiful in virtually any future scenario (WTI is currently around $50 per barrel), making Guyana one of the biggest attractions in the oil industry at the moment. fees Prospecting led by Exxon, a company that already dominates exploitation in the so-called deepwaters, had a success rate of close to 80% in 2018, which has generated enormous expectation in a sector accustomed to fees of 25%.

The positive impact that this finding will have for Guyana's Economics is evident, although it is not Exempt challenging, given the high levels of corruption or a bureaucracy and class political inexperienced for negotiations at this level. The IMF, which is advising Guyana, has already recommended freezing further negotiations until the tax system is reformed and the country's bureaucratic capacity is improved. The IMF has estimated Guyana's GDP growth at 28% by 2020, a historic figure for a country whose exports are based on rice, sugar cane and gold, Economics . The government is already designing an institutional framework to manage oil revenues and cushion their impact on other sectors. Among the proposals is the creation of a sovereign wealth fund similar to those of Norway, Qatar or the United Arab Emirates, which could be set up this year with partnership of experts from the Commonwealth, to which the country belongs.

Historic dispute with Venezuela

These new discoveries, however, increase tension with Venezuela, which maintains a territorial dispute over 70 per cent of Guyanese territory, the Guayana Esequiba belonging to the Captaincy General of Venezuela during the Spanish Empire. The disputed territory was subsequently de facto colonised by the British Empire when the British took control over the Dutch territories of Guyana in 1814. In 1899 an international tribunal ruled unanimously in favour of the UK against Venezuelan claims. Subsequent revelations, however, demonstrated serious elements of corruption in the judicial process, rendering the award "null and void" (non-existent) in 1962. In 1966, the United Kingdom, as representative of British Guyana, and Venezuela signed the Genevaagreement , which established a commitment to reach a settlement agreement: the 1970 Port of Spain protocol , which froze negotiations for 12 years. After the end of this period, Venezuela demanded that Guyana return to direct negotiations, and in accordance with the United Nations Charter, the diplomatic formula of good offices has been agreed upon and remains in force to this day, but no significant progress has been made. Since Guyana's independence in 1966, Venezuela has promoted an indigenous separatist movement in the region, Rupununi, which was harshly repressed by Georgetown, setting a precedent of military tension on the border.

Although a formal agreement has never been reached on the territorial dispute, the arrival of the socialist People's Progressive Party (PPP) to government in Guyana in 1992 and the electoral victory of Hugo Chávez in Venezuela in 1999 ideologically aligned the two countries, which allowed them to reach Degrees unprecedented cooperation during the first decade of the 21st century. In the framework of this golden era, Guyana participated between 2007 and 2015 in the Venezuelan Petrocaribe initiative, receiving some 25,000 barrels per day of oil and derivatives, which constituted 50% of its consumption, in exchange for rice valued at market prices. committee On the other hand, Guyana supported Venezuela's candidacy to the United Nations Security Council in 2006 in exchange for Caracas' express promise not to use the privileged position it temporarily acquired in the territorial dispute. An important precedent was Hugo Chávez's statement in 2004 that he did not object to Guyana "unilaterally granting concessions and contracts to multinational companies, as long as this favours the development of the region". Despite the existence of unfriendly acts between the two states during this period, the vital importance that Venezuela's anti-imperialist foreign policy gave to the Caribbean during Chávez's term of office forced him to treat topic with the utmost restraint in order to avoid a disagreement with CARICOM and to maintain Guyana's support in the OAS.

New tensions

As a result of the oil discoveries, the historic territorial dispute with Venezuela is back on the agenda. A change of government in Georgetown has also contributed to this. The 2015 elections brought the A Partnership for National Unity, led by former military officer David Granger, to power in Guyana. It is a multi-ethnic coalition that could be described as centre-right and less ideologically sympathetic to neighbouring Venezuela than the previous president, PPP's Bharrat Jagdeo. Tensions escalated at the end of 2018, following the seizure on 23 December by the Bolivarian National Navy of two Guyanese-flagged vessels belonging to ExxonMobil that were prospecting in the area and which, according to Nicolás Maduro's government, had entered Venezuelan waters. agreement . The international response was swift, with the United States urging Venezuela to "respect international law and the sovereignty of its neighbours". One of the most complex issues in the territorial dispute is precisely the projection of each country's waters. The position defended by Venezuela is to draw the maritime limits of agreement to the projection of the Orinoco River delta, as opposed to the Guyanese position, which draws the line in a manner favourable to its territorial interests. Although this was a secondary element in the territorial dispute, the economic potential of these waters places them at the centre of the discussion.

To all this must be added the declaration by group de Lima, of which Guyana is a member, not to recognise the May elections in Venezuela and to threaten to sanction the country economically (although, to date, it has not recognised the opposition candidate Juan Guaidó as interim president). The international ostracism of the Bolivarian Republic has allowed Guyana to obtain important diplomatic support from the aforementioned group de Lima, CARICOM and the United States in relation to its international dispute and the detention of the Exxon ships.

result The future of relations between Venezuela and Guyana depends to some extent on the outcome of the March elections in Guyana, which will pit the hitherto president, David Granger, recently ousted from power by a motion of no confidence, against the leader of the PPP, Bharrat Jagdeo, whose party has maintained the best relations with Chavista Venezuela. The no-confidence motion is a historic milestone for the South American country, which will have to prove its social cohesion and political stability amid geopolitical tensions and an international investment community that is watching the events closely development .

Increased revenues for defence

Georgetown, for the moment, limits itself to diplomatic action to defend its territorial sovereignty, but Guyanese Defence Force documents prior to the oil discoveries already identified the need to develop military capabilities should such resources be found in the country. According to Exxon's estimates, agreement , Guyana would be earning $16 billion annually from 2020, which would increase the military expense , currently at around 1% of GDP. In August 2018, the Army of the Cooperative Republic of Guyana carried out the largest military exercises in its history, mobilising 1,500 troops out of an estimated 7,000-strong army. Information available about the material resources of the navy and aviation show the need for a quantitative and qualitative improvement. Overcoming the ethnic divisions between the Indian and African-origin population should be one of the priorities of the armed forces, which suffer from a clear under-representation of the original Indian community, a source of historical suspicion in civil society.

At final, the Caribbean region of South America will be marked in the coming years by Guyana's economic potential and its struggle for territorial survival in the face of Venezuela's legitimate demands. Achieving a real development of the oil industry will undoubtedly be the best way of safeguarding its future as a sovereign and independent country. Venezuela's political uncertainty, mired in an enormous crisis, generates fears of a possible military escalation as an escape valve for internal economic and political pressure against a rival that lacks the resources to confront it. The ability of Guyana's political class to manage the brutal increase in its economic resources after 2020 is still an unknown, but it is conceivable that the second poorest country in the Western Hemisphere will reach great heights on development if it is able to learn from its neighbours and manage a regional context that is favourable to its national interests.