In the last few weeks, Washington think tanks, financial services analysts in New York and London, and publications from the New York Times to the Petroleum Argus, have all found a reason to express a view on Guyana, the Caribbean nation they now see as set to become one of the Western hemisphere’s major oil producers.
It is the first sign of the remarkable transformational change being brought about by the heightened levels of offshore exploration now taking place in the region. It makes possible imagining a Caribbean, a decade from now, in which nations other than Trinidad are energy rich, are net exporters of oil and gas, and are having to address the problems associated with wealth in ways previously no thought had been given to.
As is now well known, ExxonMobil announced last June a “world class” oil find in its Liza-1 well in deep water in its Stabroek block, some 120 miles off Guyana’s coast. It then confirmed in January this year, good-quality, oil-bearing sandstone reservoirs in a separate 10-mile distant well, known as Payara-1. In addition, it has said recently that it had found an additional high quality, deeper reservoir directly below the Liza field; announced that it was preparing to drill a further offshore well, and has indicated that it was looking forward to continuing to evaluate “the broader exploration potential on the block and the greater Liza area.”
Although ExxonMobil, like most major oil companies is cautious, with its Vice President of Investor Relations, Jeff Woodbury, reportedly recently saying that the company expects Guyana initially to produce about 100,000 barrels of oil per day, the company is forecasting that in the Liza field alone, there could be the equivalent to as many as 1.4 billion barrels of oil, as well as natural gas.
Exxon has said that it expects the first oil will “come ashore” by 2020 using a floating production, storage and offloading unit, but while this may in the short-term involve processing being undertaken by Trinidad’s state-run oil company Petrotrin at its Pointe-a-Pierre refinery, in the longer term a Guyanese refinery and other facilities seem likely to be required.
Beyond this it is clear that significant upgrading of much of the country’s infrastructure will be necessary, to say nothing of the services that will be needed to provide for the thousands of Guyanese, Caribbean and other workers who are expected to be drawn in to support the industry’s future development.
As such, it may be the first of several similar challenges to arise in the region, if for example there are substantial new oil finds off French Guiana and Suriname; Tullow’s exploration off Jamaica’s south coast is successful, and other prospects of oil and gas off the Bahamas, Cuba, the Dominican Republic, Haiti, Barbados and Belize were also to result in the identification of significant, exploitable reserves.
Guyana’s good fortune is an important indicator of the need for change in both the way the region sees and presents itself, and is seen from the outside. It suggests that the Caribbean’s economic development can change rapidly in ways that will not only transform thinking, but may also see new regional economic centres of gravity emerge.
This is not to downplay the economic problems, mismanagement and indebtedness that continue in some parts of the region, or the importance of the traditional economy and the employment it provides. Rather it is to observe that away from oil and gas, countries elsewhere in the region with vision, need to give thought to where they might have competitive advantage; how they might participate in Guyana’s development; and how like Jamaica they leverage their geographic location by developing the infrastructure necessary to achieve this.
Oil and gas apart, several objective factors are likely to facilitate new external thinking. The first is the enlargement of the Panama Canal. A wider and deeper canal opened in June 2016 enabling much larger vessels to transit to and from the Caribbean Sea, opening the possibility of increased transhipment activity, and making viable, plans to develop hubs in the northern Caribbean at Mariel in Cuba, Kingston and elsewhere in Jamaica, Freeport in the Bahamas, and Caucedo in the Dominican Republic.
In an early indication of the canal’s potential to stimulate growth, the Panama Canal Authority reported that in December 2016 and in January 2017 it achieved monthly records in terms of tonnage with respectively the transit of 1,166 and 1,260 container ships and other vessels. Strikingly, shipping industry reports suggest that shipments from the Far East to the US east coast have begun to abandon routes using the Suez Canal in favour of eastbound voyages through Panama, making more certain the Caribbean’s claim to being the east-west and north- south shipping crossroads of the Americas.
Secondly, many Caribbean nations have embarked on or have completed major port developments to facilitate, according to the Caribbean Shipping Association, energy shipments, mineral exports, and tourism in the form of the port facilities for the cruise industry.
There is evidence that changing regional approach to energy security and emerging demand for Liquefied Natural Gas in particular, is now acting as a spur for the construction of terminals and storage facilities across the region, with Jamaica and the Dominican Republic having ambitions to become regional distributors to others that are in the process of diversifying their energy sources to cleaner fuels and renewables.
Another quite separate development has been a surge in the requirement for facilities for upgraded and new cruise ship terminals.
This reflects the increase in the numbers of cruise ships now sailing the Caribbean – reportedly 239 in 2015 but probably significantly more this year ‒ and an increase in their size, requiring new port facilities, and related shopping and attractions to provide for the 23.6 million cruise passengers that the Caribbean Tourism Organisation reported as visiting in 2016.
Up to now and Trinidad apart, most Caribbean economic thinking has been focused on commodities, manufacturing, tourism, financial services and artisanal fisheries.
This is understandable as it is where immediate opportunity lies. However, when technology is changing rapidly, production sharing in the Americas is likely to grow, irrespective of the Trump administration’s desire for re-shoring, and the oil price is climbing, it is clear that other possibilities exist.
If the region is to harness the growing external interest now emerging, a change in thinking is required.
Previous columns can be found at www.caribbean-council.org