With the production of 500,000 barrels a day for 300 days a year at US$40 a barrel, the annual income would be US$6 billion. The cost of production of oil varies widely, depending on whether it is onshore or offshore and if offshore, how far away and how deep. To give some idea, North Sea oil was produced by BP in 2014 at US$30 a barrel. It went down to US$15 a barrel in 2017 and is expected to go down to US$12 a barrel by 2020. The estimated cost of production in offshore Guyana has not been made known by either the government or ExxonMobil. We are therefore left to speculate.
Assuming that a maximum of about half of the income would be deducted as production costs, US$3 billion would be deducted as production costs from an annual income of US$6 billion. Guyana would earn 50 per cent of the profit, that is, US$1.5 billion plus 2 per cent of US$6 billion as royalty which would add another US$120 million. At minimum, therefore, Guyana’s economy would double. More likely than not, Guyana’s economy would grow to three times its current size and even more, if the price remains around US$60 per barrel and if more discoveries are made resulting in higher production. ExxonMobil has drilled only eight wells in seven of which oil was discovered. It plans to drill another twenty. There are also other blocks to be explored by other oil companies and other blocks yet to be given out for exploration.
The public debate so far has focused on the terms of the Petroleum Sharing Agreement between the Government of Guyana and the oil companies represented by ExxonMobil. This debate is continuing. Foreign experts have given ideas to public forums as to what pitfalls Guyana should avoid and what preparations Guyana should make, including what skills training should be promoted. Little or no attention has so far been paid to how and where Guyana should deploy its oil income to prepare for the time when the demand for oil and its price will decline, except in broad terms to avoid the Dutch disease. It is not too early to do so as time is not on Guyana’s side…..