Editorial | Time to talk CARICOM energy policy

Two months ago, this newspaper reminded Jamaica’s policymakers, and domestic firms, of the business opportunities that will likely open in Guyana with the projected near-quadrupling of the size of its economy over the next four years on the back of big oil finds in its territorial seas.

The exploitation of the first of these oil wells, the Liza 1 field in the Stabroek Block, began commercial extraction of crude on December 20, several months ahead of schedule. The 120,000 barrels per day (bpd) it is expected to produce is around double the output of Trinidad and Tobago, hitherto the English-speaking Caribbean’s major oil producer.

A second phase of the Liza development is expected to start production in 2022, delivering 220,000 bpd, while a third well, the Payara Field, north of the Liza field, should become commercially operational a year later, with another 220,000 bpd.  By 2025, Guyana’s oil production is expected to be 750,000 barrels a day.

As we noted in early November, the International Monetary Fund projects that this year, Guyana, whose economy has been clipping along at an annual average rate of around four per cent for more than a decade, will see its gross domestic product (GDP) balloon by 86 per cent. Next year’s growth will, by that standard, be a modest five per cent, followed by 20.6 per cent in 2022, and 26.3 per cent in 2023.

BIG BOOM FOR GUYANA

Guyana is on the cusp of becoming a relatively wealthy country. By 2024, its GDP will be in the range of US$15 billion, or roughly the size of Jamaica’s at present. But, with a population of less than 30 per cent of the size of Jamaica’s they, on a per capita basis, will be substantially richer.

Since the last time we alluded to these figures, there have been further developments. On Christmas Eve, ExxonMobil, which, with Hess Oil and the Chinese oil company, CNOOC, controls the 26,000 sq km Stabroek block, announced its 15th oil discovery, which, it noted, “adds to previously announced estimated recoverable resources of more than six billion oil-equivalent on the Stabroek block”.  The Stabroek block alone! Put differently, at 728.3 million barrels, Trinidad and Tobago’s oil reserve is around 11 per cent of Guyana’s, although the former also has a significant amount of natural gas. 

Guyana and Trinidad and Tobago, however, aren’t the only Caribbean Community (CARICOM) member states emerging as players in the global hydrocarbons sector. This week, the American oil prospector Apache, and France’s Total, announced they had made a “significant oil discovery” off the coast of Suriname, Guyana’s neighbour.  They believe that the 1.4 million acres they are exploring “offers significant potential beyond the discovery of Maka Central 1”.

ISSUES TO CONSIDER

Suriname, too, which now produces 16,000 bpd onshore, may be on the verge of an economic take-off, which, as in the case of Guyana, will open business opportunities, of which Jamaican firms, as part of CARICOM’s emerging single market, should seek to take advantage. 

But on the broader regional level, there are issues for CARICOM to seriously consider. As we have noted in the past, the community has no articulated energy policy – either for how, or whether it should, share energy resources. Neither is there a binding regional framework for the reduction of greenhouse gases and how any tensions between emission of carbons and oil production are to be resolved. These will be increasingly significant issues if CARICOM, victims of global warming and climate change, become big players in the hydrocarbons sector.

Yet, the CARICOM treaty contemplates development of policies for sector development, including manufacturing, services, and tourism.  Trinidad and Tobago’s previous monopoly in oil and natural gas allowed it an unchallengeable competitive advantage in manufacturing, which, some critics claim, precipitated the de-industrialisation of its CARICOM partners.  Hopefully, the same complaints won’t be levelled at Guyana and Suriname. CARICOM leaders, and the region’s private sector, should begin a serious discussion on these issues.