- The Energy Mix - https://theenergymix.com -

Hope for Stability Fades as Guyana Becomes Nascent Petro-State

catmoz/pixabay

Hopes that Guyana’s nascent democracy and fragile economy might defy standard petro-state precedents and realize only benefits from the country’s sudden vault into the ranks of the oil-rich have grown dimmer in recent weeks, as the new wealth fuels pre-existing ethnic tensions.

“The discovery of an enormous oil deposit [1] off the coast of Guyana was meant to catapult this tiny country into the top echelons of petroleum producers and put its citizens on the path to better lives,” reports [2] the New York Times. Instead, the newborn oil industry has only “deepened the historical tensions shackling the nation, leaving some Guyanese afraid that the newfound wealth will subvert the country’s fragile democracy and wipe out other industries, as happened in neighbouring Venezuela [3].”

A recent election, the results of which were “split almost perfectly along ethnic lines,” gave credence to such apprehensions, writes the Times, with both parties (one representing the Afro-Guyanese community, the other those of Indian extraction) refusing to concede out of fear that the winner would “use the oil wealth to shut them out of government for years to come—and deprive their constituents of their fair share of revenue.”

Like this story? Subscribe to The Energy Mix and never miss an edition of our free e-digest.

That both sides are crowning themselves victorious is “threatening to hamstring the economy of Guyana, already one of the poorest countries on the South American continent, and plunge it into a prolonged political crisis.” Times reporter Anatoly Kurmanaev described the situation on his personal Twitter feed on March 7.

I saw an election contested mostly on Facebook Live,” he wrote [5]. “It was scary. When people only get info from their social group, without any filter whatsoever, the shared understanding of reality disappears. Both sides are now certain they won. Violence followed.”

There had been hopes the economic boost from a brand new oil industry would help heal ethnic divides in the country. “The discovery of eight billion barrels of oil off the coast of Guyana by a consortium led by ExxonMobil could have been a powerful enough incentive for the country’s 750,000 citizens to overcome mutual suspicion and unite around the promise of an economic bonanza that could benefit all,” writes the Times. “The start of oil production in December is expected to nearly double the country’s gross domestic product in 2020, according to the International Monetary Fund, and multiply in years to come.” 

But unity has not followed. “The thinking here is, ‘Why share when you’re winning?’” said Ralph Ramkarran, a Guyanese politician who ran what the Times calls a “largely Quixotic campaign” for a small, multi-ethnic party. Until such thinking can be changed, he added, Guyana will “remain a place of suspicion and economic underdevelopment.”

With the country set to reach 1.2 million barrels a day in output by 2030—more than “floundering” Venezuela currently produces—serious economic decisions are urgently needed. But the country’s “tiny civil service and outdated laws have not kept up with Exxon’s breakneck development,” the Times says, and neither of Guyana’s two major parties has announced any plan. 

Meanwhile, “a tentative deal between the government and Exxon to use the natural gas associated with oil production to provide Guyana with cheap electricity, a major voter demand, has gone nowhere because there are no laws or state agencies that can guide such a project.”

And as the new oil economy ramps up, the country’s struggling traditional industries—bauxite, rice, and sugar—are withering. “In the last few years, the government has shut down four unprofitable sugar plants, leading to the loss of 7,000 jobs,” and the country’s main bauxite mine “is also cutting jobs and exports.” Few of these lost jobs will be replaced by the new oil economy. 

As to actual gains from the oil wealth, “abandoned sugar fields are being bulldozed and turned into luxury gated compounds for foreigners and supply bases for the oil companies,” reports the Times. The country can also look forward to “a new shopping mall hosting a Hard Rock Cafe and 12 cinemas…for those able to tap into the industry’s boom.”