Guyana is due to hold a general election later this year that could have a significant bearing on the country’s emergence as a new oil frontier.
Guyanese President David Granger said on June 18 he would call an election after the Caribbean Court of Justice (CCJ) ruled that a vote of no confidence in his government on December 21 was valid.
A general election later this year – probably in November – could see the opposition People’s Progressive Party (PPP) take power, which could have repercussions for E&P operators active in deepwater areas off the country’s coast.
The party has said it would look to revise the terms of production-sharing agreements (PSAs) signed with international oil companies (IOCs) that are deemed unfavourable for Guyana.
The PSA signed with the ExxonMobil-led group that has made 13 discoveries in the offshore Stabroek block is not understood to be in the PPP’s sights, given how advanced operations in the acreage are and the short-term economic disruption any renegotiation could cause.
ExxonMobil believes the block has the potential for at least five FPSOs, following the discovery of an estimated 5.5 billion barrels of oil, and aims to be producing more than 750,000 bpd by 2025.
The Liza Destiny FPSO is due to arrive in country in the third quarter of 2019. It will be used in Liza Phase 1, with first oil anticipated in the first quarter of 2020 before it ramps up to a peak of 120,000 bpd.
The second phase of Liza has a targeted start-up of mid-2022, and a third development, Payara, could come on line as early as 2023.
The lease for the Stabroek block was awarded in 1999 and then renegotiated in 2016. Subsequent deals struck with IOCs such as Repsol, Total, Tullow and Chevron could come under close scrutiny should the PPP take office, with the terms of future PSAs also likely to be tighter.
The ruling People’s National Congress (PNC) coalition, which is led by Granger and comprises A Partnership for National Unity (APNU) and the Alliance for Change (AFC), was mandated to govern until August 2020. But a surprise vote against the government in December by Charrandas Persaud of the AFC sparked the current crisis.
The Granger government had been governing with a majority of a single seat in the 65-seat National Assembly, so Persaud’s decision to side with the opposition in the no-confidence vote was crucial. Granger’s team has accused the AFC legislator of accepting a US$1 million bribe in an attempt to bring down the government.
Persaud, who subsequently fled to a Canada, claimed it was a vote of conscience because the government had not done enough to develop the economy and create jobs.
The crisis deepened on February 1 when Guyana’s acting Chief Justice Roxanne George-Wiltshire declared the December 21 no-confidence vote legal. She said this meant Granger and his cabinet should resign immediately and a new general election be held by March 20.
The subsequent appeal to the CCJ in Trinidad delayed the dissolution of the government, though its ruling this week means Granger has little choice but to call an election.
Though his government had already suspended upstream licensing last year until 2020 while future contract terms are developed, the risk of a more aggressive revision of terms by the PPP has exacerbated risk for many IOCs active in Guyana.
While they nervously assess the political landscape, ExxonMobil has sought to reassure investors the country’s problems will not affect its operations there.
Guyana is arguably the US super-major’s most important development project and is viewed as pivotal for the company hitting its production target of 5 million boepd by 2025.
“We don’t have any concerns about the political dynamics [in Guyana],” said ExxonMobil’s CEO Darren Woods during the company’s quarterly earnings call on February 1. It was the first time ever an ExxonMobil CEO has made an appearance on a call. “It’s important to keep in mind that when we enter a country, our mind-set is to be there for a lifetime – 30 to 40 years.”
Woods went on to say that his company has “engaged with the sitting government, the opposition and communities” in Guyana to ensure the “development is understood.” The company owns a 45% stake in the consortium developing the Stabroek block with Hess holding 30% and CNOOC Nexen 25%.
The rapid ramp-up in offshore activity led by ExxonMobil and its partners looks unlikely to be stymied by the political crisis unfolding onshore. But a change in government could see a new regulatory framework emerge, which would raise the risk profile for all IOCs active in Guyana.