Impact of Oil and Gas on Guyana's Economy

This research paper discusses the impact of oil and gas on the economy of Guyana. It explores the potential for growth, challenges, and opportunities for the country. The paper also highlights the importance of effective management of oil revenues for sustainable development.

Running Head: ACCOUNTING FINANCIAL ANALYSIS REPORT
ACCOUNTING FINANCIAL ANALYSIS REPORT
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Literature Review.......................................................................................................................2
Oil and Gas Industry of Guyana.............................................................................................2
Oil and Gas Impacts Guyana Economy.................................................................................4
Concerns of Oil and Gas of Guyana......................................................................................8
Curse or Blessing...................................................................................................................9
Research Objective...................................................................................................................10
Research Design.......................................................................................................................10
Conclusion................................................................................................................................10
Reference..................................................................................................................................12

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Introduction
Guyana is the country situated on northern main land of the South America. Guyana
has gained immenseattention around the world after the announcement of the discovery of
more than the ninety meters of the higher quality, reservoirs of the oil-bearingsandstone that
is about200 km off to its coastline. The activity of the exploration of the oil and gas by the
Guyana has been the sources of the tension by the neighboring countries. The offshore of the
country has able for attracting various companies since 1940s, who have completed much of
the geographical surveyance of area as well as drilling of the number of the wells. The
ExxonMobil, which is the American multinational oil and the gas corporation, has found out
oil,from the coast of Guyana, around the year 2015. It has been believed that reserves were
big. They has believed that after flowing of the oil in the year 2020, the country Guyana
would be reaping almost billions immediately and as per them around 750,000 barrels of the
oil per day would be produced from the year 2025. This discovery of highest quality of the
reservoirs of the oil-bearing sandstone could be used by the country as the base for boosting
the economy of the country (Nowak 2018). Hence, under this research paper, discussion
would be done on the impact of the oil and gas on the economy of Guyana.
Literature Review
Oil and Gas Industry of Guyana
The oil and gas industry of Guyana is still considered to be in its infancy stage. The
subsidiary of ExxonMobil, Esso exploration and production has started exploration of the
offshore territory of the country. In the year 2015, this company becomes first company, who
has discovered significant reserves of hydrocarbons with the help of Liza-1 and in Stabroek
blocks. The country has now estimated recoverable of the resources of approx. billions boe at
the Stabroek. The domestic sector of offshore has gained immense attention from that of the

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international players, since the first discovery of the hydrocarbons. Apart from Stabroek,
Guyana, have additional seven blocks in the phases of the exploration as well as development
that includes; Kaieteur and Canje, which are also operated by the Esso; Corentyne and
Demerara by the CGX Energy as well as Roraima by Anadarko, Kanuku by the Repsol and
Orinduik by the Tullow oil (Nathan 2017).
The standard setting bodies of the country is planning for allowing the authorities for
clearly defining the policy as well as implementing the mechanism that needed for properly
governing the industry as well ensuring the growth sustainability. The international
institutions such as IM and World Bank have taken step for providing greater support for
establishing the strong frameworks of regulatory (Namazi and Mohammadi 2018). Moreover,
in 2018, department of energy was established by the ministry of presidency of Guyana by
transferring of portfolio of hydrocarbons from ministry of the natural resources.The
developments are covered in the Oil & gas Year Guyana 2019. The business intelligence
platform of Guyana, TOGYIN has the features that provide the profile of the companies as
well as institutions who are active in the oil and gas industry of the country as well as
providing the access to all of the coveragesand the content, which includes the interviews of
the key players and leaders of the industry (Nafey 2014).
After drilling of the eight gushing discovery of the wells offshore, the potential of the
company has been increased for generating the amount of approx. $20 billion in the revenue
of oil by end of next decade, which is roughly equivalent to much larger Colombia revenues.
If every planning goes well then the poorest countries in the South America will be becoming
wealthiest. However, there exist certain obstacles. The countries, which discovers oil they
often wastes the opportunities they have because the resources generally blends seamlessly
with the corruptions (Mohan, Strobl and Watson 2016). Moreover, the country, which is
having weak political institutions such as Guyana are quite vulnerable. There exist enormous

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challenges, which should not be underestimated. The companies of Guyana are seeking for
training the training of the workers in the safety as well as basic operations of oil. The
country needs for overcoming skepticism, corruptions, entitlements as well as nepotism.
Moreover, in the recent years, there has been lot of shake of the stock prices because of the
disappointing productions as well as depleting the reserves. There has been heavily
investment in the Canadian Oil sands as well as in the natural resources by Exxon, when
there were higher prices (Mistry et al. 2014)
Oil and Gas Impacts Guyana Economy
The economy of Guyana is the fastest growing economy in Caribbean. As the energy
analysts has founded that Guyana would lead the world in the discoveries of offshore crude
oil, since the year 2015. The country is on its blink of the major expansion of their oil & gas
sector for the world-class scale with the first oil to be expected in the year 2020. The
exploration of it has resulted in unprecedented rate of the success that is above 80 percent
have able for confirming the estimated gross recoverable resources that is over and above five
billion barrels of the oil equivalents as on December 2018. Guyana hosts the wider array of
the international companies of oil that ranges from the supermajors to the junior players
(Laing 2015). The investments that are projected over the life of initial planned development
by private operators have developed around twenty percent of the total gross recoverable
resources that amounts to $19.4 billion. The revenue has been expected from the export is at
$54 per barrel from the initial projects alone would be approx. $72.8 billion and the revenue
of government around $45.4 billion that is over projects life. The total revenue of the
government was $0.9 billion, during 2017. Therefore, discoveries sizes helps in presenting
the historic opportunities for Guyana for leveraging the revenue that are generated from the
productions of oil into the inclusive growth as well as sustainable growth (Khadan and Baxter
2018).

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The main impacts of the economy on the sector of oil on Guyana is expected for
taking place by the revenues of the oil helps in offering the opportunity for expanding the
investment of public in the both human as well as physical capital and lifting of the key
constraints for the inclusive growth. The appraisal of US $20million loan is provided to
Guyana for building of the capacity in the oil and gas (Wenner, Bollers and Hosein 2018).
The financial institution in this respect has said that the sector of oil and gas are expected for
impacting the economy by the demand of the sector for the services and the infrastructure,
creation of job, potential provisions of the cheaper as well as cleaner electricity, if the newly
found natural resources of gas would be able for replacing costly, heavy as well as well as
highly polluting highly fuel oil in the generation of power (Holland 2018). The country could
be able for maximizing the benefits from the revenue of the oil as well as avoiding the
pitfalls, which are associated with the petroleum generated windfalls, which have been the
major areas of the concerns and the focuses for the government and the civil society, right
since the discovery of the oil in 2015 (Trevisanut 2014). The prediction of the World Bank
regarding the economic growth rate is expected to be higher than ever before, there is
expectation that growth would accelerate from 2.1 % to $.8% in the year 2017-2018, from
run up to start up. Moreover, the growth of GDP is projected for growing rapidly as the new
fields of the oil would be coming into the production and the GNP would exclude transfers
abroad. This would be accelerating at the lower rate but it would remain sustainable over the
time (Hilson and Laing 2017).
However, the economy of the country is threatened by the conflicts over the fiscal
terms with the companies of oil, loss of the competitiveness from non-oil sector, inflation as
well as currency over-appreciation, temptations for introducing the subsidiaries of the
wasteful energy. Moreover, local population of the country confronts the unrealistic
expectations of the sudden wealth, damage of environment as well as influx of the outsiders.

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These are certain issues, which is salient particularly for Guyana. Some of the Guyanese
worries that valuable work of the services of the oil as well as contracting, which is the way
for developing the domestic skills as well as economy that is supplied mostly by the Trinidad
and Tobago that is one of the most prominent name in the industry of petroleum
(FUJIKAWA 2014). The large resources of the gas are found in combination of the oil,
which have also been used responsibly. The Guyana is considered to be most fortunate for
having the contrasting instance, which is in next door of Venezuela regarding how the oil
sector that is mismanaged helps in ruining the country as well as Trinidad in which the most
positive role has been played by the petroleum for country. The international goodwill as well
as help would be ensuring that their oil is considered to be the bonus not only for the
economy of the world but for the people (Fry and Delgado 2018).
As the result, the government of Guyana is setting for implementing the new laws that
would enable for boosting the economy, tackling the poverty as well as meeting the targets of
the sustainable developments. It is with the help of Commonwealth, Guyana government is
striving for drafting the new regulations of the petroleum, which would be helpful in
maximizing the benefits of Liza oil fields that was discovered in the off coast of Guyana in
the year 2015. This would be also helpful in meeting of the sustainable developmental goals
that are agreed by the countries of United States. The economy of Guyana would be highly
benefitted by billions of dollars as well as helping for meeting the goals of the sustainable
development that are agreed by the countries of United Nations (Drewry, Shandro and
Winkler 2017). The government of Guyana, with the help of commonwealth would be
drafting the upstream policy of petroleum that is in addition to the redrafting of the Petroleum
Exploration and Production act of Guyana. It has played central role top help for designing
the Sovereign wealth fund of the country. These funds are considered as vital step for Guyana
for effectively managing the oil revenues. The oil revenue of the Guyana helps fundamentally

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for transforming the economy as well as enabling for meeting the key goals of sustainable
developments. The country is working closely with government for drafting new legislation
for establishing the Sovereign wealth fund. The implementation of the Sovereign wealth fund
contributes towards economic stabilizations, maintaining the economic competitiveness as
well as fairly transferring the petroleum wealth across the generations. Guyana government
has supported their effort for writing the draft legislations that would help in establishing the
Sovereign Wealth Fund. There is commitment of the commonwealth for further assisting
government for ensuring effective regulations of petroleum industry as well as that of the
revenues of the oil, which are managed wisely for benefit of the current as well as future
generations of the Guyana (Sinclair and Jayawardena 2018).
The production of oil would begin from 2020 that is year of country’s next elections.
The current administrator has come to the power on the platform of the changes as well as
promises for investing in the green economy. The framework of strategy in relation to the
economic potential of the oil has outlined the ambitious aims for reducing the dependence of
Guyana on the fossil fuel and achieving close to renewable energy of 100 percent usage by
the year 2025 (Connelly and Sam 2018).
The profit of Guyana oil as well as royalty from just Liza Phase 1 and Phase 2 at the
price of oil of approx. $50 per barrel could rise up to approx. $3 billion per barrel after the
end of five years and amount of $25billion over life of the projects. The windfall of this
magnitude is quite important for the country because government has struggled a lot for
funding the education as well as healthcare. In the country, much of the population is not
having the access for paving the roads, reliable electricity as well as modern hospitals (Shah
and Niles 2016). The development pace of the prospects of the deep water is impressive, as it
would help in eradicating all the issues of the country. The pouring of the funding into the
country has made Guyana with the fastest growing in Caribbean. There has been long-

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running political battle that has diverted the attention from critical needs, for instance
development of the framework of revenue management as well as plans for overhauling the
infrastructure of the nation, system of education as well as network of healthcare (Colley and
Strutt 2015).
Concerns of Oil and Gas of Guyana
The likelihood of the oil spilling reaching to the coasts of Guyana might be small but
the Environment Protection Agency of the country has noted that the spill at Liza would be
affecting the marine resources that are found near the well that includes sea turtles as well as
other marines’ mammals. The quality of air, water, marine fish as well as seabirds would also
be impacted.The existence of the drilling of oil is having great worry for Guyana that is
especially in respect of recent spill of oil at the nearest neighbor Caribbean, Trinidad (Clegg
2014). The government is more concerned for the potential impact on endangered sea turtles,
which breed as well as live along the north-west costal region of Guyana.In this respect, the
company ExxonMobil has made their agreement for a mapping out the coastal mangroves as
well as studying the areas of turtle, bird and fish routes of mitigations for setting the priorities
in case when cleanup is required. The other benefit given by the company is for building the
pipeline of natural gases to shore, which would replace heavy burning of fuel oil for power
plants as well as lowering of the costs to the businesses as well as consumers (Canterbury
2016).
Therefore, it requires having more funding towards environmental protection agency
as well as raising of awareness, concerns as well as building of the capacity among people
living along coastline. There have been great concerns of environment about the potential
impacts on the fishing for livelihood, managements of emissions as well as waste streams. In
this respect, the applications for joining the initiatives of extractive industries transparency
have been recently approved (Bynoe 2014). The organization usually publishes what they pay

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and the government publishes what they receive from the exploitations of the natural
resources. However, Guyana is expected for publicly disclosing the contracts as well as
agreements with the companies under the requirements of EITI (Extractive Industries
Transparency Initiatives). These move speeds up for the creation of the special department
within the ministry of the natural resources that just focusses on the oil and gas. The efforts
are taken for empowering the Petroleum Commissions of Guyana. It will be empowered by
its own governing act and it will be regulating the sector of petroleum in Guyana (Brisbois et
al. 2018).
Curse or Blessing
The government of Guyana has scored relatively poor on the measurement of the
public corruption as well as transparency, which makes more prone to resourcebeing cursed
than the robust democracy, for instance in producing of the oil, the government of Guyana is
indebted heavily. Therefore, overspending the shares of the revenue of ExxonMobil could be
tempting. The curses of revenue are dangerous spiral of the political corruption as well as
economic mismanagement, which has driven frequently the nations that is rich in commodity
(Bøe and Jordal 2016). The higher revenue from the oil reduces the requirement for
collecting the taxes from the citizens. It creates the effect of no representations without the
taxation in which the government uses the real or the anticipated economic windfalls for the
fund social programs, which placate the citizens. This helps in reducing the popular demand
for as well as the willingness to the government for providing actual democratic
representation. The corruption blooms as the elected leaders uses the oil income as the part of
their political slush fund as well as votes that are bought rather than being earned. As the
result, the governments that are funded by the oil become less accountable to the citizens (Al-
Risheq 2016).

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The curses of resources are not inevitable in the Guyana. There are several resources
rich countries such as Canada, Norway, Malaysia, Chile and Botswana who have avoided all
the economic as well as political chaos. The trick for this to use the revenues of the
commodity in the sustainable as well as in the responsible as well as sustainable manner and
protecting the existing industries as the backdrop to volatility of the market of oil. The
country has joined already various international coalitions for offering requirements of
voluntary guidance as well as transparency for helping the countries managing soundly the
commodity wealth (Ali and Schena 2018).
Research Objective
The research is based on answering the questions relating to the fact that what are the
impacts of the oil and gas on the economy of the Guyana, what are the challenges faced by
the Guyana economy and whether it is advantageous and disadvantageous for the company?
This research paper aims for gaining the insights from answering these questions.
Research Design
The research design of this research paper is based on the deductive approach. The
research type selected in the research paper is descriptive. The strategy that has been selected
in the context of research is to collect the data from various sources for gaining good insights
about the topic to reach at the apt conclusion. For the research purpose, secondary data has
been selected that includes researches from relevant articles, websites and books. Lastly, the
qualitative techniques are used in this research paper.
Conclusion
Therefore, it can be concluded from the analysis that Guyana is facing great turning
point in the development of its economy. It has been found that major portion of the revenue
of the country would be coming from the oil and gas profits. It has been found that Guyana is

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having tremendous challenges as well as opportunities and the government is making effort
for responding to it in their best possible ability with the prudent measures. Further, it has
been analyzed that government should make an effort or strong regulation relating to
economic, environmental as well as social deployment. Moreover, it has been analyzed that
there are certain problems that are faced by the government such as risks of the corruption,
patronage as well as nepotism, vulnerability and over-spending for falls in the prices of oils,
lacking of the capability and weakening of the democracy for managing the operations of oil
and collections of tax. In addition, it has been found that Sovereign Wealth Fund as well as
Green State Development Strategy would help in allowing the country for prospering as the
state having oil rich feature. Lastly, it can be said for the optimistic outlook for the Guyana
that the newest industries of Guyana as well as the dollars, which follows would be attracting
the great minds, bring out the new opportunities for the development of the skills as well as
boosting the other activities of the economy.

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