Guyana, a former British colony of less than a million people, is on the verge of becoming a major global oil exporter as fears grow that the south American country is vulnerable to the so-called curse of black gold, Oil Price columnist Matthew Smith said.
With more than 11 billion barrels of exploitable oil resources identified and more than 35 discoveries to date, along with US oil company ExxonMobil’s acceleration of offshore Stabroek block development, there are indications that Guyana’s oil industry and economy will continue to boom.
The curse of oil is when a country is overwhelmed by the enormous wealth generated by that resource and leaves aside other economic sectors in order to maximize the windfall profits from that fuel.
“This often leads to further political and economic dysfunction due to weak governance, rampant corruption, prevarication, and increased conflicts over control of the enormous wealth generated by oil. In addition, it makes countries extremely vulnerable to oil price declines, such as the oil crises of the 1980s, as their economic dependence on oil increases,” Smith said.
Guyana is likely to face a similar future, given that the revenues that oil exports generate for the South American state “are considerable.”
Although the administration of President Irfaan Ali, who took office in August 2020, is focused on improving governance and significantly reducing corruption, “there are fears that the huge financial gain generated by oil will derail those reforms.”
Guyana’s oil industry generated $439 million in revenue for Georgetown during the second quarter of 2023. From the start of oil production in that state in 2019 until the end of the second quarter of 2023, the former British colony earned nearly $2.7 billion, according to Bank of Guyana data.
As a result of that vast offshore oil wealth, Guyana’s gross domestic product (GDP) between 2019 and 2022 nearly tripled to $14.5 billion.
“Guyana’s GDP grew by no less than 62% in 2022. In fact, this makes the Latin American country the state with the fastest economic growth in the world,” data from the International Monetary Fund (IMF) showed.
