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Guyana’s oil boom: The world’s newest petrostate plans to combat climate change with oil revenue

Emerging as potential oil powers while the world seeks to wean itself off planet-warming fossil fuels, South American neighbors Guyana and Suriname say they have no choice but to cash in while they can. (ERRENCE THOMPSON/AFP via Getty Images)
Emerging as potential oil powers while the world seeks to wean itself off planet-warming fossil fuels, South American neighbors Guyana and Suriname say they have no choice but to cash in while they can. (ERRENCE THOMPSON/AFP via Getty Images)

In 2015, Exxon Mobil discovered a massive oil reserve off the coast of Guyana.

Now, one of South America’s poorest countries has become the fastest-growing economy on Earth.

“It’s speculated that Guyana would become the richest country per capita because of this oil,” Kiana Wilburg says.

In a country where almost half of its people live on less than $6 a day, the oil revenues could pull the nation out of poverty.

But at what cost?

Today, On Point: An oil boom has arrived in the South American nation of Guyana. Is it a contradiction that a country threatened by climate change could get rich selling fossil fuels?

Guests

Amy Westervelt, investigative journalist. Host of the podcast Drilled, focused on climate accountability.

Melinda Janki, international lawyer based in Georgetown, Guyana.

Also Featured

Esan Hamer, climate scientist and lecturer with the faculty of Earth and Environmental sciences at the University of Guyana.

Kiana Wilburg, energy reporter with Kaieteur News.

Stacy-ann Robinson, associate professor of environmental studies at Colby College.

Transcript

Part I

PRESIDENT MOHAMED IRFAAN ALI: It is well established that those bearing the brunt of the climate phenomena have made no contribution to the current crisis. Small island, developing and low-lying coastal states like Guyana are among the hardest hit and require adequate financing to address the attendant effects. The commitments by developed world, by the developed countries, including the pledge of U.S. $100 billion per year remain unfulfilled. Guyana is using revenue from oil and gas resources to finance its transition to renewable energy.

MEGHNA CHAKRABARTI: This is On Point, I’m Meghna Chakrabarti. And that was Guyana’s President Mohamed Irfaan Ali addressing the UN General Assembly last month. Back in 2015, ExxonMobil discovered a massive oil reserve just offshore the South American nation.

That oil is poised to utterly transform Guyanese life and its economy. A country which is both highly vulnerable to even small perturbations in climate change, while also being one of South America’s poorest. For years now, the world’s richer economies have said they will help fund climate adaptations for the world’s poorer countries.

President Ali called their bluff last month, saying that the funding has not come through. He also didn’t hesitate to take those same rich nations to task. For suggesting that Guyana turn its back on developing those oil fields because of how fossil fuels contribute to climate change, Ali soundly rejected that.

PRESIDENT ALI: My country, Guyana is blessed with the best of both worlds, that is the ability to lead on climate change. And the use of our expansive oil and gas reserves to contribute to the advancement and development of our country and region.

CHAKRABARTI: Guyana is set to become the world’s newest petrostate, for better or for ill.

So we’re going to investigate today how that fact is changing both the country and the world. And I’m joined today by Amy Westervelt. She’s an investigative journalist who covers climate accountability. Her podcast is called Drilled, and season eight of Drilled was titled Light, Sweet Crude. It’s all about ExxonMobil and the fast-growing oil industry in Guyana.

Amy, welcome to On Point.

AMY WESTERVELT: Hi, thank you. Thanks for having me.

CHAKRABARTI: I should note that today you’re joining us from Costa Rica. Closer to the region than I currently am right now.

WESTERVELT: (LAUGHS)

CHAKRABARTI: Can you give us, can we, can you start by giving us the background on exactly when, why, and how that giant oil field in near Guyana was discovered? And put it into context regarding how large it is compared to other oil fields in already, existing petrostates?

WESTERVELT: Yeah, so Exxon has been exploring in Guyana since really the late ’90s. They started out in a partnership with Shell, looking for oil, didn’t find any for quite a while, and also weren’t terribly fussed about it. They were busy in Venezuela and lots of other places in Latin America.

And figured that Guyana’s reserves would be reasonably tough to get at because it’s pretty deep water offshore there. In 2015, with new partners, they have new partners now, it’s Hess Corporation in the U.S. and the Chinese National Offshore Oil Company or CNOOC, they found oil. So they announced that this was a big discovery.

They weren’t sure quite how big yet, but they knew it was going to be a big deal. And by 2019, they had shipped their first barrel. And now they are estimating that by 2025, Guyana will be their most productive oil region. So more than the Permian Basin in Texas, which is huge. That is, that’s an enormous amount of oil.

It could be up to a quarter or more of Exxon’s total output by 2025.

CHAKRABARTI: Wow.

WESTERVELT: That’s a lot. Yeah.

CHAKRABARTI: Wow. So it’s massive. So I’m seeing here, another way to put it in context, and correct me if I’m wrong, Amy, that could make Guyana the fourth largest producer of offshore oil in the world?

WESTERVELT:  Correct. Yes. Which is enormous.

And it’s really incredible how quickly that’s happened. Like I said, they just shipped their first barrel in 2019 and already they’re already a top producer and are looking to be, yeah. In the top five by 2025, which is, six years after they shipped their first barrel, that’s relatively unusual in the industry.

CHAKRABARTI: Okay. So how did you then get interested in this story?

WESTERVELT: To me, actually, that rapid increase was really interesting, because I was like, “Is there a new technology I haven’t heard about? How are they doing this? How are they moving that quickly and getting that much volume that quickly?” So I was interested to find out more about that.

And then also I heard about some lawsuits that were being filed against the government invoking all sorts of different things. And I was interested in that litigation as well and how it had come together, and whether it was having an impact on both offshore drilling and how people perceived it in the country.

CHAKRABARTI: Okay. So that litigation, tell me a little bit more about that. Cause it’s quite key to what we’re going to be discussing today.

WESTERVELT: Yeah, there’s a lot of, I think Melinda Janki, who I know you’re going to have on today, too, has filed, I want to say it’s seven suits now, but she might correct me.

And they are targeting everything from the length of the permits that were granted, which, by law are supposed to be no more than five years, but Exxon had a 20-year permit. To the constitutional right to a healthy environment, which was written into Guyana’s constitution quite a while ago with a lot of help from Melinda herself. And there’s a suit that is alleging that this project violates that constitutional right.

She also had an insurance related suit, which was pretty interesting. And actually, had an interesting outcome earlier this year, where she went after the government and then the government actually moved to add Exxon as a defendant as well, a codefendant with it, which kind of tells you a little bit about how close their relationship is.

But she was saying that, “Look, Exxon’s own environmental impact reports have indicated that if a catastrophic event were to happen offshore. So along the lines of the Deepwater Horizon event, which this drilling is just like, that could potentially impact up to 14 Caribbean countries.

So Guyana could be on the hook for a lot of liability.”

CHAKRABARTI: Okay. So you’re right. We will have Melinda on a little bit later in the show, and we’ll talk more about those specific details with her Amy. But I would love to hear more of what you’ve uncovered in your reporting. Take me back to what you said a minute ago about how rapid, not only this discovery, but the change that it’s bringing to Guyana has occurred.

And you were wondering even like how is that possible?

WESTERVELT: How is that possible?

CHAKRABARTI: So tell me more. So I asked Exxon if there was some new technology and in a lot of other additional words, they roughly said, “No.” So the answer is a very friendly government which translates to not very much regulation.

So they’ve been able to really fast track permitting and drilling. And then they’ve been able to increase the volume in ways that some people are saying is potentially dangerous. So they’ve increased the volume past a certain threshold that’s listed in their environmental impact reports, which Exxon says is fine and normal.

And a lot of environmental advocates are saying, “No, not so much.” The net of that is that, look, you can move a lot faster when you don’t have a lot of government regulation. And some people would say that’s great. But Guyana was actually supposed to create more of an oversight division.

They even got a World Bank grant to do that. And have not really done that yet. So that kind of leads into this whole fear that, look, we could be looking at another Deepwater, except this time in a country that has relatively little expertise in dealing with something like that.

CHAKRABARTI: So another Deepwater meaning, as you said, I just want to be sure I got this straight, because the oil world is pretty complicated.

WESTERVELT: It’s complicated. Yeah.

CHAKRABARTI: Meaning that people are saying there’s inadequate oversight even built into the very contract that Guyana has with ExxonMobil.

WESTERVELT: Correct. Yeah. And look, Exxon is a U.S. company. So in the U. S. if they were doing this project there would be someone on board of these offshore vessels, making sure that everything is being done correctly. There would be a certain amount of regulatory hurdles to jump through to make sure that the right safeguards are in place and Exxon has said, “Look, we’re a responsible company.

We’re taking care of that ourselves.”

But there’s already been a few issues. There’s been some spills. They were also flaring a lot of the gas that was coming up with the whale too. So this is gas, usually comes up with oil when you’re drilling offshore. And if you don’t have anything to do with that gas, you burn it off, which is called flaring.

And that creates a lot of air pollution and did create a lot of problems for folks on shore in Guyana. They also had a faulty piece of equipment that was operating for quite some time before it was replaced. So there’s already been a few of these little indications that like left to their own devices, I’m not sure how tight a ship is being run.

CHAKRABARTI: So in terms of the specificity of what’s in the contract between the Guyanese government and Exxon, I will want to return to that because devil’s always in the details, Amy. But I just want to quickly touch upon how much this money means for not just the Guyanese economy overall, but for the country’s development, because it’s about 800,000 people, one of South America’s poorest.

As I mentioned earlier, I’m seeing some data here that shows that some 40 plus percent of folks live on $5.50 cents a day. So these billions of dollars of oil revenue is going to change lives in Guyana?

WESTERVELT: That’s the idea and that’s the promise. So far that’s not entirely what’s happening for some reason.

And the Guyanese government has not really addressed this as far as I’m aware of. A lot of that money is just sitting in the bank and then can be pulled from whenever the government has a shortfall in the budget. So they have been doing quite a bit of road building and bridge building and things like that.

But as far as Guyanese people themselves getting much out of that. So far, that’s not really happening.

This article was originally published on WBUR.org.

Copyright 2023 NPR. To see more, visit https://www.npr.org.

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