How Guyana's Oil Boom Sparked A Border Dispute With Venezuela

Summary

The video script discusses the escalating tensions between Venezuela and Guyana over a territorial dispute, fueled by the discovery of vast oil reserves in Guyana's Essequibo region. The script highlights Guyana's rapid economic growth due to oil production, its challenges with the potential resource curse, and the international implications of the territorial dispute. It also touches on the role of Exxon Mobil and the geopolitical strategies of both countries, including the United States' support for Guyana's sovereignty.

Takeaways

• 🌍 Guyana, a small South American nation with a population of over 800,000, has been in the international spotlight due to its territorial dispute with Venezuela, which has escalated over oil resources.
• 🤝 A recent meeting between Venezuelan President Nicolas Maduro and Guyana President Irfaan Ali took place in the Caribbean, highlighting diplomatic efforts to address the tensions.
• 📜 Venezuela's claim to the Essequibo region of Guyana, which accounts for two-thirds of Guyana's land, has a history spanning over a century, despite being resolved by an international tribunal in 1899.
• 🛑 Venezuela's interest in annexing the Essequibo region has been reignited by the discovery of vast oil reserves by Exxon Mobil in 2015, which has significantly boosted Guyana's economy.
• 🚀 Guyana's economy has experienced unprecedented growth, becoming the world's fastest-growing with the highest real GDP growth rate in both 2022 and 2023, largely due to its oil production.
• 📈 The oil discovery has transformed Guyana from a relatively impoverished country to one of the wealthiest in South America on a per capita basis, with continued growth expected.
• 🏭 Exxon Mobil, along with partners Hess and China National Offshore Oil Corporation, have discovered over 11 billion barrels of oil in Guyana since 2015, with production expected to double by 2027.
• 🤔 Critics argue that the oil deal between Guyana and Exxon Mobil may be one-sided, favoring Exxon, with concerns about the lack of transparency and the potential for the resource curse.
• 🛑 The territorial dispute has implications beyond the region, with the United States expressing support for Guyana's sovereignty and being impacted by the growth of Guyanese oil production.
• 🏦 Guyana has established a Natural Resource Fund to manage oil revenues prudently, aiming to avoid economic instability and the resource curse associated with sudden wealth from natural resources.
• 🌳 There is a debate about whether joining OPEC would be beneficial for Guyana, with some suggesting that it is in the country's interest to produce as much oil as possible without the constraints of OPEC's production management.

Q & A

What is the current population of Guyana?

Guyana is home to just more than 800,000 people.

Why did Venezuelan President Nicolas Maduro and Guyana President Irfaan Ali meet in the Caribbean?

They met to address the escalating tensions between Venezuela and Guyana over a century-old territorial dispute, particularly regarding the Essequibo region.

What is the primary reason behind Venezuela's interest in annexing the Essequibo region of Guyana?

The primary reason is oil. The 2015 discovery by Exxon Mobil revealed enormous wealth in oil, making the region more attractive to Venezuela.

How has the discovery of oil in Guyana impacted its economy?

The discovery has led to a significant increase in Guyana's standard of living and has made it the world's fastest-growing economy with the highest real GDP growth rate in 2022 and 2023.

What was the historical context of the territorial dispute between Venezuela and Guyana?

Venezuela has laid claim to the Essequibo region for more than 100 years, despite the dispute being resolved by an international tribunal in 1899.

How has the oil production in Guyana grown since the discovery by Exxon Mobil?

Production has grown from almost zero to nearly 600,000 barrels a day by the end of the following year, with expectations to double to almost 1.2 million barrels by the end of 2027.

What is the significance of Guyana's oil production growth for the United States?

The growth of Guyanese oil production will heavily impact the United States due to its proximity and existing refinery infrastructure, potentially benefiting the American economy.

What is the Essequibo region, and why is it contested by Venezuela?

The Essequibo region makes up two-thirds of Guyana's total land. Venezuela claims it as part of its territory, despite the dispute being resolved in favor of Guyana in 1899.

How does the international community view Venezuela's claims over the Essequibo region?

The international community, including the United States, stands by Guyana's sovereignty and does not support Venezuela's claims, which are seen as a strategic mistake.

What are the criticisms regarding the oil deal between Guyana and Exxon Mobil?

Critics argue that the deal is one-sided, favoring Exxon Mobil, with the company paying no taxes, having a special arrangement to maximize profits first, and not being responsible for insurance.

What measures has Guyana taken to manage its oil revenues and avoid the resource curse?

Guyana created the Natural Resource Fund to set aside fiscal revenues from the oil sector, aiming to avoid spending revenues as they come in and maintain a stable economy.

What is the potential future for Guyana's oil production, and how does it compare globally?

By 2035, Guyana might become the fourth-largest oil producer in the world, offering the country a unique opportunity to develop rapidly and provide equitable and prosperous growth.

Outlines

00:00

🌎 Territorial Dispute and Oil Wealth in Guyana

The small South American nation of Guyana, with a population of over 800,000, has been in the spotlight due to escalating tensions with Venezuela over a territorial dispute that dates back a century. The dispute centers around the Essequibo region, which Venezuela seeks to annex, driven by the discovery of vast oil reserves by Exxon Mobil in 2015. This has led to a significant improvement in Guyana's standard of living and economic growth, making it the world's fastest-growing economy with the highest real GDP growth rate in 2022 and 2023. The situation is further complicated by Venezuela's own oil reserves, which they have struggled to manage effectively. Amidst these rising tensions, Guyana's future as a major oil producer is closely watched by the international community, particularly the United States, which stands to be significantly impacted by Guyana's oil production trajectory.

05:01

🏛️ International Support and Political Maneuvering

Despite Venezuela's claims to the Essequibo region, international public law and the support of the United States stand firmly behind Guyana's sovereignty. Critics suggest that Venezuelan President Nicolas Maduro may be using the territorial dispute as a distraction from his country's economic collapse and to bolster his image ahead of the 2024 presidential election. The United States has previously offered to ease sanctions on Venezuela in exchange for free and fair elections, but Maduro's actions have led to a loss of trust and calls for the re-imposition of sanctions. Meanwhile, the discovery of over 11 billion barrels of oil in Guyana since 2015 by Exxon and its partners has transformed the country's economy, but also raised questions about the benefits分配 to Guyana and the role of Exxon in the oil bonanza.

10:01

📈 Economic Growth and the Challenge of Resource Management

Guyana's proximity to the United States and the Gulf of Mexico positions it to benefit significantly from its oil production, both in terms of infrastructure and market access. However, the country's high GDP growth masks underlying challenges, including weak democratic institutions and a risk of falling into the 'resource curse'—a phenomenon where countries with significant wealth in a single sector tend to have worse development outcomes post-discovery. To mitigate this, Guyana has established the Natural Resource Fund to prudently manage oil revenues. Yet, there are concerns about the fund's management and the government's capacity to oversee large-scale procurement and infrastructure projects. As the world moves away from fossil fuels, Guyana is keen to maximize its oil production, opting not to join OPEC and focusing on capturing revenue in the present.

15:01

🛠️ Guyana's Path to Development and the Future of Oil

Guyana faces a pivotal moment in its history, with the potential to transition from a least developed to a highly developed nation within a short period, thanks to its oil discovery. By 2035, it could become the fourth largest oil producer globally. To avoid the resource curse and ensure equitable and prosperous development, Guyana needs to invest wisely, establish independent management of its Natural Resource Fund, build government capacity in sector management, and make capital available to its citizens. The country's enthusiasm for oil production is evident in its decision not to join OPEC, allowing it to focus on maximizing output without the constraints of production quotas. Guyana's experience offers valuable lessons for other nations on managing the wealth from natural resources responsibly and sustainably.

Keywords

💡Guyana

Guyana is a small South American nation with a population of just over 800,000 people. It is the central focus of the video due to its recent economic boom and territorial disputes with Venezuela. The country's newfound wealth from oil reserves has placed it in the international spotlight, making it a key player in the global oil market.

💡Territorial Dispute

A territorial dispute refers to a disagreement between two or more parties over the possession of a piece of land. In the context of the video, Venezuela and Guyana have a long-standing dispute over the Essequibo region, which makes up two-thirds of Guyana's land. This dispute has escalated due to the discovery of oil in the area.

💡Oil

Oil is a fossil fuel that serves as a primary source of energy and is a significant driver of economic growth. The video emphasizes the discovery of oil in Guyana by Exxon Mobil in 2015, which has led to a dramatic increase in the country's wealth and global significance. The oil reserves are central to the territorial dispute with Venezuela and Guyana's economic future.

💡Exxon Mobil

Exxon Mobil is a multinational oil and gas corporation that made a significant oil discovery off the coast of Guyana in 2015. The company's involvement and subsequent discoveries have transformed Guyana into a major oil producer, impacting its economy and geopolitical standing. The script mentions Exxon Mobil's role in starting to produce crude oil off Guyana's coast.

💡Economic Growth

Economic growth refers to the increase in the production of goods and services in an economy over a period of time. The video discusses how Guyana has become the world's fastest-growing economy due to its oil production, with the highest real GDP growth rate in 2022 and 2023, illustrating the transformative power of natural resources on a nation's economy.

💡Resource Curse

The resource curse is a phenomenon where countries with abundant natural resources, especially oil, tend to have worse development outcomes than those with fewer resources. The video mentions this concept in relation to Guyana's rapid economic growth and the potential risks it faces due to its heavy reliance on oil revenues.

💡Natural Resource Fund

A Natural Resource Fund is a financial mechanism used by countries rich in natural resources to save and invest a portion of their resource revenues. The video describes Guyana's establishment of such a fund to manage its oil wealth responsibly and avoid the pitfalls of the resource curse by setting aside fiscal surpluses from the oil sector.

💡OPEC

OPEC, or the Organization of the Petroleum Exporting Countries, is an intergovernmental organization of oil-exporting nations that coordinate their petroleum policies. The video touches on Guyana's decision not to join OPEC, reflecting its interest in maximizing oil production without being subject to OPEC's production quotas.

💡International Support

International support refers to the backing a country receives from other nations, often in matters of diplomacy or conflict resolution. The video highlights the international community's support for Guyana's sovereignty against Venezuela's territorial claims, with the United States expressing unwavering support for Guyana.

💡Venezuela

Venezuela is a South American country that has a territorial dispute with Guyana and is led by President Nicolas Maduro. The video discusses Venezuela's claim to the Essequibo region of Guyana and its potential motivations, including access to oil reserves, despite having significant oil reserves of its own.

💡Essequibo

Essequibo is a region in Guyana that constitutes two-thirds of the country's land area. The video script mentions this region as the focal point of the territorial dispute between Venezuela and Guyana, with Venezuela's interest in annexing it due to the discovery of oil reserves.

Highlights

Guyana, a nation of over 800,000, has been in the spotlight due to escalating tensions with Venezuela over a territorial dispute.

The dispute is centered around the Essequibo region, which Venezuela threatens to annex, driven by the presence of oil discovered by Exxon Mobil in 2015.

Exxon Mobil's discovery has led to a significant improvement in Guyana's standard of living and economic growth.

Venezuela's claim to the Essequibo region dates back over 100 years, despite the area being part of Guyana.

Guyana has become the world's fastest-growing economy, with the highest real GDP growth rate in 2022 and 2023.

The United States supports Guyana's sovereignty and is impacted by the trajectory of Guyana's oil production.

Guyana's oil production is expected to double by the end of 2027, indicating a substantial growth trajectory.

The International Monetary Fund's data shows a skyrocketing GDP for Guyana since the start of oil production in 2019.

Critics argue that the oil deal between Guyana and Exxon Mobil is one-sided, favoring Exxon with no taxes and priority profit.

Guyana's government capacity to manage the oil and gas sector had to be rapidly scaled up post-discovery.

Venezuela's economic collapse and Maduro's untrustworthiness are highlighted as concerns in the context of the territorial dispute.

Guyana's potential to become one of the largest oil producers by 2035 is underscored, with implications for global oil markets.

The risk of the 'resource curse' is discussed, where countries with single-sector wealth often have worse development outcomes post-discovery.

Guyana's establishment of the Natural Resource Fund is seen as a measure to manage fiscal revenue from the oil sector prudently.

The country's decision not to join OPEC allows it to focus on maximizing oil production without market management constraints.

Guyana's aspiration to transition from a least developed to a highly developed nation by 2035, leveraging its oil wealth wisely.

Transcripts

Guyana is a tiny nation home to just more than 800,000 people.

This small South American country though has been making

big headlines.

Venezuelan President Nicolas Maduro and Guyana president

Irfaan Ali met in the Caribbean yesterday.

Tensions between South American neighbors Venezuela and Guyana

escalated this week over a century old territorial dispute.

As Venezuela threatens to annex more than half of the country of

Guyana.

Yes, Venezuela wants to annex Essequibo part of Guyana. Why? A

one word answer to this is oil.

So, it's all about the oil. In 2015 discovery by Exxon Mobil as

you noted, there's enormous wealth there and Guyana has been

in the last three years - their standard of living has

skyrocketed with this newfound source of wealth

This discovery has made has made it seem more attractive to

Venezuela to pursue this course of action.

Venezuela has laid claim to this for more than 100 years.

Venezuela even though they have 300 billion barrels of proven

reserves in Venezuela that they can't manage to drill on their

own. They would like to lay claim to this area as well. So

this is why there's been a rising tension escalation.

Amid rising tensions with Venezuela, Guyana has become the

world's fastest growing economy recording the world's highest

real GDP growth rate in 2022. And that happened again in 2023.

Guyana is at a crossroads in its history. It is about to become

one of the most exciting and important oil producing

countries in the world. And that matters a great deal both for

the Guyanese people and also for the United States, which will be

heavily impacted by the growth of Guyanese oil production and

by the trajectory that Guyana takes over the next 10 to 15

years whether oil boom happens or whether it suffers an oil

bust.

Everything changed for Guyana, a country the size of Idaho in

2015.

ExxonMobil says it has made a significant oil discovery off

the coast of Guyana.

Guyana joined the ranks of the world's oil producers for the

first time on Friday. As US oil company Exxon Mobil said it

began producing crude off the coast of the South American

country.

Exxon made a major discovery that then led to a string of

discovery after discovery after discovery. And at that time,

Guyana, like many of the countries that we work with, had

only a couple of people in government who really were

familiar with the oil and gas sector, and so had to quickly

ramp up its capacity in order to oversee this rapidly growing

sector.

We started drilling and 2019 started producing in 2019. So

production has gone from basically zero to almost 600,000

barrels a day of oil by the end of next year. And that

production is going to double to almost 1.2 million barrels by

the end of 2027. So the growth trajectory has been tremendous.

The only English speaking country in South America has

been witnessing tremendous economic growth since the

discovery of oil. This chart from the International Monetary

Fund shows how its GDP has skyrocketed since it began

pumping oil in 2019.

Really massive changes to the economy in the last two years.

And we're expecting that to continue for the foreseeable

future.

It's a moment of great excitement in the in the

economic landscape of the country. The challenge though

it's really too tied to the oil and gas industries.

Guyana is one of the great success stories in the oil

industry in the western hemisphere of the last 10 years.

It has gone from being a relatively impoverished poorer

country to one of the richest countries in South America on a

per capita basis, and it stands to increase its wealth as it

continues to grow its oil production.

This is the map of Guyana and this region is called Essequibo,

which makes up two thirds of the total land. Venezuela claims

this region as part of its territory, even after the

dispute was resolved by an international tribunal all the

way back in 1899. Ever since the oil discovery in Guyana in 2015,

Nicolas Maduro led Venezuela has been very vocal about annexing

this region. The escalation raised eyebrows when Venezuela

held a referendum in December to seek approval to take over the

area.

However, a few days later, leaders of both countries met

and agreed not to use force or threaten one another in a

dispute.

We are a peace abiding country and people. We have have no

other ambition than to pursue the peaceful coexistence with

Venezuela at every country in this region.

Venezuela doesn't truly have sources of support in its

ambitions to take over that territory of of Guyana, whereas

Guyana has seems international public law on its side, as well

as the United States.

We absolutely stand by our unwavering support for Guyana

sovereignty.

I'm not sure Guyana standing on its own. To tell you the truth.

I think, you know, there are a lot of we've all seen what

happens when nation sovereignties are challenged and

unilateral actions taken. I think the world and outside

community have grown pretty sensitive to that. So my

expectation is, there's more support more broad support in

the international community to make sure that the right

processes are followed to resolve this dispute.

Critics also argue that Maduro is playing the Guyana card to

win the country's 2024 presidential election. They say

Maduro may be trying to distract voters from his country's dire

economic situation, once the wealthiest nation in South

America thanks to its oil industry, Venezuela's economy

has collapsed since Maduro took power in 2013.

So this has has two purposes for Venezuela, one for a government,

which is providing a relatively poor quality of life to its own

citizens, that gives them an opportunity to rally around the

flag and say, Oh, there's more to be had across the border. It

allows President Maduro to activate the sort of electoral

machinery that he will need for elections in 2024. That gives

him a bit of a dry run on mobilizing his constituencies.

It also gives him a, you know, a way to to position himself for

the presidential election in 2024. By saying, I'm the one who

fights for Venezuela. But it is a very thin legal claim. And I

think it's going to be an enormous strategic mistake by

Maduro. Because Venezuela is trying to reconnect to the

international community, regain legitimacy and remain free from

sanctions. And there is no better way to organize the

entire international community against you than to

impermissibly transgress a border with your peaceful

neighbor.

I wouldn't believe anything, Nicolas Maduro said yesterday,

he's proven to be a very untrustworthy negotiating

partner, particularly with the United States. Back in October,

the US came to deal with Venezuela saying, Okay, if you

promise to have free and fair elections, we will in advance of

that we will ease sanctions, and that's what allowed Chevron to

get a license at least for six months to go back in there and

start resuming work. Within two weeks of that agreement, he

outlawed the opposition candidate and said the person

could run for office. You know, the Financial Times has written

an editorial saying that the US should reimpose the sanctions

right away. Because he's so untrustworthy.

We have the international world. On our side. There'll be very

few countries who would approve of what President Maduro and

Venezuela have been suggesting and indicating and doing in the

last six months or so.

US oil giant Exxon and its two partners Hess and the China

National offshore oil company have discovered more than 11

billion barrels of oil in Guyana since 2015. Ghana's economy has

exploded since then. Critics argue that Exxon Mobil is

reaping the most benefits from this oil bonanza.

For many years, there's been controversy surrounding Guyana

and Exxon's oil deal with many critics within Guyana,

challenging the validity or the soundness of that deal, because

it's very much to the advantage of Exxon.

It's a one sided deal because Exxon pays no taxes. Exxon

didn't put up the insurance they're responsible for putting

up Exxon has a special arrangement, where they maximize

profit first. They get their profits first and Guyana gets

theirs later.

On the question of whether the arrangement with Exxon is fear

or not for Guyana. I was with it from the very beginning. And it

may be that way. I think it was a fear or I think it is a fee

arrangement. It is a production sharing arrangement.

Deals get struck. And sometimes the deals don't always favor you

in all of the aspects and I think that Guyanese have to

embrace that if they want to continue to participate in this

broad global setup. And to say how do we ensure that the terms

going forward.

For all the international oil companies they look for big

finds and Guyana is the biggest that anybody has found that a

long time and there may not be other giants, as they're called

in the business that are left. So it's extremely important. And

I think that's why you see ExxonMobil play such a high

priority not only on the development of the asset, but on

the development of the country. Because, you know, for

international oil companies, these are 30 year projects,

they're going to be there for a long time. And so if the country

doesn't succeed, neither do they.

Guyana is very close to the United States. It's close to the

Gulf of Mexico, where the United States has an enormous array of

refinery and oil and gas refining infrastructure, so a

lot of Guyana's oil will go to the United States and

potentially could be consumed by the American market. So the

United States is in a pretty strong position to benefit from

the exploration and expansion of Guyana's oil both in terms of

corporate infrastructure, and also in terms of the American

economy.

On paper, Guyana's sky high GDP growth looks like the envy of

the developing world. However, critics highlight that the

country's weak democratic institution, and deeply divided

politics among ethnic lines could cause Guyana to suffer

from the so called resource curse.

So, the resource curse is this unfortunate historical

circumstance that countries which have significant wealth in

a single sector, which dominates their economy tend to have worse

development outcomes after the discovery of the resource than

they had before.

Guyana created the Natural Resource Fund in order to set

aside some of the fiscal restraints from the oil sector.

It's a precautionary step really to avoid having a situation

where revenues are just spent as they come in. And you end up

with a quite an erratic economy as the commodity prices go up

and down.

I think the fund is being it's a very, very poor fiscal choice by

the government to put the money in a fund like this and to not

have it subject to normal rules of accountability. I'm a former

Comptroller of the state of New York, and I manage both the fund

investment funds as well as the fiscal side of government. This

is not how you manage this amount of money, unless all you

want to do with it is put it into the budget in order to meet

the political needs of the party in power.

In order for Guyana to avoid the curse they need to get to the

next level. First, they have a Natural Resource Fund, but they

need independent management of that fund, as Norway has to have

a long term view on investment and avoid wasting that money.

Second, they need to build government capacity to manage

the sector, not only the oil and gas sector, but very large

procurements, billions in procurement for roads and

infrastructure. And governments don't think it's politically

popular to do that. But without that government capacity,

accounting, inspectors general budget supervision, they're

going to have a hard time managing that money well. Third,

they need to make capital available to Guyanese.

As the world tries to move away from fossil fuels, Guyana wants

to pump as much oil as possible. The country's enthusiasm for oil

production became most evident when officials said they were

not interested in joining OPEC, the cartel of oil heavyweights

like Saudi Arabia and the United Arab Emirates.

For a country like Guyana. It's probably not in its interest to

join OPEC because it wants to produce as much as it can, as

quickly as it can. And that's not the game and OPEC . In OPEC,

it's all about curtailing production to manage the market.

So I think a country like Guyana, which is a bit on the

margins, it will be more in its interest to be a bit of a free

rider and benefit from OPEC's management of the market without

itself having to cut back its production.

I think Ghana is essentially wanting to produce as much oil

as possible and to capture as much money as possible today.

And I think she's well within her rights to do that. And, you

know, so I would, you know, state in a very nice way by

saying she wants to maintain her autonomy.

Rossil fuels will no longer be loan will no longer be

commercial at least, that by that time, we will be able to

have a good life without oil. Without the income that comes

now from oil. I think we've been working our way through those

things. And I think we are making good experiences that are

good for the world at large.

Guyana is one of the few countries in the world which has

an opportunity to go from least developed to highly developed in

a rapid period of time, and that's because of this major

discovery that they've had in oil. By 2035, Guyana might be

the fourth largest oil producer in the world. And so they have

an opportunity to do what very few countries have ever done

before, which is to spend this money wisely and to provide

equitable and prosperous development.