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Major oil find in Guyana, country races to setup rules, plans

Published:Monday | September 5, 2016 | 11:26 AM
People walk near the central bank in Georgetown, Guyana, where the discovery of major oil and gas deposits offshore in the Atlantic have ignited hope that one of the poorest countries in the Western Hemisphere will undergo an economic transformation.

Sleepy Guyana has long been one of the hemisphere's poorest places, a sparsely populated nation on South America's northern shoulder that relies heavily on exports of sugar, rice and gold.

But these days, there's a surge of excitement about an anticipated windfall from major oil-and-gas deposits found in the deep seabed 120 miles (193 kilometers) off the coast — as well as worries about the disruptions and conflicts it might bring.

Hopes are high that fuel siphoned in a few years' time from more three miles (more than 5 kilometers) below the sea's surface might be an antidote to entrenched poverty and underdevelopment in the country of 750,000 people.

"We will have billions in foreign reserves and our population is going to swell big time," miner Cosmos Santo said from a park bench in the seaside capital of narrow streets and mostly low-rise, wooden buildings.

The US Geological Survey had long estimated that offshore Guyana was rich in gas and oil. Now US-based ExxonMobil has announced a "world-class oil discovery" off Guyana after drilling a well that struck oil-bearing sandstone with an estimated 800 million to 1.4 billion oil equivalent barrels.

Exxon and partner Hess Corp haven't yet announced development or investment plans, which could be complicated by low current oil prices and a dispute with neighboring Venezuela.

However, Guyanese authorities are racing to set up rules and plans to administer the hoped-for new industry while avoiding what is known as the "resource curse". In places like Congo and Nigeria, oil or mineral wealth has fuelled conflict instead of development.

Guyana only has to look at Venezuela next door to see what can go haywire with an oil-dependent state. South America's biggest energy producer has been in economic freefall since the 2014 crash in prices for the oil that funds nearly all the spending of its socialist government.

Guyana's presidential spokesman, Mark Archer, said the administration is determined to avoid the mistakes of Venezuela and other energy-rich nations that have run into hard times.

"The plan is not to spend wildly like a drunken sailor but to put in a wealth fund for future generations and ensure we do not neglect agriculture," Archer said.

Norway and the US Energy Department are advising Guyana on setting up such a fund as well as a regulatory framework for the industry, Natural Resources Minister Raphael Trotman says.

Some of the hoped-for riches would go toward building a 350-mile (565-kilometer) jungle road from the capital to northeastern Brazil, opening up Guyana's rugged, mineral-rich interior. Households would get free cooking gas and cheap gasolene.

Guyana's small military would get new aircraft to protect the offshore fields and borders, to provide some "comfort to Exxon and other investors," Archer said.

"We must be able to protect our investment," he said.