The approval of plans by ExxonMobil for new exploration in the Stabroek offshore oil block has sparked intense debate in the parliament of Guyana.
Opposition MP K. Sharma Solomon voiced strong reservations regarding the plans of the American company; however, Joel Bhagwandeen, who authored a comprehensive economic model on the matter, dismissed the criticism. As he argued, slowing down exploration activities would inevitably lead to an energy impasse, given that maintaining maximum production from known reservoirs is unsustainable over the long term.
Production limits and the risk of reserve depletion
According to an economic model covering the period up to 2051, the reserves of the Stabroek block are not limitless. Based on estimated resources of 11 billion barrels of oil equivalent and cumulative production reaching 1.2 billion barrels by 2026, existing reserves are projected to be depleted by 2054 unless new discoveries are made.
Production is estimated to peak at 1.3 million barrels per day in 2028 and remain steady at that level until 2040. From that point onward, however, a gradual yet inevitable decline is forecast: falling to 1.13 million barrels per day in 2041, 783,000 in 2046, and a mere 114,000 barrels per day by 2051.
Fiscal windfalls and state revenue
The author of the economic model also rejects the notion that the drilling cost recovery mechanism operates at the expense of public finances. As he emphasizes, under the 2016 agreement, all exploration risks are borne exclusively by the contractor rather than the state. Guyana is not required to commit equity capital for capital expenditures, while securing royalties alongside a 50% cut of profit oil.
According to the same analysis, alleged fiscal losses do not reflect economic reality, resulting solely from timing disparities between cash outflows and revenue recognition.
Projections show the government of Guyana collecting approximately $186.4 billion between 2027 and 2051. Of this total, $105.6 billion is expected to flow directly into state coffers, while $109.6 billion is slated for accumulation in the Natural Resource Fund. The effective take of the state across projects is estimated at approximately 35.7%.
"The real threat to the economy of Guyana is not ongoing exploration, but entering an era of declining output without the requisite preparation to pivot operations toward new, untapped resources," stated regional economist Valery Kozlov in an interview with Pravda.Ru.
Concurrently, Guyana must navigate a complex geopolitical and investment landscape, factoring in the aggressive activity of neighboring petrostates such as Suriname, Trinidad and Tobago, and Venezuela. Within this framework, it seeks to strike a delicate balance between Western and Chinese capital, actively drawing investment from CNOOC. As the analysis concludes, confusion surrounding upstream contractual terms, specifically the erroneous conflation of ongoing exploration with direct financial loss, compromises the formulation of a coherent long-term energy strategy.
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