Guyana: Polishing the Diamond in The Rough

I have been intrigued when I came across the story of Guyana. This hidden gem in the continent of South America is undergoing a major transformation that is attracting international investors. This is the only English speaking country in the South America and sharing borders by Venezuela on the west, Brazil on the north, and Suriname on the east. Guyana's north borders are opened to Atlantic Ocean.

So what is so special about this country? and what do we need to watch for in the coming years?

Finally, why the US, UK, China, India, South Korea, Canada, Spain, Qatar, and many others are jumping to invest in the country?

Background

Guyana was known as Dutch Guiana from 1667 to 1814; then as British Guiana until 1966 when it gained its official independent from the United Kingdom and became Guyana that exists today on 26th of May 1966. The meaning of the name "Guyana" comes from the indigenous language and means "Land of many Waters." The country covers 214,970 km2 with water covering around 8.4% of the land. There are around 800,000 people living in the country which makes it one of lowest in term of population density (around 3.7 persons / km2). The country is generally known to be poor; with a GDP estimated to be around $3.8 b in 2018 making the GDP/capita around $4,800. This low GDP gives Guyana the 100th place in the world.

The Turning Point

Guyana was believed to be the place where El Dorado resides in (a mythical city that is covered by gold). Now, this believe doesn't look far fetched any more as the new discoveries shows that Guyana is about to be covered with the "Black Gold" aka oil. ExxonMobil the oil giant has spearheaded the exploration and discoveries in Guyana since 2015 with 14 discoveries so far. The discoveries are about 200 km from the coastline of Guyana, however, this challenge can be overcome by deploying the solution for deep offshore oil operation FPSO (Floating Production, Storage, and Offloading) vessels.

The planned production is for 120,000 barrels per day by 2020 which will reach around 750,000 by 2025. With 5.5 b barrels of proven reserves and the low density population these numbers show that Guyana is about to become one the world richest countries in term of GDP/capita.

Challenges to Avoid

The arrival of sudden riches are not a blessing in its absolute terms. There are many undesired outcomes that a country can get from the sudden riches. For example, if the wealth is not distributed in a just and systematized way the country might witness a civil unrest which can lead to a civil war (based on ethnicity, political views, or even religion), think about African nations. Another undesired outcome could be corruption, in which government officials award contracts in based on gaining personal payments or favors, think about South American nations. But assuming that the previous two challenges were avoided there is still another softer but very difficult economical challenge that can rise. Inflation could hit the country's local economy big time, think about the Persian Gulf Countries.

This requires that the leaders of the country set a clear plan on how the wealth will be managed in a way that build a prosperous and sustainable economy. Some good example to look at are Norway, Kuwait, and Qatar.

International Investment Rush

The United States is leading by far the international investments in Guyana. In August 2018 the US  launched the American Chamber of Commerce in Guyana. ExxonMobil, HESS, Anadarko (bought out by Occidental), and others are already active in the oil sector of the country. From the map below we can see Repsol (Spain), Tullow Oil (UK), Total (France), CGX (Canada), and Nexen (now CNOOC from China) all are active players in Guyana.

South Korea has strengthened diplomatic relations with the official opening of its Consulate in Georgetown in November 2018. Moreover, Canada in June this year announced plans to established a business chamber in Guyana. The Chinese and the Indians are not far from taking similar steps.

Finally, Qatar has moved quite ambitiously with investment in Guyana as Qatar Petroleum (QP) acquired 40% stakes in 2 explorations blocks in Guyana From Total pending for the government approval; furthermore, Qatar Airways has signed a golden agreement with Guyana. The agreement will permit Qatar Airways to operate any number of passenger and cargo flights and to have an operation center in Guyana to fly to any country in the region and other regions as well.

More is More for Guyana

The mining and energy sectors are not the only sector that requires massive investments in Guyana, the country lacks infrastructure and it has great potential for agriculture projects. The entire country is looking to build sustainable industries in: Forestry (value-added products), Information and Communication, Manufacturing, Tourism, and all supportive sectors. As the mining and energy sectors grow, the GDP of the country will grow so will the need for all the mentioned sectors. With no doubt, Guyana is the a diamond in the rough that is being polished.