Can Newly Oil-Rich Guyana Survive the Resource Curse—and a Dispute With Nosy Neighbor Venezuela?

October 1, 2015 Updated: October 1, 2015

We might have a new energy superpower to talk about. Guyana, the former British colony on the northern edge of South America, apparently controls vast amounts of offshore oil and gas. That, at least, is Exxon-Mobil’s view. In May 2015 the American major announced it had discovered huge potential reserves at its Liza-1 well in the Stabroek Block—some 120 nautical miles off the Guyanese coastline.

Exxon-Mobil claims 700 million barrels of oil might be recoverable and, even despite depressed oil prices, analysts have spoken about the Stabroek Block being worth $40 billion. With fewer than a million Guyanese citizens, such a windfall could go a long way. If shared evenly it would work out to around $60,000 each—in a country where per capita income is currently just $4,170.

But sudden oil wealth is rarely distributed smoothly or equitably, and ordinary Guyanese worry their nation will become the latest victim of the resource curse. Guyana also has a long-running border dispute with its larger, wealthier neighbor Venezuela. Not long after the oil discovery, Venezuelan President Nicolás Maduro issued a decree reiterating a historic claim over western Guyana and large parts of Guyana’s Atlantic waters—including much of the Stabroek Block.

Nonetheless, Guyana’s government is naturally upbeat. Raphael Trotman, minister of governance, described the find as “transformational“—a common view when such news is released, nourishing a bonanza political-economic model of hydrocarbon exploitation and development. You would have heard similar terms being bandied about back when the Falklands were being described as a “South Atlantic Kuwait” or Equatorial Guinea was set for an “economic explosion.”

Guyana’s president has reassured Exxon-Mobil that its operations won’t be disrupted by talk of disputes and controversies involving Venezuela.

Venezuela claims the shaded regions—and much of the sea off Guyana's coast. (Kmusser/Wikimedia, CC BY-SA)
Venezuela claims the shaded regions—and much of the sea off Guyana’s coast. (Kmusser/Wikimedia, CC BY-SA)

Guyana’s Problem Next Door

The international boundary between Guyana and Venezuela remains a source of tension for the latter. An 1899 arbitration panel in Paris settled the current borders but, as any visitor to Venezuela will attest, you can easily find maps and even tea towels that depict the country’s borders extending into a significant portion of Guyana to the east. The spat has even made it onto the Internet—Guyana recently protested Google Maps’ choice of Spanish (Venezuelan) place names in the disputed Esequiba region.

Since 1899, international law including the Law of the Sea Convention has granted additional sovereign rights to coastal states. And international maritime boundaries can take on added significance when potentially thousands of square miles of sea and seabed are at stake.

The Guyanese government is eager to ensure oil and gas exploration continues without controversy and has initiated a new round of diplomacy designed to garner support for the international status quo. After a meeting at the United Nations in New York on Sept. 29 the leaders of the two countries agreed to resume diplomatic relations, though we can expect a great deal more presidential speech making and backroom diplomacy at the U.N. and regional summits.

The two nations have plenty of history. The Guyanese government will be mindful of an incident in 2013 when the Venezuelan Navy detained a survey ship operating in what it considered to be disputed waters. The ship was owned by Malaysia and operated on behalf of an American company.

At home, Maduro is under pressure to be seen as defending the “fatherland.” He also faces elections in December and Venezuelan voters may not be in a forgiving mood given food shortages and chronic inflation.

The end result is what we might describe as “hot nationalism,” a situation where political leaders talk grimly about the dangers facing their countries, or conversely talk about the historic opportunities to make a notable difference to their countries. Either way, “oil talk” can and does inflame the passions, especially when at least one party thinks the discovery was made in disputed waters.

Klaus Dodds is a professor of geopolitics at the Royal Holloway. This article was previously published on TheConversation.com

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

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