Since establishing ties in the 1970s, China has become a major contributor to Guyana\u2019s economic development, with a presence in infrastructure, forestry, fisheries, wholesale and retail service\u200bs\u200b sectors, as well as in gold and bauxite mining.<\/p>\n
After years of partnership in these industries\u200b, China now appears well positioned to strengthen its bilateral ties with Guyana, with one of its state-owned oil firms among the key partners involved in the South American country\u2019s \u200blargest deep-water oil reserves \u2013 the Stabroek Block.<\/p>\n
This offshore concession is operated by the ExxonMobil subsidiary Esso Exploration and Production Guyana Limited (EEPGL). To date, Esso and its partners, the USA\u2019s Hess Corporation and the China National Offshore Oil Corporation (CNOOC) \u2013 the third-largest national oil company in China \u2013 have discovered<\/a> an estimated 10 billion barrels of recoverable oil equivalent at the site.<\/p>\n In this oil-rich 27,000km2 block, CNOOC holds a 25% stake, with Hess\u2019 at 30%, while the operator, EEPGL, has 45%.<\/p>\n The discovery of these significant resources has sparked debate in the local and international arena, including on the environmental, climate and governance risks and the future role of Chinese companies in Guyana\u2019s burgeoning oil and gas industry.<\/p>\n CNOOC itself is a relative newcomer to Guyana\u2019s oil sector, which only had a production capacity of 120,000 barrels per day<\/a> as of December 2019. However, China\u2019s state-owned oil companies are expected to demonstrate their economic strength in the years to come, according to Arthur Deakin, co-director for energy analysis at Americas Market Intelligence (AMI). He adds that China\u2019s role as a development partner will grow in tandem with Guyana\u2019s economic prosperity.<\/p>\n \u201cWhat China offers Guyana that the US does not is speed; their centralised government allows them to disperse sizeable funds without bureaucratic delays or red tape,\u201d he told Di\u00e1logo Chino. \u201cI think China could win many projects that will underpin Guyana\u2019s oil industry and energy sector.\u201d<\/p>\n Deakin pointed to the Amaila Falls hydropower station as an example: the project was recently given government approval<\/a> to be built, owned and operated by the China Railway Group Limited, which will then supply electricity to Guyana Power and Light, the public utility.<\/p>\n As a small state and as a World Trade Organization member, our job is not to seek to exclude states with an interest in, and a capacity to invest in Guyana<\/p><\/blockquote>\n As Guyana<\/a> moves to develop its gas resources as well as the industries required to support them, Deakin said the country will need foreign direct investment. This is not just going to come from the US and western nations, he added, suggesting that much would arrive from China. \u201cSo as Guyana grows, so too will China\u2019s influence in the oil sector,\u201d the AMI analyst added.<\/p>\n Such a forecast is supported by a Trinidadian energy expert who has worked with the current and former governments of Guyana on the legislative framework for the oil industry, and who did not wish to be identified. The analyst agrees that, in the next few years, one can expect to see China\u2019s investments in Guyana grow.<\/p>\n On CNOOC\u2019s direct investment offshore, he said that the state-owned company could buy out stakes in other offshore blocks such as the Orinduik block, led by London-based firm Tullow, Canada\u2019s Eco Atlantic, Total SA of France, and Qatar Energy.<\/p>\n He noted that companies such as Eco, which are focused mostly on identifying new frontier areas requiring low-cost entry, are known for cashing out of projects early. Given the mounting momentum for the global energy transition, he posited that CNOOC could seek to acquire the stakes held by Eco, and even Total, which is looking to reduce its carbon footprint.<\/p>\n \u201cThe game is very, very dynamic and a lot of money is at play in Guyana,\u201d the Trinidadian consultant said of the sector\u2019s development.<\/p>\n For CNOOC, the investment in Guyana\u2019s development also complements China\u2019s foreign policy goals: \u201cCarrying out national initiatives and actively promoting the development and construction of countries along the Belt and Road is an honourable mission for CNOOC,\u201d read a statement<\/a> from 2019. \u201cThe Guyana Stabroek project will continue to increase production and storage for the company in the next few decades, and contribute to high-quality sustainable development,\u201d it continued.<\/p>\n However, the discovery of oil has sparked debate in Guyana on the sustainability of development of the new resource, and the government\u2019s aspirations to maintain its low-carbon credentials.<\/p>\n Melinda Janki, a Guyanese international lawyer and staunch advocate for environmental protection, said that previous and current Guyanese governments have failed to demonstrate that they can stand up to the oil companies and enforce strict penalties and orders when environmental breaches are found, or when the soundness of their operations is unproven.<\/p>\n Janki is also part of the legal team representing two Guyanese who have mounted the first constitutional challenge to ExxonMobil\u2019s operations<\/a> in the Caribbean. The case argues that emissions from the US oil major\u2019s Liza Phase One, Liza Phase Two and Payara projects in Guyana are so significant, they infringe upon citizens\u2019 right to a healthy and safe environment.<\/p>\n 400million<\/p>\n A group of 30 Guyanese stakeholders, including Janki, wrote to ExxonMobil\u2019s shareholders this year about the environmental threat posed by the ongoing gas flaring aboard the Liza Destiny floating production storage and offloading vessel (FPSO). The Stabroek bloc would require ten FSPOs to recover its 10 billion-barrel reserves, according to concessionaires Esso, Hess and CNOOC. Thus far, nearly 400 million cubic metres of gas have already been flared \u2013 the process of disposing of the gas associated with oil production by burning it.<\/p>\n But along with the concerns over the environmental threats of the Stabroek Block operations, some Guyanese fear that the country has already been afflicted by the \u201cresource curse\u201d \u2013 the negative impact of natural resource abundance on meaningful economic growth and indicators of democracy and development compared to countries with fewer endowments.<\/p>\n Carl B. Greenidge, a former Minister of Foreign Affairs and now an advisor on borders, does not share this \u201cdoom and gloom\u201d perspective. He said the oil and gas discoveries and their development will provide the platform Guyana needs to fast-track its development and diversify its economic structure, a view shared by many Guyanese.<\/p>\n He said China can be a key development partner for Guyana as it matures into a strategic oil and gas player and insisted that while traditional revenue earners such as mining and agriculture have buttressed strong economic growth over the years, nothing has the capacity to bring in the resources needed for rapid transformation as quickly as oil. This is especially pertinent now that Guyana, which became independent of British colonial rule in 1966, may be able to retain more of the economic benefits.<\/p>\n Moreover, the future growth and transformation of Guyana will hinge on investment in infrastructure and human resources, Greenidge said. The former minister added that Chinese companies have been preparing technical and economic feasibility studies on infrastructure in Guyana, which formally endorsed China\u2019s Belt and Road Initiative<\/a> (BRI) in July 2018.<\/p>\n Transport infrastructure, such as deep-water ports and major highways, is a particular focus: \u201cThere has been no comparable interest demonstrated by US companies in this sector or in productive capacity such as manganese and bauxite mining,\u201d Greenidge said. \u201cIt would not be unreasonable therefore to see China\u2019s companies bidding more [often] than those of the US when the time comes.\u201d<\/p>\n \u201cAs a small state and as a World Trade Organization member, our job is not to seek to exclude states with an interest in, and a capacity to invest in Guyana and in contributing to building our physical and social infrastructure,\u201d Greenidge said of the country\u2019s variety of international development partners. \u201cGuyana needs to set appropriate rules and to ensure that its executive institutions are in a position to implement and enforce these rules.\u201d<\/p>\n Deakin, who has followed the Guyana oil story since its beginnings in 2015, said it is too early to tell if the country is afflicted by a resource curse. He did, however, note that the government\u2019s closeness to the oil sector is a red flag: current legislation puts too much control in the hands of the Minister of Finance, and there is no mechanism in place to ensure transparency and accountability.<\/p>\nChina as an important source of investment for Guyana<\/h2>\n
Climate and governance risks<\/h2>\n
\ncubic metres of gas have been flared since Guyana began extracting offshore oil in 2019
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