This is an audio transcript of the Behind the Money podcast episode: ‘Will Exxon make or break Guyana?’
Michela Tindera
Last month, my colleague Jamie Smyth found himself driving around a city called Georgetown. It’s the capital of Guyana.
Jamie Smyth
It’s a beautiful city. It’s on the coast of the Atlantic, but it’s also beside this huge river, the Demerara River. It’s known for its tree-lined streets and colonial architecture.
Michela Tindera
It’s hot and sunny outside as Jamie makes his way through town, but as he’s driving around, he notices what seem like pretty immense changes.
Jamie Smyth
So the whole city looks to be under construction at the minute. There are streets being dug up everywhere. There’s buildings popping up all around. So there’s at least five luxury hotels that are currently under construction. And you’ve got all the big brands. You know, there’s already a Marriott, but the Hilton’s going there. You’ve also got American-style malls popping up featuring Starbucks and Hard Rock Cafe with sky-high prices.
Michela Tindera
American brands opening up left and right. Jamie says you can tell that something big is happening here.
Jamie Smyth
It’s a city that you can really see is under huge development.
Michela Tindera
But this booming development is all very new to Guyana. It’s one of the poorest countries in South America.
Jamie Smyth
Half the population live below the poverty line on less than $6 per day.
Michela Tindera
However, that statistic might change in the near future. And that’s thanks to one company that’s the reason for all this new development, ExxonMobil. In 2015, the company and its partners discovered a gigantic oil reservoir off Guyana’s coast.
Jamie Smyth
It’s estimated that there are up to 11bn barrels worth of oil and gas reserves in this area. It’s going to make Guyana the fourth-largest offshore oil developer in the world.
Michela Tindera
Over the next roughly 15 years, Guyana’s government expects to receive more than $100bn from this project.
Jamie Smyth
This windfall could allow the government to update the country’s health system, its education system, and it could improve their infrastructure.
Michela Tindera
But there’s also concerns that this oil could be the country’s downfall. That the wealth generated by Exxon’s oil bonanza will bypass the general public and cause more harm than good.
Jamie Smyth
There are really lots of challenges and risks that lie ahead in how it uses this money and what this money goes towards.
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Michela Tindera
I’m Michela Tindera from the Financial Times. Today on Behind the Money, Guyana is experiencing an unprecedented windfall thanks to Exxon’s major oil discovery. But will the country flounder or flourish inside this new era?
If everything goes according to plan, the money generated from Exxon’s discovery would mark a significant change in Guyana’s economic fortunes. The country’s past, like much of South America, includes a history of colonisation. First, it was by the Dutch and then later the British in the 18th century. Guyana stayed under British rule through the 1960s.
Jamie Smyth
The economy under the British was mainly based on agriculture. It was run for the benefit of the British, not the locals, so it experienced a lot of post-colonial challenges. It also did have some natural resources, for example, gold mining. It has some bauxite, which is a mineral that can be made into aluminium.
Michela Tindera
South America has long been known for its rich oil reserves, but it’s not until 2015 that Exxon finds this black gold in Guyana, and it’s more than 100 miles off its coast in the Atlantic Ocean.
Jamie Smyth
Forecasters suggest Guyana could get up to $150bn through to 2040. For context, Guyana has a $3.7bn national budget. So this really is a huge deal, gonna give the government a heck of a lot more money to play with.
Michela Tindera
It’s an incredible sum for Guyana, and it has the potential to lift a lot of its population out of poverty. But in the past, natural resource booms in developing countries haven’t always panned out very well for the local people.
Jamie Smyth
So if you look at countries like Venezuela, Nigeria, Equatorial Guinea, you know, they all had big oil discoveries and their economies shifted to be very focussed on oil, but it led to corruption, political instability and a hollowing out of their economy. And it could be apt to put out the question that it would have been much better if they didn’t find this oil at all.
Michela Tindera
Now, let’s look a bit closer at this example of Equatorial Guinea, which is in Central Africa. In the 1990s, the energy company Mobil, which Exxon later acquired, discovered oil off the coast of Equatorial Guinea.
Jamie Smyth
Its GDP per capita surged, but it failed to develop its economy for the local people. So most people still live in poverty in the country, living on, you know, only a couple of dollars per day. And the ruling family has lived in luxury.
Michela Tindera
Jamie, can things be different for Guyana? I mean, what’s Exxon said about its role in the development of Guyana’s economy? How does the company see itself fitting into this transformation and helping the country tackle these challenges?
Jamie Smyth
So I interviewed Exxon’s president in Guyana, and he told me that they’re well aware of the risks posed by this sudden financial windfall, and they’re doing everything they can to try and circumvent them. They’re pushing money into education and skills. They’re supporting local environment and community projects and building new roads, and trying to ensure that the country has the best chance of succeeding. However, he did say that not all the levers are within Exxon’s control, which I thought was an interesting point. And he’s right. You know, it’s up to the government to try and manage this as much as it is for Exxon.
Michela Tindera
So in order to avoid a fate like Equatorial Guinea, what will Guyana have to do? Oil production in Guyana began in late 2019 and now in 2024, the money from that is beginning to flow into the country. So to understand exactly how Guyana plans to manage this windfall, Jamie arranged to speak with the country’s president, Irfaan Ali. He met with him at his official residence in the centre of Georgetown.
Jamie Smyth
I suppose the first question is really, how transformational do you think the oil discovery is for Guyana? What’s your vision for transforming the country?
Irfaan Ali
Well, first of all, you know, we have laid out a very elaborate plan on how the revenues from oil and gas would be used to transform the country from different perspective. One is the infrastructural transformation that is the physical reality of the country. Ensuring that . . .
Jamie Smyth
The president has big plans like building more hospitals, building the country’s first gas-fired power plant, and even constructing a new road to link Guyana with Brazil in order to boost regional trade.
Michela Tindera
These are massive plans, but in order to achieve them, the government has to make sure that the money actually gets to these projects and that it doesn’t fall into the wrong hands. Jamie tells me that Ali’s government has made an important move in that direction. Guyana and Exxon have a production sharing agreement, which splits profits 50-50 between the country and the company. Guyana’s portion goes into what’s called a national resource fund.
Jamie Smyth
And it’s tried to put in place protections to make sure it can’t be plundered by politicians. When Ali got into power, one of his priorities was to pass new legislation, which basically limits the minister of finance’s role in terms of spending the cash in the Natural Resource Fund. It set up a board of directors and other safeguards. That was something that was welcomed by the World Bank and the IMF, International Monetary Fund and others. But of course, we have to see how it operates in practice when more funds go into this Natural Resource Fund.
Irfaan Ali
It’s the way you invest the resources. Our future is not concentrated in oil and gas. So we are going the full dimension in building out the ecosystem to support many other planks of the economy in building out a well-diversified, highly structured, modern economy.
Michela Tindera
Still, Jamie says that the clock is ticking for the president to show the people in Guyana that this money from Exxon will actually benefit them.
Jamie Smyth
One former chief executive of a very large oil company told me recently, the challenge for these countries is that you’ve got to show the benefits are being shared within the first decade, or you begin to see discontent and it affects the domestic politics. You’ve got to really show that it’s benefiting people early on to get their support, or they’ll become disaffected. And that just makes the whole politics more toxic.
Michela Tindera
So those improvements to the country’s health system, the education system, they have to be implemented quickly. And Jamie wanted to hear from locals about this very issue. Are they convinced that the Exxon deal will make their lives better?
Jamie Smyth
So one of the days when I was in Georgetown, I was close to the Marriott Hotel, which is the most luxurious hotel in Guyana. Rooms can go for up to $600 a night, because there are so many oil workers who are flooding into the city. And round the back of that hotel is the seawall. This is where I met Olivia. She was selling peanuts, some sweets, and other types of food and drink. And I asked her how life had changed since the oil industry came to Guyana.
Olivia
To me, since the gas came, things got a little harder to survive because although we get our money, you still got to grow there, you still got to work and they’re making things difficult for us.
Jamie Smyth
I think Olivia really has two main complaints. You know, the first one is that the stallholders, you know, who situate themselves by the seawall, where everybody comes out at night to shop and hang out, you know, they’re being moved from pillar to post because there’s different construction projects going on.
Olivia
They got to move it up and forward, back and forth (inaudible). You know, it’s not settling at all. You would be expecting with the oil money thing, it would be a little more easier for us, but it’s just getting complicated because you’re not getting the benefit of the oil money.
Jamie Smyth
And then there’s also the issue of inflation. You know, she has to buy her products from different suppliers and farmers. And she says that the costs have really increased a lot over the last few years. It’s sort of a microcosm of what’s happening all across the Guyanese economy.
Michela Tindera
Official figures show that inflation jumped 6 per cent last year. But Jamie tells me that he had conversations with other people in Georgetown, and he says that they told him that the price of food and other necessities has increased by a third over the last few years.
Jamie Smyth
Lots of oil industry workers from other countries who are highly paid are piling into Georgetown, and businesses are popping up to cater to them. But people like Olivia are struggling to cope with rising costs. There’s also been a big jump in rents in Georgetown as foreign workers snap up the best housing, forcing many local people to move to the outskirts of the city. It’s making it hard for local people.
Michela Tindera
Coming up, Exxon’s oil project in Guyana is moving at record speed. But what other risks lie ahead?
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If we’re talking about the ways in which this Exxon deal could backfire on Guyana, one of the biggest risks that we haven’t mentioned yet is climate change.
Melinda Janki
So, we’re at the seawall now. And to see the sea, you go up.
Michela Tindera
That’s Melinda Janki, a local activist and lawyer. Melinda was born in Guyana and took Jamie on a tour of her home country. During the day, she brings Jamie down to have a look at the seawall that wraps around Georgetown.
Melinda Janki
We’re actually going to go up these steps here now. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11.
Jamie Smyth
It’s a huge structure which surrounds the entire capital city. It’s several metres high. It’s like a big sort of barrier which protects the city and the buildings from flooding.
Melinda Janki
And this brings us to the top of the seawall. And now you can see that we’re barely above the level of the tide, which is not even in as yet.
Jamie Smyth
Much of Georgetown is at least six feet below sea level, so it really is at risk of flooding as sea levels rise due to climate change.
Melinda Janki
And this used to be a very popular place for people to come and sit in the afternoon. It was none of this stuff here, this really quite ugly concrete building. And what’s happening in Georgetown is that the government’s approach seems to be to put up concrete buildings, to get rid of what is beautiful and traditional and to replace it with concrete that is hot, that is ugly and is the worst thing that you can be putting up now given the increase in the global temperature.
Jamie Smyth
Guyana’s in a really unique position. It’s one of South America’s most important carbon sinks, with about 90 per cent of its landmass covered in rainforest. It’s a very rich ecosystem, and yet it’s very vulnerable to floods and other natural disasters linked to climate change.
Michela Tindera
Some environmental studies suggest that the seawall will become futile in the very near future. Some estimate that Georgetown could be underwater by 2030. As Jamie says, Guyana’s in this unique spot. It’s poised to profit heavily from the very thing that could sink its capital.
Now Jamie wanted to meet with Melinda not only because she knows the country so well, but also because she’s in the process of suing Exxon.
Jamie Smyth
So Melinda Janki is a Guyanese lawyer who worked previously for the oil company British Petroleum in London. She was born in Georgetown and educated in England, including at Oxford University, where she studied law. She’s emerged as one of the chief critics of this Exxon-led oil project. She’s filed several lawsuits on behalf of local people against the government and Exxon, and she’s enjoyed considerable success in these lawsuits, winning several of them.
Michela Tindera
Last year, Jamie tells me, she won an important case. It aims to force Exxon in the event of an oil spill, to be responsible for paying for any cleanup that’s needed.
Jamie Smyth
Exxon has warned that if it doesn’t win an appeal in this insurance case, it might actually have to halt production in Guyana, costing it hundreds of millions of dollars a year. So I think Melinda’s really taking on this David and Goliath struggle to protect her country and ensure that the government forces Exxon to abide by Guyana’s environmental laws.
Michela Tindera
Beyond the long-term concerns around climate change, there’s another looming threat just next door, which intensified last December.
News clip
Tonight, tension’s rising between two neighbouring South American countries as Venezuela threatens to annex more than half of the country of Guyana.
Michela Tindera
And that part of the country includes Guyana’s oil fields.
Jamie Smyth
Whenever a country discovers oil or some other large natural resource and there’s a lot of wealth coming in, it often provokes competitors, rivals, people within the government and elsewhere to try to get a share of that wealth. One of the most recent examples was Iraq’s invasion of Kuwait in 1991 to gain more control of Middle East oil supply. This sparked the Gulf war in 1990 led by US forces.
Michela Tindera
Jamie says that the latest example of that looks to be Guyana.
Jamie Smyth
The tension has ratcheted up over the past few months, and what we’re seeing is that Guyana is desperately trying to call on its friends, and it’s begun to have a lot of military cooperation with the US and other countries. So this is another potential threat that in the future, Venezuela could take military action against it and try and seize these parts of the country.
Michela Tindera
Like you heard at the beginning, along with the new luxury hotels in Georgetown, there’s also some shopping malls opening up, and Jamie went to check out a few of them.
Jamie Smyth
And at one of these malls, I met this young Guyanese entrepreneur called Abbas Hamad.
Michela Tindera
Abbas has his own shop inside the mall, where he sells personal protective equipment, or PPE for workers in the oil industry.
Jamie Smyth
He’s got lots of different safety equipment from boots, high-vis overalls, other types of gear hanging around the shop. And yeah, I just asked him, you know, how did you set up, what are you trying to do here? And he told me he sees this as a big opportunity to tap into the oil boom.
Abbas Hamad
Well, my background is really in finance. I’m an accountant, and I have also a legal background. So the reason for setting up this business is that I have many clients coming in asking me, you know, where can they find PPEs, you know, and quality PPE that are certified. So after numerous clients keep asking, the entrepreneurial side of me thought maybe there’s a business here.
Michela Tindera
Jamie tells me that Abbas is one example of the many locals who are trying to find their own small way to profit from the growing oil industry. Now, Jamie also asks him about what he sees for the future of Guyana. Does he think that the oil boom is going to last? After all, his new business seems to depend on it.
Abbas Hamad
Speaking from a Guyanese perspective, I hope that oil is not the only, industry that we focus on. I hope that it is used as a catalyst to develop the auto industry. I don’t feel like oil is something that’s gonna last forever. And I believe it is Guyanese’s right to exploit that resource responsibly, you know, most environmentally friendly manner. Because the truth is, no one has come in and, like, given us money to do to make our country better. And everyone else has exploited their resources, so why can’t we?
Jamie Smyth
I think this really underscores the massive challenges that Guyana has to overcome to make the most of its oil wealth. This could really transform the country. It could, you know, bring huge benefits to its population. I mean, there’s a lot of hope, but there’s also a lot of factors pushing against this, too. There just haven’t been very many examples of democratic, developing countries managing such a financial windfall from resources and enabling them to provide a fair share for their people and to continue growing their economy. It’s a very rare thing.
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Michela Tindera
Behind the Money is hosted by me, Michela Tindera. Saffeya Ahmed is our producer. Our contributing producer is Max Johnston from Goat Rodeo. Our intern is Prakriti Panwar. Sound design and mixing by Sam Giovinco. Special thanks to Kasia Broussalian. Topher Forhecz is our executive producer. Cheryl Brumley is the global head of Audio. Thanks for listening. See you next week.