Exxon's gigantic oil discovery puts it squarely in the middle of a huge political battle
- Jan. 18, 2016, 3:03 PM
Reuters
For Guyana, a small nation on the northern coast of South America, Exxon Mobil is a welcome potential savior.
Even as the energy industry grapples with low oil prices and countries around the world struggle to adjust to a new paradigm, it’s worth keeping in mind the example of Guyana.
The country produces no oil currently and is relatively poor with a GDP per capita of around $8,000 annually. All that appears poised to change thanks to Exxon Mobil.
Last year, Exxon Mobil announced that they had found a massive offshore column of oil, which may hold 700 million barrels or more. The value of that oil dwarfs the roughly $3 billion gross domestic product of Guyana, and as Exxon continues development of the well, the small nation is likely looking at a windfall in royalties.
For a country of less than a million people, the find changes everything. Within a decade Guyana could be completely transformed by the find, going from unpaved roads and sporadic power to being a developed nation.
For Exxon as well the find could be a major boon. Exxon has seen declining production rates for several years, but true to the stereotype, this one find will help change that dramatically.
Guyana will become a significant oil exporter, and Exxon’s proven reserves and production will be greatly bolstered. This is the type of find that also helps bolster the beleaguered offshore drilling industry which has been hammered first by an oversupply of capacity, and then by a glut of oil.
Finds like the one in Guyana help remind oil majors of the value in investing heavily in offshore E&P. Such discoveries may be rare, but when major discoveries do occur, they can significantly move the needle, even for the biggest of companies like Exxon Mobil.
Yet for all of the optimism on the Guyana find, there is a fly in the proverbial oil ointment for both Guyana and Exxon Mobil: Venezuela. Guyana’s much larger oil rich neighbor openly covets much of the Guyana’s territory and claims Guyana’s recent discovery as its own