Big oil discovery stirs border tensions in Latin America

Guyana, one of the poorest nations in the Americas, is poised to strike it rich. Big oil deposits finds in recent years, the latest in January, seem certain to turn it into one of the biggest energy producers in the Western Hemisphere.

But there is a catch, though it’s unlikely to halt the multinational rush toward production at this stage. Neighboring Venezuela claims nearly two-thirds of Guyana in a long-standing dispute that the United Nations Secretary General Antonio Guterres, after decades of failed mediation, decided at the end of January that he would refer to The Hague-based International Court of Justice (ICJ).

It is a decision that Guyana has welcomed but has infuriated Venezuela.

The border controversy arose as a result of Caracas’ contention that an arbitration award in 1899 about the frontier between then British Guiana and Venezuela is null and void.

Tensions were heightened by the announcement in May 2015 of a significant discovery of high-quality oil in an offshore concession 190 km off Guyana. Subsequent finds have simply added to the estimates of recoverable oil that will make a huge difference to the economy of a nation with a gross domestic product of 3.2 billion US dollars.

Venezuelan President Nicolas Maduro (R) meets with his Colombian counterpart Juan Manuel Santos to discuss a border issue between the two nations, in Puerto Ordaz, Venezuela, on Aug. 11, 2016. (Xinhua photo)

When ExxonMobil announced its sixth discovery since then last month that will push the total above the previous estimated three billion barrels of oil and gas, Guyana’s finance minister Winston Jordan said, “This will spur a major change of fortunes in the country.”

At the same time, oil-rich Venezuela is in the throes of  a severe economic and political crisis partly triggered by falling energy prices.

Clearly mindful that these developments have hastened the need to find a solution, Antonio Guterres, secretary-general of the UN, announced his referral decision on January 30.

He had appointed a personal representative, Dag Halvor Nylander, to work on resolving the dispute. The Norwegian diplomat had helped to broker a peace deal in Colombia.

“The Secretary-General has carefully analysed developments in 2017 in the good offices process and has concluded that significant progress has not been made toward arriving at a full agreement for the solution of the controversy,” Stephane Dujarric, a spokesman for Guterres, said in a statement.

Natural resources minister Raphael Trotman expects Guyana’s expected new riches to transform the country. /Guyana Govt photo

“Accordingly, the Secretary-General has fulfilled the responsibility that has fallen to him within the framework set by his predecessor in December 2016, and has chosen the International Court of Justice as the means to be used for the solution of the controversy.”

Guyana’s foreign ministry said it welcomed the decision, adding the ICJ is the “appropriate forum for the peaceful and definitive settlement of the controversy, and is pleased that that view has prevailed under the process.”

Venezuela opposed the decision. “The Government of Venezuela … reiterates its willingness to defend the territorial integrity of our homeland,” Venezuelan Foreign Minister Jorge Arreaza said.

Guterres appeared to leave open the possibility of continued mediation by saying the two nations could still benefit from the UN’s “good offices” process that has been around since 1966 when Guyana was nearing independence from Britain.

Venezuela had by then resurrected its claim to the Essequibo region, almost two thirds of Guyana, leading to a meeting among the two countries and Britain that set up a disputes settlement procedure with the United Nations at the center.

The Stabroek Block discoveries in Guyana, three-quarters of which is forested, have stirred a lot of excitement in the international oil industry, which is experiencing a slow global recovery. ExxonMobil subsidiary Esso Exploration and Production Guyana has a 45 percent operating interest in Stabroek, which covers 26,800 square kilometers. Hess Guyana Exploration holds 30 percent and Chinese-owned CNOOC Nexen Petroleum Guyana 25 percent.

ExxonMobil  put the cost of phase one offshore development alone, to develop 450 million barrels of oil, at 4.4 billion US dollars, well above Guyana’s GDP.

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That’s virtually peanuts for the petroleum giant, whose revenues last year reached 66.5 billion dollars. It’s the impact on the economy and citizens of Guyana, roughly the size of Britain but with a population of just 750,000, that’s likely to be the most profound.

“Managed prudently, these resources will allow for an enormous transformational effect on the lives of every Guyanese in the years ahead,” natural resources minister Raphael Trotman said last month.

Matt Blomerth, head of Latin American Upstream Research for Wood Mackenzie, a consultancy firm, summed it up this way last year: “It’s not often that a country goes from 0 to 60 so fast like this.”

Venezuela could, however, try to throw a spanner in the works.

“The last thing the Caribbean and the Western Hemisphere needs is continuing disputes between any of its nations that could lead to military conflict,” said a hopeful Caribbean diplomat Sir Ronald Sanders in welcoming the decision of Gutteres. “The way is now open to settle legally and peacefully the contention that has persisted between Guyana and Venezuela for over half a century.” (CGTN)


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