11 Billion Barrels

ExxonMobil's discovery of oil off the coast of Guyana could lift many residents out of poverty, but some fear that extraction could exacerbate the country's exposure to climate change.

MARCH 7, 2023

 

Attorney at law Elizabeth Deane-Hughes’ brother owns a piece of land on the plantation of Bordeaux, a fertile area situated on the West Bank of the Demerara River, a region famous for its brown sugar production. The land has been in her family since 1848, and many of her neighbors have held their properties for just as long. Deane-Hughes visits the plot regularly to maintain the adjacent 27 acres of farmland, where the family grows citrus fruits, avocados and mangos. Many of their neighbors are farmers, too. One plants pineapple, and the family living across the road cultivates rice on an approximately 100-acre plot. They live a quiet life.

On Sept. 20, 2022, Deane-Hughes and around 50 of her landowning neighbors were invited by the Guyanese government to a community meeting. At the meeting, two officials announced that the government wanted to appropriate part of her and her neighbors’ land in order to make it available to the U.S. oil giant Exxon Mobil Corp.

The Guyanese Ministry of Finance would offer Deane-Hughes’s brother around $10,000 for about one acre of the plot — much less than the estimated $18,000 an acre that a land valuation had found six months prior, according to documents seen by The Dial. The government planned to buy a total of 73.3 acres from the landowners, according to local press coverage, and make it available for ExxonMobil to build a new pipeline designed to exploit Guyana’s rich offshore gas reserves. The pipeline would transport the gas approximately 22 kilometers inland to a $900 million natural gas processing plant slated to be built in the small Guyanese hamlet of Wales. According to the Ministry of Natural Resources, the pipeline and plant are scheduled to be completed by 2024. (When asked about purchasing land for the gas pipeline, a spokesperson for ExxonMobil referred The Dial to the Guyanese government. The government did not respond to a request for comment.)

In 2015 ExxonMobil announced the discovery of more than 90 meters of “high-quality, oil-bearing sandstone reservoirs” about 200 kilometers off the coastline of Guyana. The large shale reserve known as Liza-1 is considered to be one of the largest crude oil discoveries of the past decade and the first major offshore oil discovery in Guyana. Since then, ExxonMobil and its partners have identified a total of 11 billion barrels of reserves in the area. Many of the oil wells are located more than 1,500 meters below sea level, preserved in underwater sandstone reservoirs.

Guyana finds itself in a paradoxical historical position, having discovered immense reserves of the world’s primary source of energy at precisely the moment when global consensus is shifting away from further investments in dirty fuels.

Guyana expects a total of $5 billion in revenue from its new oil industry over the course of four years, accounting for profit oil, royalties and interest. This could help lift Guyana — where 48% of the population lives on less than $5.50 a day — out of poverty. But developing the oil industry represents an exacerbation of the country’s already catastrophic exposure to climate change. The Guyanese capital, Georgetown, is among the top nine coastal locales in the world that are likely to be underwater by 2030 if greenhouse gas emissions continue at their current rate, according to the research group Climate Central. Ninety percent of Guyana’s population of 800,000 lives in coastal cities. In 2021, a flood affected 52,000 households, forcing the president to declare a natural disaster.

Because Deane-Hughes had done her own land evaluation, she recognized that the amount offered by the Ministry of Finance was below market value. “My family [was] still negotiating with the lawyers on a price when the government announced in The Official Gazette that they were vesting these lands for the state,” she said, referring to a journal published by the Guyanese government. By vesting the land, the government would be declaring it to be used for public work under the Acquisition of Lands for Public Purposes Act, without providing compensation to the landowner. This is common across Guyana. “Moving persons, acquiring property for national development has always been part of the repertoire of powers that a state must necessarily possess, and when the occasion arises, the state must be able to exercise it in the public’s interest,” Attorney General and Minister of Legal Affairs Mohabir Anil Nandlall has said to the local press. (Nandlall did not respond to a request for comment.)

Guyana finds itself in a paradoxical historical position, having discovered immense reserves of the world’s primary source of energy at precisely the moment when global consensus is shifting away from further investments in dirty fuels. In 2019, the International Energy Agency released a report stating that there can be no new coal, gas or oil development if the world is to meet emissions-reduction targets set in the Paris Agreement. Peter Ramsaroop, the chief investment officer at the Office of the President, is convinced Guyana can combine the best of both worlds. “The plan is to use the revenue from the oil and gas sector and invest it in renewable energy projects,” he said in an interview with The Dial.

Guyana, a former Dutch and British colony, never saw the benefits of previous waves of development. Given that it was cut out of the rapid industrialization of the 20th century, its leaders see no reason for the country not to seize its chance with oil in the 21st. But there are inhabitants who think otherwise.

The discovery of a massive oil field brought ecstasy to the people of Guyana in 2015. But as time has passed, the discovery has brought other complications. Reports about the lack of safety measures in the operation of the oil field, accusations of corruption, illegal gas flaring and illegal environmental permits are causing growing discontent. Over the past few years small groups of people have taken to the streets, protesting the government’s lack of transparency and the deals made with ExxonMobil — and demanding changes in the oil contracts.

“There has been a big shift in how people feel about oil,” said Guyanese environmental lawyer Melinda Janki. “First people wanted it because they were told it would make them rich. Now they realize it’s not making us richer, but poorer” — a reference to the environmental damage caused by the oil industry.

To bring the gas to shore, ExxonMobil must lay over 220 kilometers (137 miles) of pipeline. The pipeline will start at the Liza-1 oil field — located 190 kilometers offshore in the Stabroek Block, a 6.6 million-acre ocean territory containing oil reserves — and end at the plant in Wales. Since Feb. 11, 2022, ExxonMobil, the Hess Corporation and the China National Offshore Oil Corporation (CNOOC) have been producing more than 340,000 barrels of oil a day from the Stabroek Block.

In 2020, the United Nations raised concerns about the environmental impact of Guyana’s oil production, asking the country to provide information on the steps it has taken to prevent and mitigate the negative effects of climate change and environmental degradation. Despite the global turn toward more sustainable sources of fuel, the Guyanese government has no intention of keeping their wealth in the ground. “There are many people saying now that we should not be producing oil,” Guyana’s Vice President Bharrat Jagdeo remarked to a local radio host in 2020. “We don’t have that option in Guyana. Our people badly need development.”

Suphane Dash, 23, is a member of the Caribbean Environmental Network. She lives in Malgre Tout, a tiny residential area on the West Bank of the Demerara River, a 15-minute drive north from where Deane-Hughes has her family land. The village lies next to mangroves that protect the land from the waves of the Demerara River. In January 2021, a construction team arrived and broke ground on what would be a shore base: an onshore support facility that provides services to the oil companies during drilling, development, maintenance and production operations offshore. The team began clearing away the mangrove forest, according to local reports.

“Shortly after that, rain season began, and our area flooded faster than normal,” Dash said.

The processing plant outside of Dash’s home is just one of many major construction projects currently unfolding in Guyana. In January 2023, the government’s Natural Resource Fund (NRF)—established to manage the natural resource wealth of the country — boasted $1.4 billion in total assets.  Money from the NRF has been used to support the country’s budget, including infrastructure. President Irfaan Ali is planning substantial projects, including several four-lane highways.

At present, the government of Guyana is facing a total of six lawsuits over oil and gas development.

Dash acknowledged that oil profits could help her country on the path to development. But she is worried that the government is is not doing enough to consider the impact of infrastructure development. She said there is no way of knowing to what degree the project will affect the surrounding environment, animals, people and fishing industry, she said. Fishers can be found daily between the mangroves, looking for trout, butterfish, tarpon, bangamary or mangrove snapper. Fishing is valued at approximately 3 percent of the country’s GDP, and the industry employs over 15,000 people, according to the Agriculture Minister Zulfikar Mustapha. “We have learned time and time again, if we do not see the environment as a priority, people suffer,” Dash said.

Dash is not the only one concerned. At present, the government of Guyana is facing a total of six lawsuits over the oil and gas development, as reported by the Institute for Energy Economics and Financial Analysis. Four of the lawsuits relate to the government’s failure to properly manage and enforce the permitting process. A fifth concerns Guyana’s failure to release the details of an ExxonMobil insurance policy that would cover the costs of cleaning up any future oil spills caused by the offshore drilling. None of the plaintiffs who were contacted replied to our interview request. According to environmental lawyer Janki, who represents several of these plaintiffs, they do not wish to negatively impact their cases.

Concerns about the environmental impact of oil were amplified by ExxonMobil’s recent disclosure of an oil spill at a second well, Liza-2, in September 2022. Initial investigations by ExxonMobil indicate that about one barrel of crude oil — equal to about 159 liters — spilled during a maintenance activity on the vessel. The company did not release any pictures of the spill. (“We immediately stopped all activity and quickly isolated and contained the leak. We conducted extensive aerial surveillance after the incident and confirmed no further evidence of a sheen. We notified all relevant government agencies, including the EPA,” said an ExxonMobil spokesperson in an email.)

In May 2021, tour guide Quadad de Freitas and university lecturer Troy Thomas filed a lawsuit against the Guyanese government. They argued that the large-scale oil and gas extraction violates the constitution, which guarantees citizens the right to a safe and healthy environment. It is the first constitutional climate case in the Caribbean. A final verdict in the case will likely take years. (Another case, filed by Thomas and settled in October 2020, limited environmental permits on Liza-1 and Liza-2 to five years; the permits were previously good for 23 years.) “No one can dispute the global climate crisis anymore,” said Janki, who is representing the claimants in court. “The production of fossil fuels is accelerating global warming and is a threat to human rights.”

The Guyanese government has not addressed these claims. “We are moving at a fast pace, much more aggressively than other parts of the world have done,” said Chief Investment Officer Ramsaroop in an interview with The Dial. “From infrastructure to our industries and our export market, in 10 to 15 years Guyana’s going to be a developed state. The world will want to be our trade partner.”

In 2022, Guyana saw some of the world’s fastest economic growth. But much of the money will go to the foreign oil companies that have invested in the operations.

“Those in the developed world--who are telling us to not take out the oil and keep our population poor--are going down a wrong path, because they can’t compete with our carbon,” Ramasaroop said. At over 87% forest cover, Guyana is one of the most heavily forested countries in the world, and said to be one of the few countries that are carbon neutral. Because of that status, Ramasaroop claims, the Guyanese government feels justified in developing the country’s oil industry. “Guyana will be a model for how the world should have done it in the past,” he said. Still, there is no evidence to suggest that oil revenue is being invested in renewable energy or environmental protection at present. Asked for further details on these plans, Ramsaroop referred to the Guyanese government’s Low Carbon Development Strategy 2030, but while this plan discusses sustainability and development, it makes no mention of specific projects in clean energy from oil revenue.

On the contrary, according to Guyana-based financial analyst Joel Bhagwandin, most current investments support oil and gas infrastructure. “We started to invest in shore base facilities, warehousing, infrastructure and so on.”

For the past nine months, Deane-Hughes has been considering filing her own lawsuit against the Guyanese government. In particular, she has been concerned about the building of a new natural gas processing plant in Wales, part of the large gas-to-shore project overseen by the government from which her brother’s land has been vested. The government has argued that the plant does not need an environmental review, as the proposed project “will not significantly affect the environment.” She has written letters to the chairman of the EPA, the attorney general, the minister of legal affairs and the minister of natural resources, sharing the relevant sections of the laws she claims they are breaking. She has yet to receive a response.

 

Published in “Issue 2: Energy” of The Dial

Zoë Deceuninck

ZOË DECEUNINCK is a journalist in Suriname, South America. She writes for the Surinamese magazine Parbode and for various Dutch and Belgian media.

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