Blooming Flower
The critical mass theory of oil and gas development.
“Momentum begets momentum, and the best way to start is to start.” – Gil Penchina
As the crow flies, the distance between the capital cities of Ireland and Guyana is roughly 7,000 kilometers, and the two countries could hardly be more different. Ireland, having positioned itself to maximize the financial and accounting advantages of both its EU membership and its geographic role as a transit hub, boasts one of the world’s highest GDPs per capita. For centuries, Guyana sat on the opposite end of the spectrum, consistently ranking among the poorest nations on the planet.
Guyana’s fortunes took a decisive turn in May of 2015, when ExxonMobil struck oil at the Liza-1 well in the Stabroek Block, about 120 miles offshore. The discovery capped years of careful geological study and silenced critics who had long doubted that commercially viable oil would ever be found there. It also ignited one of the most remarkable economic booms in modern history.
As production ramped and oil volumes surged, GDP skyrocketed, and Guyana was transformed into one of the world’s fastest-growing economies. Under the leadership of President Irfaan Ali—up for reelection on September 1 and widely expected to secure a second term—the country has worked to distribute its newfound oil wealth across its 835,000 citizens. Guyana’s per capita standard of living is racing up the global charts, a trend that is bound to continue in the decade ahead.
Keeping the people of Guyana poor somehow has become a bizarre cause célèbre among the progressive environmental left, and the current crop of Irish political leaders is undoubtedly full of charter members of that club. Ireland itself produces no meaningful oil, and new drilling has been banned since 2019.
In mid-August, the Dublin-based Irish Times published a lengthy tsk-tsk lamenting Guyana’s newfound prosperity and dripping with the usual, tired climate-virtue posturing. Here are a couple of choice morsels:
“While the Guyanese government argues that oil extraction and environmental protection can coexist and it has a right as a developing nation to utilise its resources, critics believe that, amid a worsening global climate crisis, Guyana is backing the wrong horse…
For Prof Ivelaw Griffith, author of new book Oil and Climate Change in Guyana’s Wet Neighborhood, the Guyana predicament is ‘a living paradox’ – a nation pursuing the promise of oil while living the potential peril of climate change.”
And our particular favorite:
“Melinda Janki, a Guyanese international lawyer who was instrumental in persuading her government to include the right to a healthy environment as a fundamental constitutional right in the early 2000s, says that renewables out-competing fossil fuels shows the oil industry has no future.”
While Janki might think Exxon has no future, the company is certainly acting like it does, bringing online a fourth floating production, storage, and offloading vessel (FPSO) to boost total production capacity in Guyana to over 900,000 barrels per day (bpd). The Stabroek Block consortium, which Exxon leads in partnership with Chevron and China’s CNOOC Petroleum Guyana Limited, has set a goal of reaching an incredible 1.7 million bpd by 2030.
More troubling for the keep-it-in-the-ground crowd: the region where the Caribbean meets northern South America is about to experience what we internally call a “hydrocarbon critical mass moment”—a phenomenon that occurs when a cavalry of majors assembles in close proximity. Such an anchor point ensures that a full suite of midstream companies, engineering firms, and other critical service providers arrives alongside them, making exploration and development of neighboring resources far more likely. Having already paid the sunk cost to establish operations, the price of staying and branching out becomes all the more affordable.
If we’re right, Guyana is just the beginning of an extended oil and gas boom that could reach levels few are fully anticipating. Let’s put some numbers to the potential.