The African Export-Import Bank (Afreximbank) said it intends to set up a $1-billion “oil service” financing facility in Guyana, hoping to secure participation for African companies in the Caribbean country’s booming oil industry.
“This initiative aims to enhance local participation in the country’s fast growing oil industry, in alignment with the government’s local content policies”, Cairo-based Afreximbank said in an online statement. “The Bank will deploy the $1 billion facility directly to qualifying corporate clients or through a factoring line via local banks, enabling them to finance invoices from local contractors”.
It said “in the spirit of deepening Afri-Caribbean partnership”, oil service firms from Egypt, Ghana and South Africa are ready to support Guyana’s oil industry.
“Afreximbank is there to underwrite the marriage”, said Afreximbank president and chair Benedict Oramah, who announced the plan at the Guyana Energy Conference and Supply Chain Expo.
“Given the level of oil production in Guyana and its offshore location, I estimate that the oil service sector would amount to 5 to 8 billion US dollars annually”, Oramah said. “But where will it go?
“Most of it would be paid to oil service companies abroad, if Guyana does nothing to avoid that. A 50 percent retention in Guyana would increase Guyana’s GDP by 29 percent to 47 percent”.
Oramah advised the Guyanese government to secure long-term offtake contracts with service firms to bolster market access and promote price stability in the oil industry.
“The commodity market is prone to volatility and cyclicality; hence, the reliance on crude revenues as a primary source of government funding could expose the national economy to volatile commodity markets”, Oramah cautioned.
In the 2020-23 period, Guyana was the third fastest growing producer outside of the Organization of the Petroleum Exporting Countries with an annual average increase of 98,000 barrels per day (bpd), according to a report by the United States Energy Information Administration May 21, 2024. Guyana trailed the U.S. in first place and Brazil in second, outpacing Norway in fourth and China in fifth.
All of Guyana’s oil comes from the offshore Stabroek block. Stabroek, spanning 6.6 million acres, holds discovered recoverable resources of over 11 barrels of oil equivalent, according to its foreign developers.
Exxon Mobil Corp. operates the block with a 45 percent stake. Hess Corp., another U.S. company, holds a 30 percent interest. China National Offshore Oil Corp. holds the remaining 25 percent. Pending international arbitration over a Stabroek rights dispute between Hess and its partners, Chevron Corp., also a U.S. oil giant, could enter the asset as part of an ongoing process to acquire Hess.
Last year the Stabroek co-venturers reached a final investment decision (FID) on a sixth development that is expected to raise Guyana’s oil production to 1.3 million bpd. ExxonMobil targets to put the $12.7 billion Whiptail project onstream 2027, according to its announcement of the FID April 12, 2024.
“Production from the six Stabroek block developments will generate tens of billions of dollars of revenue and significant economic development for Guyana”, ExxonMobil said then. “Since first production in 2019, more than $4.2 billion has been paid into the Guyana Natural Resource Fund”.
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