Exxon's $40 Billion Oil Discovery Sparks a Nasty Feud

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Guyana

Vendors head to the market in Georgetown, Guyana. Photographer: Andrew Rosati

For generations, Venezuela has formally laid claim to most of its tiny neighbor, Guyana. Many dismissed the case, given Venezuela’s oil wealth and Guyana’s penury. Hugo Chavez, longstanding president of Venezuela, even let it slide, referring to the Guyanese as his brothers.

Then in May, Exxon Mobil Corp. revealed that under contract from Guyana it had found massive offshore oil and gas deposits. Chavez’s successor, Nicolas Maduro, demanded that the drilling stop because the area was Venezuela’s. He dismissed Guyana’s president as a tool of Big Oil, declared his statements “nauseating” and Guyana’s actions likely to “bring war to our border.” He withdrew his ambassador, and Guyana announced the end to a long-time rice-for-oil deal.

For Guyana -- which produces no oil and whose 800,000 inhabitants live with unpaved flooded roads and power outages -- the estimated offshore find of 700 million barrels promises a revolution, a shift from negligible food exporter to global energy dealer. The combined oil and natural-gas deposits appear to be worth $40 billion, at least 10 times the country’s gross domestic product.

“We’ve gone through suffering for many decades and our time is due,” Raphael Trotman, minister of governance, said in an interview in his office on an unassuming road in the capital, Georgetown. The discovery is “transformational,” he said. “For us, there is no going back.”

Ordinary Guyanese, who rely on Venezuelan oil, are giddy with anticipation. Staring at a potential jackpot, they also are livid with Maduro, accusing him of trying to evade his economic and political woes by coveting what belongs to them.

“Just Being Greedy”

“Chavez never fought and now Maduro?” said Otis Adams, a 42-year-old heavy-machine operator in the destitute border town of Mabaruma. “He’s a nobody, trying to pass off the worry of his people from all that killing and suffering -- he’s just being greedy.”

Venezuela has the world’s highest inflation, chronic shortages of consumer basics, including medicine and toilet paper, and a murder rate that surpasses Iraq’s. Parliamentary elections are in December, and Maduro’s socialist coalition may lose its majority for the first time in 16 years.

“Why so suddenly?” asked Charlie Bees, about the renewed claim to large swathes of his country. “Maduro is losing votes!” explained the 52-year-old currency trader working near Georgetown’s port.

It may seem to the Guyanese like a mere political diversion, but their president, David Granger, says Venezuela is causing real trouble.

Intimidated Investors

“Investors have been intimidated, development has been derailed, projects have been obstructed,” he said in a speech in Washington last month. “It is too much to bear for a country that has less than a million people.”

Rather than halt its exploration activities, Guyana is moving forward, Guyana’s foreign minister, Carl Greenidge, said in an interview. The government expects it will take five to seven years for the first production.

“We call upon the international community to help us develop within the internationally recognized borders, peacefully and without the burden of a neighbor whose actions serve to impoverish us and whose claim is based on what happened 200 years ago.”

Edward Glab, who teaches at Florida International University in Miami and worked at Exxon for 25 years, said the find was clearly of major significance for Guyana, even with oil approaching $40 a barrel.

Take Risks

“You could have investors trying to get ahead of the curve because they figure at some point there is going to be huge wealth in the country,” he said. “They might be able to take risks, counting on the fact that the country will be able to pay its bills.”

Venezuela’s claim on Guyana’s land a century ago had a very different feel. It was a British colony until 1966; its citizens speak English and are descendants of African slaves, indentured Indian laborers and native peoples. In 1899, an international tribunal in Paris granted the disputed region, known as the Essequibo, to Guyana; Venezuela rejected the ruling. It amounts to two-thirds of Guyana which has been developing it with occasional outbursts from Venezuela.

To be sure, gaining possession of Essequibo has long been a matter of national pride for Venezuelans, whose maps denote the area a “reclamation zone” drawn with dashed lines.

And despite having the world’s largest oil reserves, Venezuela has struggled to increase production, with output falling.

$1.6 Billion Award

There is an additional issue: Exxon is trying to collect a $1.6 billion award from Venezuela granted by a World Bank tribunal after Chavez nationalized a number of its assets. So there is also no love lost between Exxon and the Maduro government.

Last month, Maduro met with United Nations Secretary General Ban Ki Moon to ask for help. Caricom, an economic association of Caribbean states, has sided with Guyana, as has Britain and the rest of the Commonwealth. Venezuela has been seeking backers for a negotiated settlement that could take a long time.

Sadio Garavini di Turno, a former ambassador to Guyana and an adviser to the opposition, said Venezuela is not in a strong position, given international sentiment. Moreover, he said, an international court seems unlikely to rule for Venezuela.

“In the international community in general, and therefore in the international tribunals, there’s a profound antipathy towards changing national borders because of historical injustice,” he said. “Think of how many borders around the world are unjust and how many borders would have to be changed.”

Guyana has “strong international support, said Carlos Romero, professor of international relations at the Central University of Venezuela. While Venezuela wants mediated negotiations, Guyana prefers a tribunal where it probably will find a sympathetic hearing.

Maduro insists military action is out of the question. As a result, Romero said, ‘‘Maduro is against the wall.’’