VENEZUELA VS. GUYANA

Oil at play: understand how the Essequibo oil reserves influence the dispute between Venezuela and Guyana

The meeting between Maduro and Ali eased tensions, but did not end claims; analysts are skeptical about cooperation

Translated by: Ana Paula Rocha

Brasil de Fato | Caracas (Venezuela) |
American company Exxon Mobil explores offshore oil reserves off the Essequibo coast - Exxon Mobil Guyana/Reprodução

The meeting between the president of Venezuela, Nicolás Maduro, and his counterpart in Guyana, Irfaan Ali, eased tensions between the two countries over Essequibo, as both pledged not to use violence to resolve the controversy. However, the countries did not give up on their demands, especially regarding oil, which became a central topic.

Guyana has said it will not suspend concessions to the US company Exxon Mobil for exploiting huge oil reserves off the Essequibo coast. Caracas, which classifies the agreements as illegal, relies on the referendum held on December 3 to claim its sovereignty over the region, but has even considered cooperation agreements with the neighboring country to access oil reserves.

The idea of "shared development", raised by Venezuelan chancellor Yván Gil after being questioned by Brasil de Fato, is seen with skepticism by analysts. For economist Carlos Mendoza Potellá, the talks between Maduro and Ali worked to eliminate the danger of a conflict, but it is still too early to think about energy cooperation agreements.

"The truth is that we are giving opinions about a project that has just begun. We are saying things about discussions that are beginning now and that may only be concluded in five years. This agreement ends the possibility of a war and restarts the path of negotiations," he told Brasil de Fato.

Professor emeritus at the Central University of Venezuela and a researcher on oil, Potellá said he believes that even if a cooperation mechanism is created, a partnership between the Venezuelan state-owned company PDVSA and Exxon Mobil, a company that is currently exploring the Essequibo coast, would be impossible, because "this is the core element of the controversy" between the countries.

"Former Exxon Mobil President Rex Tillerson was appointed to the US State Department during the Donald Trump government to promote an aggressive policy against Venezuela. Agreements with other companies such as Shell, BP, and Chevron may be possible, but not with Exxon because their interests and those of PDVSA are opposed," he explains.

Tillerson was Secretary of State for former US President Donald Trump shortly after leaving the company's presidency. He was in office during the beginning of the so-called "maximum pressure" policy adopted against Venezuela, which aimed to force Maduro out of the presidency. Potellá also recalls that Caracas and Exxon Mobil have had troubled relations since 2008, when Chávez advanced in the process of nationalizing the oil industry, and the company withdrew from the country, demanding larger compensation than that paid by the government.

"Exxon Mobil lost the lawsuits it filed against Venezuela in international courts and had to accept the compensation Venezuela paid. That's why Exxon thinks it has to settle old scores with Venezuela and probably won't have any intention of negotiating", believes Potellá.

Venezuela-Guyana partnership

 

At the same time relationships between PDVSA and Exxon Mobil are complex, the Guyanese government also does not seem willing to give up on its strategy. After meeting Maduro, the Guyanese president said the country "has the right to exercise its sovereignty within its territorial space, to approve and facilitate any investment, partnership, business, collaboration, cooperation and issue any license or concession."

Since the discovery of oil reserves on the Essequibo coast and the beginning of Exxon Mobil activities, Guyana's GDP has soared. In 2022, the country grew more than 62% and, according to IMF projections, it should grow 38% this year, the highest figure in the world.

“Guyana cannot undo the contracts with Exxon,” says Venezuelan political scientist Luis Javier Ruiz. The researcher says he believes that a step back by the Guyanese government regarding the concessions issued to the American company is unlikely, given the level of commitment on both sides.

“Guyana’s government has already complied with transnational companies such as Exxon Mobil and cannot undo the contracts sitting with Venezuela and make it all again. It would literally start a legal case in the US, and Guyana would probably suffer an embargo,” he states.

The concessions handed over to Exxon Mobil in 2019 have elements that displease Caracas and were presented as one of the main arguments in the Venezuelan escalation over the Essequibo case. However, when considering the possibility of joint exploration in the region, the Venezuelan chancellor mentioned the agreements with Trinidad and Tobago in the Dragão border gas field, which is partnered with Shell and BP.

"I cannot say more because we are starting a dialog. What I can say is that our history has elements of its political and diplomatic will, with clear examples such as Petrocaribe and the agreements with Trinidad and Tobago. These are concrete cases that could be used for future agreements with the Cooperative Republic of Guyana,” he said.

The contracts involving the Dragão field resulted from the interests of Shell and British Petroleum (BP), majority shareholders of Atlantic, one of the largest producers of Liquefied Natural Gas in Trinidad and Tobago. The Caribbean country received a US license in January to resume gas imports from the maritime platform controlled by PDVSA and located on the maritime border between the two countries.

The existence of sanctions against the Venezuelan oil industry prevented PDVSA from receiving any cash payment for the sale of products from the Dragão field, which has over 4 trillion cubic feet of natural gas. However, in October, Washington announced a temporary suspension of the blockade against PDVSA, which paved the way for the countries to move forward with the agreement.

For Carlos Mendoza Potellá, partnerships with Trinidad and Tobago flowed more easily due to the good diplomatic relations between the countries, which would not be the case between Caracas and Georgetown. "Venezuela and Trinidad have great relations. There is a large Venezuelan community living there and the country received many exiles during the dictatorship in Venezuela. So, it is a different scenario than that of Guyana,” he says.

Even with an adverse and complex scenario, Luis Javier Ruiz believes that "creating a mixed commission to operate in oil terms would be a mutual, beneficial and peaceful solution.” He continues: "What is not mutual, nor beneficial or peaceful is to have a transnational company take control of this area, take advantage of the resources, take all the wealth, for Guyana to continue being poor and for us to have a conflict that seems to have no solution after 120 years of dispute,” he stated.

Edited by: Rodrigo Durão Coelho