Evolving South American, Caribbean alliances can help alleviate the global energy conundrum

(OM) The global energy market continues to shift dynamically, from being oversupplied in 2020 to presently having a deficit, a trend which has been exacerbated by the ongoing Russian-Ukrainian conflict. Additionally, years of underinvestment in hydrocarbon projects has only amplified this deficit. The result: elevating the stature of nations with hydrocarbon reserves that can be produced domestically and exported internationally. Key examples come via the US and Guyana, by way of liquified natural gas (LNG) and offshore oil, respectively.

Furthermore, Guyana continues to deliver optimal production from its nascent offshore sector (even during years marked by under investments), while Suriname is on the cusp of rising as formidable offshore producer based on discoveries being made there. Importantly, this article will explore how Guyana, as well as neighboring nations in the Caribbean and South America, are accelerating the process of ‘banding’ together via strategic alliances that principally focus on offshore hydrocarbon resources. However, there are also international alliances that are to be accounted for by way of Saudi Arabia and Guyana, for example.

With respect to regional strategic alliances, Guyana and Suriname’s Presidents Irfaan Ali and Chan Santokhi, respectively, are pursuing a joint strategy. Ali declared that both nations are “on the cusp of major development … [and becoming] a new force in the world.” Barbados, Grenada, and Trinidad and Tobago (T&T) are also part of the alliance equation, as outlined by Ali. This was declared at the Suriname Energy and Oil and Gas Summit held in Paramaribo, Suriname, in June, which the author attended. Ali highlighted the need to protect collective resources, with an emphasis on energy security purposes. Notably, T&T’s Energy Minister, Stuart Young, is adding a layered structure to the regional banding that is unfolding in this region. How so? He emphatically doubled down on regional banding, backing Guyana and Suriname’s unified stance, and he was present when Suriname and T&T’s “state-owned energy companies” came together via a strategic pact (from the summit’s sidelines). This put action to the regional alliance rhetoric.

International focus rising in Guyana

On an international level, Saudi Arabia is emerging as an alliance candidate for hydrocarbon production via Guyana. The South American nation is embarking upon the creation of a national oil company (NOC) and is looking to have a “strategic developer to work within the company to take shares and operate the company.” Guyana is expected to make its NOC decision sometime this month, as detailed by Guyana’s Vice President, Bharrat Jagdeo. Thus, it is not surprising that a Saudi Arabian delegation visited Georgetown, Guyana, in July, including the Deputy Minister for Investors’ Outreach Badr Al Badr. He noted how Saudi Arabia can bolster unlocking Guyana’s hydrocarbon resources, since the Middle Eastern nation has pronounced experience as an NOC via Aramco. This would not be the first time that Saudi Arabia has partnered with a South America nation, as OPEC traces its roots to Venezuela and Saudi Arabia—as witnessed in the 1960s. But international interest in Guyana is not limited to Saudi Arabia, or even other nations with NOC experience.

Meanwhile, production is ramping up offshore Guyana. ExxonMobil continues to see promising results from the prolific Starbroek block, along with Chinese and US partners. Impressively, they recently reached 380,000 bbl/day threshold. Guyana is poised to surpass the 1 million bbl/day threshold by 2027, via additional commitments made by international developers. Achieving this rate of production would place the nascent oil-producing nation in the same realm as current US offshore production — in a span of just eight years. For context, it took the US Gulf of Mexico nearly 50 years to reach that production mark.

Critically, adjacent to the Starbroek block is Suriname’s Block 58, where significant offshore discoveries have been made by TotalEnergies. These discoveries have elevated Suriname’s stature on a regional and global level. If Suriname experiences the same level of success as Guyana, this will invariably augment the alliance thesis, for South American and Caribbean nations. Furthermore, T&T’s Energy Minister forged an international alliance (in principle) with Ghana at the Surinamese summit, which furthers the region’s potential for international alliances. This raises the following question: will additional nations—from other regions of the world—join this emerging alliance? 

A regional perspective on alliances

Recently, T&T’s Energy Minister met with the Venezuelan government, with a view towards increasing energy cooperation. The two nations had previously pursued the Dragon offshore project, which had proposed moving Venezuelan natural gas to the Caribbean nation. Under the proposed deal, gas would have moved from Venezuela’s offshore sector to T&T’s existing offshore-to-land infrastructure, which includes land-based LNG export infrastructure. But that deal was shelved in 2020 due to US sanctions against Venezuela.

Peculiarly, this year, the US has made approaches to Venezuela in the context of energy, despite the imposed sanctions. Given that the US is now making overtures to Venezuela, it will be interesting to see how and whether the Dragon project moves forward—especially given Europe’s urgent need for additional gas supplies.

Indeed, other entities are looking to liquefy gas from the region and move it to international markets. US-based Firebird LNG is endeavoring to create an LNG base in Suriname to ramp-up LNG production in the region, while tapping into Guyana and Suriname’s natural gas. Moreover, TotalEnergies’ CEO, Patrick Pouyanné, remarked on the need to “valorize” (to create value) from the natural gas produced from block 58 in Suriname. Such valorization can bolster the potential for building out LNG infrastructure with export capabilities. 

Cold winters and the energy conundrum

At the time of writing, Russia has shut-in Nord Stream 1, drastically impacting Europe’s access to natural gas, making its needs more urgent. It is in this context that alliances among South American and Caribbean nations become even more important, as reserves from these nations can play a critical role in filling the global hydrocarbon deficit. To be clear, these ‘banding’ nations cannot be expected to totally replace ‘lost’ Russian oil and natural gas in the near term. But the point remains that the world requires access to these reliable reserves.

Therefore, how South America and the Caribbean nations develop their resources in the following years will be of paramount importance on a regional and international level. To quote the founder of the Soviet Union, which in certain respects transformed into present-day Russia: “There are weeks where decades happen.” A lot has taken place in a span of weeks since the Surinamese summit concluded.

We will know more this month what the future holds for the region, when Guyana makes their announcement of how they proceed in the future—under the auspices of an NOC, or as part of an emerging regional alliance, or otherwise.

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