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❯ INTRODUCTION
❯ THE WORLD’S FASTEST GROWING ECONOMY
❯ KEEPING IT LOCAL
❯ KOTUG CONTRACT
❯ SURINAME / GUYANA PORT

GUYANA: INTRODUCTION

A transforming nation

In a year overshadowed by the global coronavirus pandemic and the world’s response to the impact of the virus, one nation in particular had a slightly different focus. And that was Guyana.

Coronavirus didn’t exactly pass Guyana by (it’s had its fair share of deaths and infections), but there were even bigger fish to fry in South America’s only English-speaking country. The nation’s first oil exports got underway and further large discoveries during 2020 are set to transform this nation over the next decade. Caribbean Maritime takes an early look at how oil exports and a booming economy are benefitting Guyana’s ports and shipping sectors.

GUYANA: Special Report

The world’s fastest growing economy in 2020

I doubt that many Guyanese would have believed you if you had told them in, say, 2010 that, within a decade, their country would be home to the world’s fastest growing economy.

Guyana president Dr Irfaan Ali
_{Wikimedia Commons | U.S. Department of State | Public Domain}

But that was the reality in 2020 as much of the rest of world reeled from the impact of the global coronavirus pandemic, Guyana, by contrast, saw its economy rack up growth (albeit from a lowish base) estimated at a staggering 26.2 %. What’s more, the overall size of the local economy is expected to triple by 2025. At one point early last year, the IMF was even forecasting growth of 51% for 2020 and on the back of recent major oil discoveries and following the nation’s first crude exports.

In short, this economic expansion is set to transform Guyana from one of South America’s poorest countries into its richest on a per capita basis. At the same time, Guyana will eventually become the second or third largest oil producer in the western hemisphere.

But to cope with its new-found wealth, Guyana has a lot of catching up to do in terms of its infrastructure – especially in the transport sector – and to avoid the chaotic scenes witnessed in Nigeria and the Arabian Gulf in the 1970s where limited port capacity could not cope with a massive influx of imports (especially cement) and visiting business people were forced to sleep in hotel corridors or to share rooms due to the lack of accommodation.

Yet, and as things currently stand at the start of 2021, the port of Georgetown remains woefully under-maintained and there are still only vague-ish plans to design, construct and finance a new deep-water harbor in Guyana. And, only then, well away from the economic heart of the country, Georgetown.

Limited

So, for the time-being, the size of container vessels entering Georgetown is limited by a chart datum draft of just 7.4 metres and, even worse, a pier draft of only 6 metres in most places. Even then, most piers and the navigable access channel have lost depth due to a lack of dredging. The end result is that the port currently struggles to accommodate container vessels larger than 2,600 TEU.

Aside from handling containerized imports, there is a clear and immediate need to service the burgeoning offshore oil and gas sector. The size of the task is enormous. London-based research company Rystad Energy estimates that one new FPSO will be stationed off Guyana every year for the next ten years – and that’s just to serve the already producing Starbroek block. This will involve a total investment estimated at around US$ 50 billion over the coming decade. Forecasts vary, but Guyana could ramp up oil production to 1.2 million barrels a day by 2025; rising to 1.4 million barrels a day by its mid-2030s peak.

Demand

So, despite the access restrictions, work continues apace on various privately owned shore base facilities to meet the anticipated demand to service and supply the FSPOs; although many terminals will also be able handle regular, project and other similar types of out-of-profile cargoes.

Perhaps the most notable of these is Guyana Shore Base Inc (GYBSI), which has started construction on the Demerara River of the nation’s first heavy-lift berth. The company believes that this new berth will dramatically change the industry, enabling a range of products and services previously unable to enter the country.

In particular, GYBSI has a big contract to provide shore base services to ExxonMobil's offshore operations, and it will be responsible for the operation of a shore base facility Muneshwers Houston Terminal. The 28-acre warehousing and logistics base is part of ExxonMobil's Liza Field project and will provide port facilities and a range of services such as bunkering, bulk cementing and mud plants as well as container handling and repair. GYSBI has invested over US$ 100 million in the terminal and expects to spend a further US$ 50 million on additional facilities. GYSBI is a consortium comprising long-established local firm Muneshwers, TOTALTEC Oilfield Services, Pacific Rim Constructors, and LED.

Experienced

Another offshore base is being built by a joint venture comprising the experienced InterOil Group and the local Mings Products & Services. The base will comprise 330 acres of land with 460 meters of waterfront on the east bank of the Essequibo River. Known as the Isika Shore Base will include industrial areas, offices, warehouses, workshops, spool base, a liquid-mud plant, equipment and construction laydown areas.

Compared to similar facilities in Georgetown, the Isika Shore Base will have several major advantages such as being developed on land above sea level – a significant factor in a nation that experiences flooding. By late last year, the tendering process for civil, marine and dredging works was finalized. Phase 1 is expected to be completed within the fourth quarter of 2020 and full operation within the first quarter of 2021. It’s planned that the navigation channel and the jetty will have an impressive 12-meter draft.

Then there’s Italy’s Saipem, which is proceeding with the final phase of the US$ 9 billion Payara development for EEPGL. This authorization allows for the finalization of the detailed engineering and procurement activities and the full execution of the contract scope, the company said. Saipem’s flagship vessels Saipem FDS2 and Saipem Constellation will perform the offshore installation while a soon-to-be completed construction yard in Guyana will take on the local fabrication of part of the subsea items. The yard will feature a heavy load bearing jetty, the largest heavy lift crane in Guyana and specialized welding and testing equipment. All construction work for the new facility is being awarded to Guyanese contractors and is yet another example of the push for local content (see separate article).

Investment

But these new facilities are just the tip of the investment iceberg. Guyana, for so long seemingly half-forgotten but one with almost limitless potential, now sees a steady stream of wealthy would-be investors from Russia, the Middle East (Qatar and the UAE in particular), the US, Canada and elsewhere beating a hasty path to Georgetown.

In his address to the Association of American Chambers of Commerce and Latin America and the Caribbean in October last year, Guyana president Dr Irfaan Ali said: “Guyana is about to become the investment colossus of the Caribbean. It will become the region’s most exciting investment destination. Now, therefore is the right time to be doing business in Guyana.” Adding that the multi-billion-dollar investments into the offshore developments represent “a major opportunity especially for businesses involved in this sector and those providing support services.” Luxury hotels, a Demerara harbor bridge, a deepwater port (see separate story) and new highways are all under discussion and are expected to go to tender in 2021.

The president’s words were echoed by Minister of Natural Resources Vickram Bharrat, who late last year said: “Almost every single day we have investors come in. And I want to say, it’s not only oil and gas. There are also forestry, gold, and bauxite (at Tarakuli) ventures under consideration." Investor interest is such that meetings with government officials are taking place almost on daily basis. How times have changed and when in years past a Guyana government minister might have to go cap-in-hand in order to woo inward investment.

Not only is fresh investment being funnelled into Guyana, but previously stalled and half-forgotten infrastructural projects have suddenly sprung back into life. For example, Canadian oil and gas exploration company CGX Energy, announced late last year that it is finally ready to recommence work on its proposed and much delayed Berbice Deep Water Port scheme.

Refurbishing

According to CGX, the company is now refurbishing a 3.1 km road leading from the Corentyne Highway to the location of the planned port and is in the process of tendering for the construction of a bridge that leads from the Highway. As was previously the case, the Berbice Deep Water Port is being executed through CGX’s wholly owned subsidiary, Grand Canal Industrial Estates Inc.

Up until only recently, the Government of Guyana had expressed concerns over the slow pace of CGX’s activity and questioned whether the company actually had the financial resources to invest in Guyana’s oil and gas industry as it had originally claimed. To date, the company has not commenced any oil production in Guyana and despite the way being cleared to do so since 2007 when a long-standing territorial dispute with neighbouring Suriname was settled at a United Nations Tribunal.

Meanwhile, like many underdeveloped countries and where oil is discovered, Guyana has little or no experience and few resources to handle the taxation, regulation and environmental control that comes with global-scale energy production and world-scale infrastructural development. The government has proposed establishing a sovereign wealth fund similar to Norway’s for “transformational projects that will benefit generations to come.” Let’s hope that Guyana uses its apparent good fortune to look more like Norway in 10-to-20 years from now and not to succumb to the oil curse that has sadly impacted many other countries – not all of whom are located that far from Georgetown.

GUYANA: Special Report

Keeping it local

One of the most pressing issues for the Guyana government is promoting local content. This not always easy in a nation of just 780,000 people and when some skills are in short supply or were not previously required in a largely agriculturally based, non-oil, economy.

_{tateyama / Shutterstock.com}

But at a political level there is a clear desire to see local companies and local people gaining access to major contracts and to good jobs. There is also a large and skilled Guyanese diaspora that may now see opportunities to return home to take up new positions in the local labor market.

So that’s when the issue of local content kicks in. Guyana has previously lacked or even really needed the broad range of maritime and offshore-support services seen in other parts of the Caribbean such as in Curaçao or Trinidad. But this is already changing and there are moves to build or install additional facilities such as a drydock for vessel repair and maintenance to cater for the oil sector, while improving the software in the form of local training and upgrading technical expertise, which initially will in some cases come from beyond Guyana. Georgetown’s Matpal Marine Institute (a satellite of the Jamaica’s Caribbean Maritime University) clearly has a role to play here.

Encouraging

It’s encouraging to see that offshore activity has already helping the local economy. For instance, more than 1,000 Guyanese are employed by ExxonMobil and its sub-contractors. In fact, ExxonMobil has made a special effort to develop a Guyanese workforce, collaborating with local companies to supply in-country goods and services, and investing to support health, education and infrastructure programs.

Meanwhile, the Guyanese Business Development Centre has also opened to promote the establishment of small- and medium-size businesses in the country.

GUYANA: KOTUG contract

KOTUG Contract

A further example of the immediate benefits for the shipping sector came in October when Rotterdam-based KOTUG was awarded a long-term contract from Esso Exploration & Production Guyana (EEPGL) to provide offshore terminal towage to support its operations in Guyana. This contract marks KOTUG’s first operation in South America. 

To support its Guyana operations, KOTUG (through the local entity KOTUG Guyana Inc.) will employ its newly acquired vessel “SD Power”, a high-spec 130 tonnes bollard pull, DP-2 azimuth anchor-handling tug, which will provide support to the existing and upcoming FPSOs at the Liza Field.

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GUYANA: Suriname / Guyana Port

Mixed reception greets plans for new port

The Commewijne shore-base project (or Comport) may already have a head start (see separate story on page 32), but this has not stopped others looking at alternative facilities from which to serve the booming Suriname and Guyana offshore energy sectors.

As is already mentioned elsewhere in this issue, the massive hydrocarbons reserves found in the Guyana-Suriname basin will result in the creation of significant shore base support services. And the proposed Comport project alone in Suriname may not provide sufficient capacity to serve the estimated nine billion barrels of oil discovered off Guyana and a further 1.4 billion so far found off Suriname.

For this reason, the Surinamese and Guyanese governments have tentatively proposed establishing a joint venture shore base – and one that would be able to serve oilfields either side of the maritime boundary between the two countries.

The presidents of Suriname and Guyana have confirmed that they are evaluating the potential of a joint deep-water harbour that will provide services for both exploration and production activities in the basin ramp-up.

Disguised

Guyana’s president, Dr. Irfaan Ali, said during a visit to Suriname in November that he had discussed the idea with his Surinamese counterpart President Chandrikapersad Santokhi. This new port would form part of the Memorandum of Understanding between the two governments that focuses on infrastructural projects.

In terms of the development of a deepwater harbor, President Santokhi said: “The  working group will have similar discussions to see what is the best approach for the benefit of both nations because an offshore base is a more than a USD$1 billion investment. There is an opportunity to look at such a huge project jointly.”

President Ali meanwhile confirmed: “We are now exploring synergies, and this is where we are.”

The case against

There is some scepticism locally as to the viability of such a joint port. Concerns are founded on both countries – but especially Suriname – having strict “local content” requirements in their contracts with international oil companies and those involved in the sub-region’s maritime sector see neither country being especially willing to give up a large chunk of this local business.

As hinted to in the main article: Suriname is looking at generating US$ 10-15 billion in direct oil revenue over the next 20 years, and the same amount in local business revenue, for which the shore base will be a gateway. Some believe that neither country is willing to give up this additional revenue. And, what’s more, for a combined shore base to work a 5 km bridge (across the Corentyne River) first needs to be built. As it is, Guyana’s Environmental Protection Agency currently has four Guyanese shore base facility permit requests pending. So, there’s no sign there then that Guyana is "waiting" for a joint government port initiative.

Meanwhile and despite the friendly politics, Suriname and Guyana have longstanding and ongoing legal border issues, pertaining to the "Tigri" triangle in the south, and the continuous grumbling about the Corentyne river border being Surinamese territory up to the high tide mark on the Guyana shore. The bridge that’s needed to make a joint shore-base work, would be 100% on Suriname soil, joint project or not. This could prove another bone of contention.

Shallow

Furthermore and, perhaps crucially that very same Corentyne river, where a joint shore base is being looked at on the Suriname side, is extremely shallow. At present, the river has a 4.90 meter maximum draft at high tide / 4.30 meter of draft at mean neap tide. The first possible location for a shore-base, would require at least 40 kilometers of fairway dredging, from the mouth in the Atlantic..... As one locally based expert told Caribbean Maritime: “in a nutshell, and for political, business and technical reasons, we don't see this happening anytime soon....”

Expressions of Interest

Meanwhile and possibly at variance with the joint venture idea, Guyana’s Minister of Public Works, Juan Edghill, recently announced that the government in Georgetown would be requesting “Expressions of Interest” for the development of a new deepwater harbor in East Berbice-Corentyne. The Guyana-Suriname border adjoins the region and the Corentyne river forms the border between the two countries. A new bridge is to be built across the Corentyne; although planning is at a very early stage.

Mr Edghill sees the proposed Berbice port as more than just shore-based; mentioning the handling of cruise ships and vessels that currently operate on the Demerara River.

• Under the name Grand Canal Industrial Estates (GCIE), Canadian firm CGX Energy has for some years had plans to build such a Berbice port. GCIE acquired a Government of Guyana Lease of 54.96 acres of Berbice River Front land adjacent to and North of “Crab Island” from CGX Resources Inc in 2012 (see seperate article).