Venezuelans Back Referendum to Fight for Oil-Rich Essequibo

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Researched by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--Earlier this week, Venezuelans voted in a referendum to maintain their claim over the Essequibo territory as tensions with Guyana increase. However, an armed conflict between the nations is unlikely, at least for now.

On December 3, more than 10 million Venezuelans approved a referendum to gather national support behind the claim for the Essequibo territory, a century-old dispute over a swath of land that encompasses about two-thirds of Guyana.

The Essequibo territory also represents part of the Stabroek Block, the prodigious oil area offshore Guyana where ExxonMobil Corporation's (NYSE:XOM) (Spring, Texas) consortium has discovered more than 11 billion barrels of recoverable reserves.

ExxonMobil holds 45% of the stake in the Stabroek Block. Subscribers to Industrial Info's Global Market Intelligence (GMI) Production Project Database can click here for related project reports and learn more in our November 16, 2023, article - ExxonMobil Starts Production at Payara Oil Field in Guyana.

The Venezuelan referendum is part of the latest saga between the neighboring nations. In the last few weeks, the governments of both countries have mobilized equipment and part of the armed forces to the borders as the territorial disputes reach new heights.

Nonetheless, an armed conflict over the Essequibo remains unlikely for now. Instead, Guyana probably will continue with its efforts to resolve the conflict through the International Court of Justice, which Venezuela rejects.

Meanwhile, Caracas will claim the use of the Geneva agreement from 1966 with the United Kingdom to negotiate the territory.

While tensions are expected to linger as the neighboring countries remain at loggerheads, they are not likely to affect Guyana's hydrocarbon expansion, at least not in the short term.

As proof of that, last month, Guyana's vice-president announced new drilling concessions offshore Guyana to several companies, including ExxonMobil. Also, in November, ExxonMobil started production at the Payara oil field, which is expected to add 220,000 barrels of oil per day (BBL/d) of output.

The former British colony is producing close to 400,000 BBL/d, and it is projected to have an output of more than 1.2 million BBL/d by 2027. Meanwhile, companies continue to explore Guyanese waters in search of new reserves, despite the territorial dispute.

Venezuela, for its part, has seen its output increase to 750,000 BBL/d after the U.S. eased sanctions on Caracas for six months. On Friday, the Biden administration said it would maintain the sanctions relief as some of the November deadlines for political concessions were being met.

The increase in Venezuelan oil production and the sanction relief are attracting refiners' international attention to the nation's heavy-sour Merey grade, especially in the U.S. Gulf Coast. Moreover, Reuters recently reported that Indian refiners also are interested in purchasing Venezuelan crude.

Yet, there is only so much that Venezuelan oil production can offer without considerable investments. The country is expected to see some production gains as companies, such as Chevron Corporation (NYSE:CVX) (San Ramon, California), work to boost their output. But returning to production levels close to 2 million BBL/d will take years and major funding.

Venezuela is expected to usher in investments, though uncertainty remains high as the nation prepares for presidential elections next year and the U.S. sanctions relief expires in March. The White House likely will extend the license, if Venezuela offers a clear electoral calendar and allows some political concessions.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).