Oil is the nerve of war… The discovery of huge oil deposits has revived the ancient conflict over Essequibo, a 160,000 km2 territory administered by Guyana but claimed by Venezuela, claiming that the real border is the dating of the Spanish Empire was in 1777.
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The dispute is being heard by the International Court of Justice (ICJ), the highest court in the United Nations, which does not recognize Venezuela. Guyana believes its boundaries were established in 1899, when the United Kingdom was the territory's colonial power.
Are Venezuela and Guyana's oil reserves significant?
The American giant ExxonMobil discovered huge oil reserves in the Essequibo in 2015. With new discoveries in October, Guyana, with a population of 800,000, now has the highest per capita reserves in the world, estimated at 11 billion barrels, a level similar to Kuwait.
ExxonMobil has developed 63 drilling projects in the Stabroek block, helping Guyana increase its production to 600,000 barrels per day (bpd). It is expected to reach 1.2 million bpd by the end of 2027.
Caracas believes the oil operation is taking place in disputed waters and accuses Guyanese President Irfaan Ali of being a “slave” of ExxonMobil.
Venezuela has the world's largest proven oil reserves at 300 billion barrels, but its oil industry is in crisis due to mismanagement, corruption and economic sanctions. Its production has fallen from more than 3 million bpd to less than 400,000 in just over a decade. Production is slowly increasing and is around 750,000 bpd.
Can Venezuela issue licenses in the region?
After the December 3 referendum that approved the creation of a Venezuelan province in Essequibo, Venezuelan President Nicolas Maduro ordered the state oil company PDVSA to issue licenses for the extraction of oil, gas and minerals in the disputed area. He proposed giving companies working with Guyana three months to withdraw from the zone and negotiate with Venezuela.
The Guyanese president described the announcements as a “direct threat” to Guyana’s security.
“The issue of the three-month deadline (…) is one of the most worrying and in some ways generates significant uncertainty,” International Crisis advisor Mariano de Alba told the AFP Group (ICG). “This creates uncertainties, risks and costs for these companies, we have to wait and see how they react.”
However, the issuance of operating licenses is difficult to enforce. “It’s rhetoric,” says Ramon Escovar Leon, a lawyer specializing in international litigation. “On paper the license can be granted, but the execution is not guaranteed,” emphasizes Mariano de Alba, estimating that Nicolas Maduro is essentially trying to force a negotiation that his counterpart Irfaan Ali rejected.
“Any attempt at petroleum exploration by your state oil companies or companies on our territory will be viewed as an invasion of Guyana,” warned Guyanese Vice President Bharrat Jagdeo, calling on companies to “ignore Maduro and his ultimatum (…) legally.”
An impending armed conflict?
Despite international concern, experts believe the situation will not escalate into an armed conflict. Tensions continued to rise with the announcement of American military air exercises in Guyana, which constituted a “provocation” to Venezuela.
Because the United States is concerned about its oil supply in the medium and long term, it has a great interest in ensuring that this nearby area, which hosts the largest reserves in the world, remains stable.
According to Mariano de Alba, “limited military operations”, such as patrols in contested areas, could take place in the medium term.
But “what would happen if the interests of China, which holds a 30% share in the concessions granted by Guyana, were compromised?” asks Ramon Escovar Leon.
The international community recommends, as requested by the Government of Guyana, that the dispute be settled before the International Court of Justice (ICJ) based in The Hague. It remains up to Caracas to recognize its competence.