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Will Venezuela Go To War Over Oil?

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January 2021 is still far from over yet the pages of Oilprice already boast 6 articles about Guyana being the hottest drilling spot in the world. This is hardly surprising, considering the hot streak that ExxonMobil had over the past 5 years, with new companies coming in and stepping up the drilling game. The interest globally attributed to Guyana has aggravated Venezuela’s long-standing grievances over the disputed Essequibo province – before 2015 the Venezuela vs Guyana oil standoff was akin to a David vs Goliath story but now, with Guyana building up its oil reserves tally and continuing to attract new investors, the balance has become a lot more nuanced. Amidst all of this, Venezuelan President Nicolás Maduro has pledged to reconquer Essequibo. 

At first glance, the proposition that Venezuela should go to war over a disputed territory, let alone with Guyana, seems rather dubious. Venezuela boasts the world’s largest proven oil reserves, totalling roughly 304 Bbbls (see Graph 1), i.e. more than all of North America combined, more than Iraq and Iran combined. Guyana’s reserves are a fraction of that, barely reaching 3% with its 9-10 Bbbls. However, behind the dry facade of data and statistics, there lies an entire universe of human emotions, oftentimes led astray due to their subjective nature and in this particular realm, Caracas is the one frustrated and concerned. Guyana is adding one major discovery after another (the recent failure of Hassa-1 notwithstanding), whilst the Venezuelan national oil company PDVSA keeps on struggling to make ends meet.

Graph 1. Venezuela’s Proven Oil Reserves 1980-2019 (billion barrels).

Source: BP Statistical Survey 2020. 

The dispute over Guayana Esequiba (alternatively dubbed the Essequibo Region) is one of the most complex remaining, mixing colonial legacies with modern-day grievances. It all began in 1840 when the British Empire demarcated the heretofore undisputed and unsettled frontier between British Guiana and Venezuela, by means the “Schomburgk Line”. To no one’s surprise Venezuela rejected the British claim, however, unwilling as they were to get mired in a protracted conflict, both sides agreed to disagree in 1850 and vowed not to colonize the then-largely uninhabited region. Despite arbitrations and negotiations, the question of who should control the Essequibo Region remained unsolved by the time of Guyana declaring itself independent in 1966. Caracas recognized the independent Guyana, however only its territories located to the east of the Essequibo River, maintaining its claim that all the territories to the west are part of Venezuela.

Related: Can Shale Resist The Lure Of Another Output Surge?

One of the most protracted territorial disputes globally, the discovery of oil offshore Guyana might have been the factor missing to propel the issue forward. ExxonMobil, the operator of Guyana’s Stabroek offshore block, was subject to maritime harassment by the Venezuelan Navy and had one of its surveying vessels detained in 2013. However, when Exxon discovered the Liza…



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