Caribbean – the new Crude Oil destination

The Caribbean has for long been synonymous with white sandy beaches and excited tourists, the relaxed vacation destinations have traditionally been related to being tax havens for the rich, bio- diversity, and limited commodity-based agriculture. However, in the recent past Caribbean nations like Guyana, Suriname, Jamaica and Barbados have had huge crude oil and natural gas discoveries which have the potential to change how the world perceives the Caribbean and its importance in the global markets as well as its relationship with climate change negotiations.

The same plate has led to most geologists believing that most of the Caribbean islands and continental Caribbean countries potentially would possess crude oil and natural gas reserves.
The same plate has led to most geologists believing that most of the Caribbean islands and continental Caribbean countries potentially would possess crude oil and natural gas reserves.

By Dr Aparaajita Pandey

The Caribbean has for long been synonymous with white sandy beaches and excited tourists, the relaxed vacation destinations have traditionally been related to being tax havens for the rich, bio- diversity, and limited commodity-based agriculture. However, in the recent past Caribbean nations like Guyana, Suriname, Jamaica and Barbados have had huge crude oil and natural gas discoveries which have the potential to change how the world perceives the Caribbean and its importance in the global markets as well as its relationship with climate change negotiations.

Geologically most islands and the nation of Guyana share the same underwater shelf as the Orinoco River. It is the same Orinoco River that flows through Venezuela and whose basin has been a provider of dense Maya crude to Venezuela of centuries, while the reserves in Venezuela have not diminished, years of maladministration and lack of technical know-how have driven Venezuela into a situation where they find it difficult to harvest the vast quantities of crude oil that they have in their midst.

The same plate has led to most geologists believing that most of the Caribbean islands and continental Caribbean countries potentially would possess crude oil and natural gas reserves. Trinidad and Tobago proved this theory right decades ago, when they also were an oil rich nation, however, Trinidad and Tobago now are a nation with depleted oil reserves but still surviving on natural gas. As of the recent discoveries, Guyana has come out on top of the crude oil lottery, since 2015 it has announced twenty-two commercial oil discoveries in its territorial waters. Similarly, Jamaica, Suriname and Barbados have also had sites that have had positive crude oil and natural gas discoveries around these countries. It stands to reason that with further research more sites could be discovered and larger oil reserves could be found.

While these sites are welcome news for the Caribbean nations and their economies, it is also a harbinger of some change. Beginning with the events in the region itself. As a country that has been steadily spiraling out of control since 2015, Venezuela is understandably unhappy about alternatives to its status as the largest oil producing nation in the Latin American and the Caribbean region. Maduro has also claimed that the Guyanese offshore sites fall inside the Venezuelan territorial waters in addition to initiating small border skirmishes along the Venezuelan – Guyanese border. There is little to no substance in these claims.

There is also a fundamental difference between the relationship that Latin American nations have with their natural resources and that the Caribbean nations have with their natural resources. While Latin American nations for long have been exploited for their natural resources first by their colonial masters, then by countries more powerful and have had steady intervention in their politics for greater control over these resources, the Caribbean nations do not have a historical resource-based exploitation of this magnitude. Therefore, the resource nationalism that exists in Latin America is not replicated and can not be juxtaposed on the Caribbean. The Caribbean nations are also very aware of their lack of human resources. Most Caribbean countries are plagued by brain drain where due to lack of opportunities of growth, the best Caribbean minds end up in the US, Canada, and/or the UK which has led to a severe crunch of people who possess the knowledge to gainfully exploit these oil discoveries.

Due to this reason an influx of big oil and gas conglomerates has been an ongoing process in the Caribbean. While the Trinidadians who have faced this in the past warn against it and are also helping Guyana navigate the nitty-gritties of being an oil rich nation; the ‘Dutch-Curse’ for these countries does seem like an inevitable prophecy. That does not, however, take away from the fact that the Caribbean stands at the precipice of being the next big oil market of the world.

This is specifically great for a country like India. The Caribbean gives India an opportunity to diversify its energy partners, at the same time India is one of the very few countries in the world that possesses the technology and capability to refine such heavy crude, which leads to more downstream opportunities for India as well.

As the Caribbean becomes bigger in the oil and gas sector, its own relationship with environmental conservation and climate change negotiations stands to change drastically. The Caribbean is a climatically sensitive region whose sustained existence pretty much depends on the world drastically reducing its carbon emissions; at the same time the oil discoveries will allow the Caribbean to raise its GDP drastically in the coming future. Balancing the two extremes is going to be a difficult predicament for the Caribbean. It would be interesting to see what the future holds for the white sandy beaches.

(The author is an Asst. Professor at the Dept. of Public Policy, Amity University and has a PhD in Latin American Studies from Jawaharlal Nehru University. Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited).

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