A tiny rainforest country is growing into a petrostate. A US oil company could reap the biggest rewards

By Laura Paddison, CNN

(CNN) — Guyana’s destiny changed in 2015. US fossil fuel giant Exxon discovered nearly 11 billion barrels of oil in the deep water off the coast of this tiny, rainforested country.

It was one of the most spectacular oil discoveries of recent decades. By 2019, Exxon and its partners, US oil company Hess and China-headquartered CNOOC, had started producing the fossil fuel. They now pump around 650,000 barrels of oil a day, with plans to more than double this to 1.3 million by 2027.

Guyana now has the world’s highest expected oil production growth through 2035.

This country — sandwiched between Brazil, Venezuela and Suriname — has been hailed as a climate champion for the lush, well-preserved forests that carpet nearly 90% of its land. It is on the path to becoming a petrostate at the same time as the impacts of the fossil fuel-driven climate crisis escalate.

While the government says environmental protection and an oil industry can go hand-in-hand, and low-income countries must be allowed to exploit their own resources, critics say it’s a dangerous path in a warming world, and the benefits may ultimately skew toward Exxon — not Guyana.

Since Exxon’s transformative discovery, Guyana’s government has tightly embraced oil as a route to prosperity. In December 2019, then-President David Granger said in a speech, “petroleum resources will be utilized to provide the good life for all … Every Guyanese will benefit.”

It’s a narrative that has continued under current President Mohamed Irfaan Ali, who says new oil wealth will allow Guyana to develop better infrastructure, healthcare and climate adaptation.

Oil’s economic impact has already been enormous. The country of around 820,000 people is now the world’s fastest expanding economy. Its GDP grew more than 33% in 2023 and more than 40% in 2024.

Critics, however, accuse the country of squandering its climate leadership by throwing its lot in with fossil fuels, especially given Guyana’s huge vulnerability to climate change. Sea level rise could claim its capital Georgetown by 2030, according to one assessment.

“You have a government that is reckless about what is going to happen to Guyana,” said Melinda Janki, an international lawyer in Guyana who is handling several lawsuits against Exxon. It’s pursuing “a supposed course of development that is actually backward and destructive,” she told CNN.

And while plenty of Guyanese people welcome the new oil industry, some say Guyana’s startling economic statistics do not reflect a real-world prosperity for ordinary people, many of whom are struggling with the higher prices accompanying the oil boom. Inflation rose 6.6% in 2023, with prices of some foods shooting up much more rapidly.

“Since the oil extraction began in Guyana, we have noticed that our cost of living has gone sky high,” said Wintress White, of Red Thread, a non-profit that focuses on improving living conditions for Guyanese women. “The money is not trickling down to the masses,” she told CNN.

CNN contacted President Ali, the Ministry of Natural Resources and the Ministry of Finance for comment but received no response.

Guyana, a former Dutch then British colony which gained independence in 1966, is one of only a handful of countries that is a “carbon sink,” meaning it stores more planet-heating pollution than it produces. This is due to its vast rainforest; trees remove carbon dioxide from the atmosphere as they grow.

The country has protected its biodiversity where others have destroyed theirs, President Ali said in a BBC interview last year. In 2009, the country signed an agreement with Norway, which promised Guyana more than $250 million to preserve its 18.5 million hectares, or nearly 46 million acres, of forests.

Ali insists the country can balance climate leadership and fossil fuel exploitation. The new oil wealth will allow Guayana to develop, including building climate adaptations such as sea walls, he has said. He has also pointed to the continued failures of wealthy countries, already grown rich on their own fossil fuels, to help poorer countries with climate finance.

But there are concerns Guyana could fall victim to the “resource curse,” in which vast, new wealth can actually make life worse for those who live there.

“That foreign money and that sudden rush of opportunities, combined with very limited manpower and government capacities, does often result in a lot of corruption,” said Michael Ross, a political science professor at UCLA.

Ross pointed to Guyana’s neighbor Venezuela, where a large oil windfall led to a dramatic decline in government accountability and an increase in authoritarianism. The oil has also upped tensions between the two countries, with Venezuelan president Nicolás Maduro laying claim to the oil-rich Essequibo region of Guyana.

Newly wealthy countries also find themselves suddenly interacting with foreign companies “whose own infrastructure and access to information just dwarfs anything that’s happening in the country,” Ross said.

Critics say this power imbalance is clear in the 2016 contract Guyana signed with Exxon. Under the agreement, Exxon can recoup up to 75% of its investment from profits until costs are recovered. The remainder is split 50% between Exxon and partners and 50% to the government, which also takes a 2% royalty.

“It was a bad deal,” Ali said in the BBC interview, but he has rejected the idea of unilaterally changing the agreement, which was signed by the previous government. He says the next contract with Exxon will be on different terms.

An Exxon spokesperson said the contract is “globally competitive for countries at a similar stage of exploration,” and said Guyana is averaging $1 billion a year in “oil profits” and $6.2 billion had been paid into its natural resource fund.

Exxon has also faced a number of lawsuits over its potential environmental impact, many filed by Melinda Janki, a Guyanese international lawyer, who drafted the country’s Environmental Protection Act back in the 1990s.

A big victory for Guyana’s people and environment came in 2023, when the court ruled Exxon should have unlimited liability for the costs of any oil spill. Exxon has since appealed the ruling and has posted a $2 billion guarantee while it awaits the appeal outcome.

Exxon said this commitment supplements “its robust balance sheets … and the insurance policies they already had in place.” Janki says this isn’t enough. Offshore oil spills can be extremely expensive to deal with, the 2010 Deepwater Horizon spill cost nearly $70 billion to clean up.

The push and pull between those who say oil offers Guyana a brighter future and those who fear the industry’s impact will continue.

Exxon said it’s had a positive impact on the country, including employing more than 6,200 people, investing more than $2 billion with local Guyanese businesses since 2015 and spending more than $43 million on community projects.

But Red Thread’s Wintress White says people are struggling with sky-high rents and food prices that have doubled or tripled in some cases.

“The reality here is that the oil is not a blessing, it’s a curse and it’s only polluting our environment,” she said.

Janki believes Guyana can move swiftly to renewables. It is a country of sunshine, wind and rivers for small-scale hydropower she said.

She fears the country’s rush for oil has come much too late and will trap the country into an industry without a long future. “It’s too late to do oil … the only people who are going to make money from this are Exxon and the oil companies,” she said.

Clarification: This story has been updated to better explain the terms of the contract between Guyana and Exxon.

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