I CAST MY MIND BACK to driving through St. Philip in the late 1980s, on the way to my paternal grandmother’s house in Brereton. My earliest memories of Barbados’ second-best parish contain several stimuli, chief among them the “Digging Donkeys”.
That was my term for them, and will remain so in the name of nostalgia. Those oil pumpjacks seemed to be everywhere in the parish. My memory may be exaggerating the quantity, but every Barbadian once knew there was a noticeable amount of natural gas onshore.
Those donkeys toiled continuously. Nowadays, there are surely young adults, raised and living outside the Parish of Centipedes, who have no idea that we once met a significant share of our natural gas needs. You should, however, have coloured me unsurprised in the dying moments of the Owen Arthur administration.
You should recall then the same level of hype – possibly informed – around promising prospects for deep-sea oil exploration to the south-east of the island. Modern-day manna, it seemed, all at a time when the economy was booming in the lead-up to the Cricket World Cup. Despite being around this long, I fear that we risk losing rationality over this potential. Oil and gas must be struck first, after all, and that is still years away from happening.
Renewed opportunity
Unfortunately, the subjects I took as an undergraduate concerned themselves with quantitative rigour applied to tourism, finance and agriculture. There was a smattering of health and technology, but never oil and gas. This is to say that me nor my contemporaries truly understand this renewed opportunity, except for those who work in the Ministry of Energy. They are the people who should be heard most, whether to answer real public concerns or quell untamed optimism. It is just sad that they are typically not allowed to be louder than I am.
I have casually followed the global and regional industry for years. I have long understood how the secondary market works. Moreover, I have long understood “local content” and “upstream activity” from a practical point of view three years before Exxon struck oil in Guyana. Believe me when I tell you that we are at a very tenuous stage, especially if our hopes are high.
Essentially, it seems most of our blocs are spread across very deep water; deeper than usual and more than Guyana’s. They are perhaps economical at the forecast long-term price of oil. Supporting infrastructure has to be built out, and I am learning that there may be ten years of waiting before any possible announcements of extraction.
The global oil and gas industry comprises all types of players. They range widely in sophistication. One thing is common: they are aggressive about achieving their goals. I continue to observe frontier but “small” markets like Barbados often lack leverage, even when they provide access to natural resources. We point to Guyana aspirationally. Yet we seem not to realise that, because her people, through their government, did not participate in the actual significant early-stage infrastructural investment and were not able to negotiate what most of them deemed fair up front.
Some put this down to oversight whether intentional or not. However, the fact remains that Exxon, as an example, is able to delay full payment of its licensing fees until the project in Guyana breaks even. This can be interpreted as meaning that it must first recoup exploration costs before the full proportion of licensing fees are paid. Therefore, I tend to smirk whenever that company announces that it has struck on another bloc there.
I listened with great interest to the Minister of Energy’s press conference on bids for our 19 blocs. I did the same for his follow up on Down to Brasstacks. I actually smiled at the narrative being presented. I’ll close on my reason why. Guyana’s economy has been transformed; of that we can be sure. Its potential is still troubled by the aforementioned reasons, along with other inherent socioeconomic weaknesses. Barbados competes well in the latter sense.
Present momentum
Moreover, its economy is overheating, overwhelmingly due to speculation in its non-oil part. Inflation is therefore presenting a very real medium to long-term problem, especially as that jurisdiction still desires to be low-cost. It won’t happen. Furthermore, much of the present momentum is based on private sector support for the industry through local content, the hype surrounding that system, and the Government’s renewed appetite to borrow for large-scale public infrastructure development purposes.
People seem to forget a time when Guyana was defaulting on loans made to it even by “little” Barbados. This was within my own lifetime and at a stage when it was amongst the fastest-growing economies in CARICOM. International lending organisations are once again displaying a strikingly healthy interest in Guyanese debt where they weren’t before.
In the closing months of last year alone, the government borrowed approximately US$180 million for infrastructural development from the World Bank and Inter-American Development Bank. First quarter 2025 even saw over US$245 million lent from various state and multilateral organisations. Roads, improved water management and delivery systems, and healthcare support were all included.
For emphasis, Guyana borrowed half of our government’s revenue just to spend on this infrastructure. Its economy is almost four times the size of ours now (from similar sizes a decade ago), so this is by no means a huge undertaking at this point.
There is a longer-term issue that both of our publics need to be wary of, and that is the effects of the delayed full value of licences. I believe I heard during the Minister’s time on Brasstacks that the Government was not going to participate “financially” in the development of any blocs at this time. If that statement points to a lack of investment, then it creates a lack of leverage during early-to mid-stage negotiations.
Exploratory stages
None of you readers would seek to rent land from someone who had installed nothing, built all of the infrastructure, and then expect to pay commercial rental rates for the land itself. I was further concerned when it was seemingly conveyed that the Government could seek to extract financial benefit during the exploratory stages. I certainly hope that I misunderstood, and that they plan on the private sector truthfully controlling local content from the outset. Anything else is tantamount to leaving more of your leverage on the table than Guyana did in all of its negotiations.
Those bidding oil companies will demand even more ease than waiting until they reach breakeven on all blocs leased to them. The only way I can see us having more leverage is for the Barbados National Energy Company (BNEC) to be granted investment powers to participate with successful and financially sound bidders.
I would even recommend that all bidders that reach certain early milestones be required to become shareholders in a joint venture with the BNEC. Through this, the Government could realistically extract financial value after the first bloc makes a profit, or much earlier if it is craftier. But this all makes sense to me only if the global price of oil stays elevated in the medium to long term. And this only happens when there is economic uncertainty all around. Oh, what a time to be alive!
Jeremy Stephen is an economist/financial analyst with extensive experience in private equity and economic consulting in Barbados and the region. Email: economistfeedback@gmail.com