Writer: Aditya Gupta
Editor: Philip Wegerhoff
A historic oil boom has thrust Guyana into two simultaneous crises: political controversy over a lopsided contract and an economic struggle to withstand the tsunami of cash it will generate.
In 2015, Guyana was among South America’s poorest countries. Today, it is the fastest-growing economy on the planet. This stunning reversal of fortune is fueled by the Stabroek Block, a 6.6 million-acre offshore basin holding over 11 billion barrels of high-quality crude oil. Yet, this once-in-a-generation opportunity is governed by a 2016 Production Sharing Agreement (PSA) with terms so favorable to foreign oil companies that it has created two starkly opposing realities: a golden ticket for investors and a potential gilded cage for the country.
The corporate value created by the deal was validated in July 2025, when Chevron acquired Hess corporation for $53 billion, driven primarily by Hess’s 30% stake in the Stabroek project. For Guyana, however, this deal has created two distinct, simultaneous challenges. Politically, the contract’s lopsided terms have become a central grievance, fueling a vocal opposition. Economically, the sheer volume of resulting wealth poses a classic threat to the nation’s long-term health. This has forced the government into a difficult balancing act: managing the public’s anger over the past, while trying to survive the economic shock of the future.
The Corporate Windfall
The 2016 PSA’s terms created an asset so uniquely profitable that it distorted market behavior. For investors, Hess, the junior partner, became a proxy for the project itself, giving rise to what can be called the “Guyana Premium.” Hess’s stock (HES) dramatically outperformed both the S&P 500 and ExxonMobil (XOM), its senior partner, whose vast global portfolio diluted the project’s impact.
This was not mere hype. It was driven by stellar financial returns stemming Stabroek Block’s low production costs of $25-$35 a barrel. Hess’s net income nearly doubled to $2.77 billion in 2024 from $1.38 billion in 2023, and its Guyana operations yielded a Return on Capital Employed (ROCE) of nearly 69%—an exceptionally efficient profit rate. This premium was driven by the favorable contract terms and growth of the asset rather than oil prices alone: even during periods of low Brent crude, Hess’s stock continued to appreciate.
Anatomy of a Lopsided Deal
The 2016 PSA is responsible for both the corporate windfall and Guyana’s political dilemma. This contract, signed by a caretaker government before the full extent of the discovery was understood, diverges significantly from international standards, due to several controversial terms: a mere 2% royalty, a high 75% cost recovery ceiling, and a clause forcing the Guyanese government to pay the oil consortium’s income taxes out of its own share of profits.
Crucially, the PSA lacks a “ring-fencing” provision, allowing the consortium to use revenue from its most profitable fields to pay for exploration and development costs across the entire basin. This perpetually expands the “cost bank” that must be paid down before Guyana’s profit share can meaningfully grow.
The waterfall chart below breaks down the revenue from a single barrel of oil priced at $82. While the final “profit” bars may suggest a fair 50/50 split, this is highly misleading. The consortium first takes the largest share, $60.30, for cost recovery. This means the companies’ total take is their cost recovery plus their profit share, for a total of $70.31. The government of Guyana is left with its royalty and profit share, totaling just $11.69.
Navigating the Political Backlash
The inequitable terms of the 2016 PSA have undeniably created a political challenge. Public awareness of the deal’s flaws is high, fueled by meticulous analysis from critics like chartered accountant Christopher Ram who have turned fiscal terms into front-page news. This has provided ammunition for a vocal opposition movement, amplified by outlets like the Kaieteur News newspaper, which has consistently campaigned against the contract, often framing it using the slogan “Heist of Guyana.”
This intense scrutiny placed the Guyanese government in a precarious position. Legally bound by the contract’s robust stability clause, it could not renegotiate the 2016 PSA without risking massive international arbitration claims. Yet, ignoring the public criticism fueled by the opposition was politically untenable.
Faced with this dilemma, the government adopted a dual strategy: honor the legally binding 2016 contract while demonstrating a commitment to securing better terms for the nation’s future. This began with the popular 2021 Local Content Act, mandating prioritization of Guyanese businesses and workers. Subsequently, the government introduced a new model PSA for all future oil blocks, featuring significantly stricter terms like a 10% royalty and a 10% corporate tax.
This pragmatic approach—effectively separating the unchangeable past from a more profitable future—was put to the ultimate test in the September 2025 general election. The result was a decisive victory for the incumbent government, which won a second term with over 55% of the popular vote. This outcome clarified the political landscape: while criticism of the 2016 PSA persists among the opposition, the majority of the electorate endorsed the government’s focus on new policies and future gains over a potentially destabilizing fight about the past contract.
Graphic By: Noam Tal
The Looming Resource Curse
But navigating this political dilemma is only half the battle. The government also faces the second, and perhaps greater, challenge: the “gilded” part of the cage. The sheer scale of the Stabroek discovery means that even with its lopsided terms, the deal will generate a tsunami of cash, bringing Guyana face-to-face with the classic resource curse, a paradox where a sudden resource boom harms a nation’s long-term health.
The danger comes directly from the massive influx of foreign currency from oil sales, which threatens to trigger “Dutch Disease,” strengthening the local currency and making traditional exports like agriculture uncompetitive while fueling rampant inflation. The government’s primary shield against this shock is the Natural Resource Fund (NRF), a sovereign wealth fund designed to hold this foreign currency offshore and prevent it from “overheating” the local economy.
The scale of this challenge is staggering. A forward-looking financial model of Guyana’s Natural Resource Fund (NRF)—built using production schedules from Hess’s investor filings and price scenarios from the U.S. Energy Information Administration—projects the fund’s balance will swell beyond $50 billion in less than 10 years. To put that in perspective, Guyana’s entire GDP in 2019 was just over $5 billion. This tsunami of cash poses a serious test to the country’s developing institutions. While the government has established the NRF precisely to manage these pressures, the sheer speed of the boom presents the classic challenge of absorbing massive wealth without succumbing to its damaging effects.
Guyana’s story is at a turning point. For oil companies, the Stabroek bet has already paid off handsomely. But for Guyana, the fight to create a prosperous future for its people has just begun. The investors have found their golden ticket; now Guyana must find the key to its gilded cage.
Featured Image by David Thielen on Unsplash
