Guyana’s oil sector is set to receive a significant boost with the African Export-Import Bank (Afreximbank) announcing plans to establish a $1 billion oil service financing facility. The announcement was made by Prof. Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank, during the Guyana Energy Conference and Supply Chain Expo, held from February 18 to 21.
This financing initiative aims to increase local participation in Guyana’s oil industry, aligning with the government’s local content policies. Afreximbank will deploy the funds directly to qualifying corporate clients or through a factoring line via local banks, allowing them to finance invoices from local contractors.
President Oramah highlighted the transformative potential of Guyana’s estimated 12 billion barrels of crude oil reserves, emphasizing the importance of proactive resource management. “Given the level of oil production in Guyana and its offshore location, I estimate that the oil service sector would amount to $5 to $8 billion annually. But where will it go? Most of it would be paid to oil service companies abroad if Guyana does nothing to avoid that,” Oramah stated.
He stressed that retaining 50% of oil service revenues within Guyana could increase the country’s GDP by 29% to 47%, underscoring the need for strong local content policies to empower Guyanese entrepreneurs in the oil value chain. Drawing from Afreximbank’s extensive experience in financing commodity-driven economies, Oramah cautioned against over-reliance on crude oil revenues. He noted that the commodity market is prone to volatility, making it risky for Guyana to depend solely on oil as a primary government revenue source.
To mitigate this risk, he advised securing long-term off-take contracts with oil service companies to enhance market access and price stability. Oramah also highlighted opportunities for deeper Afri-Caribbean collaboration, noting that skilled oil service companies from Ghana, Egypt, and South Africa are eager to support Guyanese businesses. He assured that Afreximbank stands ready to underwrite these partnerships, ensuring a mutually beneficial economic relationship.
“These measures are necessary if Guyana and other new entrants in the Caribbean and Africa are to avoid the painful ‘Dutch Disease.’ We make these suggestions based on three decades of financing oil and gas activities across Africa,” Oramah stated.
With Guyana’s oil industry rapidly expanding, the Afreximbank financing facility is expected to play a pivotal role in strengthening local participation, fostering economic growth, and ensuring sustainable development in the sector.
