Venezuela Opposes Guyana’s Offshore Oil Bidding, Citing Maritime Border Dispute

Venezuela Opposes Guyana’s Offshore Oil Bidding, Citing Maritime Border Dispute

Dispute Over Maritime Areas

On Tuesday, the Venezuelan government voiced its strong disapproval against the offshore oil bidding round conducted by Guyana. According to the Venezuelan authorities, the bidding process involves maritime areas that are still subject to delimitation between the two South American nations. Venezuela’s Foreign Ministry declared these bidding rounds as illegal, arguing that the Guyanese government does not hold sovereign rights over the areas in question. As such, any activity within these boundaries infringes upon international law unless conducted through an agreement with Venezuela.

Long-Standing Border Dispute

The oil block bidding has further intensified the long-standing territorial dispute between Guyana and Venezuela. The International Court of Justice (ICJ) ruled in April that it has jurisdiction over the boundary issue, which could determine which country has rights to the oil and gas-rich territory, especially offshore. However, the Venezuelan government has insisted that Guyana does not have sovereign rights over the disputed areas and any oil activity must be executed in agreement with Venezuela.

(Read Also: Venezuelan Central Bank Updates Dollar Exchange Rate: An In-depth Analysis)

Tension Over Oil Blocks

Last week, Guyana received bids from several companies, including Exxon Mobil and TotalEnergies, to allocate eight new offshore oil blocks. This move aimed to diversify the portfolio of energy firms participating in Guyana’s nascent industry, currently dominated by an Exxon-led consortium. The Venezuelan government, however, has vehemently rejected this licensing round, reinforcing its stance that any unlawful concession granted by Guyana infringes upon its sovereign rights and does not generate any rights for third parties involved in the process.

(Read Also: Expect Rainfall Across Venezuela on September 19: Weather Forecast Report)

Guyana’s Stand

In response to Venezuela’s claims, Guyana’s President Irfaan Ali stated that his country reserves the right to pursue economic development activities in any portion of its sovereign territory or any appurtenant maritime territories. He also encouraged Venezuela to participate fully in the ICJ process and respect its outcome. Despite the ongoing dispute, companies like Exxon, in partnership with Hess Corp and China’s CNOOC, have discovered more than 11 billion barrels of oil and gas and continue to explore and produce oil in Guyana.

Historic Territorial Dispute

The historical dispute revolves around the 160,000-square-kilometre region of Essequibo, administered by Guyana but claimed by Venezuela. The contention escalated after the discovery of crude oil deposits off the Essequibo coast in 2015. The dispute over the 19th-century border is currently pending before the ICJ at Guyana’s request, despite objections from Venezuela. The Venezuelan Foreign Ministry has maintained that Guyana lacks sovereign rights over these maritime areas, and any activities there defy international law without a deal with Venezuela.

(Read Also: China’s ‘Powerful’ Hand in Venezuela’s Electricity Sector Revamp)

Geopolitical Implications

This dispute adds another layer to the already complex geopolitics of South America. The potential for immense gains from the oil reserves has only fuelled the fire. For Venezuela, already grappling with an economic crisis, the stakes are high. On the other hand, Guyana views these reserves as a gateway to a more robust economy. The gray area in international law concerning these claims puts global organizations like the United Nations in a challenging position.

Impact on the Oil Industry

Despite the dispute, Guyana has been rapidly monetizing its oil assets, with two producing oil developments, a third set to come online shortly, and two others under construction. A development plan for a sixth project could be submitted to the government by year’s end. According to S&P Global Commodity Insights, Guyana’s oil production is expected to hit 571,000 b/d by the end of 2024. This standoff between Venezuela and Guyana underscores the complex interplay between geopolitics and the global energy industry.