Afreximbank Unveils $1 Billion Oil Service Financing Facility for Guyana
In a significant development for Guyana’s oil industry, the African Export-Import Bank (Afreximbank) has announced the launch of a $1 billion oil service financing facility aimed at bolstering local participation in the nation’s rapidly expanding energy sector. The announcement was made by Afreximbank President and Chairman, Prof. Benedict Oramah, during the Guyana Energy Conference and Supply Chain Expo, held from February 18 to 21.
The financing initiative is designed to align with Guyana’s local content policies, providing much-needed capital to domestic businesses engaged in oil and gas services. The $1 billion facility will be channeled directly to eligible corporate clients or made available through local banks to finance invoices from Guyanese contractors. With Guyana boasting an estimated 12 billion barrels of crude oil reserves, the nation is on the cusp of economic transformation. However, Oramah cautioned that without strategic policies, a significant portion of the financial gains from the oil service industry could leave the country.
Highlighting the economic potential, Oramah estimated that the oil service sector in Guyana is valued between $5 billion and $8 billion annually. He warned that most of these revenues could be directed to foreign oil service companies if appropriate measures are not taken. He emphasized that retaining even 50% of these revenues within the country could result in a GDP increase of 29% to 47%, underscoring the importance of robust local content policies to empower Guyanese entrepreneurs within the oil value chain.
Drawing from Afreximbank’s extensive experience in financing oil and gas projects across Africa, Oramah also highlighted the risks associated with over-reliance on crude oil revenues. He noted that commodity markets are highly volatile, and dependence on crude oil as the primary source of government funding could expose Guyana’s economy to market fluctuations. To mitigate these risks, he advised the government to secure long-term off-take contracts with oil service companies, enhancing both market access and price stability.
As part of Afreximbank’s broader mission to strengthen economic ties between Africa and the Caribbean, Oramah announced that skilled oil service companies from Ghana, Egypt, and South Africa are prepared to collaborate with Guyanese businesses. Afreximbank will underwrite these partnerships to facilitate knowledge transfer and economic growth.
Additionally, Oramah warned of the economic dangers posed by the “Dutch Disease,” a phenomenon where resource booms can negatively impact other sectors of the economy. He stressed that the success of Guyana’s oil industry will depend on the policy choices made by its leaders and urged the government to implement measures ensuring long-term economic benefits.
“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. A 50% retention in Guyana would increase Guyana’s GDP by 29% to 47%,” Oramah stated.
“The commodity market is prone to volatility and cyclicality; hence, the reliance on crude revenues as a primary source of government funding could expose the national economy to volatile commodity markets,” he added.
With Afreximbank’s support, Guyana’s oil sector stands to benefit from increased local participation, economic diversification, and greater financial stability. The success of this initiative will hinge on how effectively the government and local businesses leverage the available support to maximize the country’s oil wealth
