(Bloomberg) -- Venezuela President Nicolás Maduro has recently announced his plans to annex a vast region of Guyana called Essequibo covering roughly two-thirds of the neighboring nation’s territory. While Venezuela has claimed the territory for more than a century, the dispute has escalated as Guyana emerged as a major new area for oil development, following a string of discoveries by Exxon Mobil Corp., beginning in 2015. The move has sent shock waves through the region, fueling fears of armed conflict in an already unstable continent.

1. What is the fight about?

Maduro’s threats focus on oil blocks granted by Guyana to oil majors in the Atlantic Ocean, north of the Essequibo - a 61,600 square mile area both nations claim as their own. The majority of Guyana’s discovered oil riches are located mainly in the Stabroek bloc, where Exxon discovered 11 billion barrels of off shore resources, the biggest find of the past decade. A conglomerate led by Exxon actually produces all of Guyana’s oil exports, which amount to about 333,000 barrels of oil a day in November, or two thirds of Venezuela’s output. Revenues from these exports are set to grow to $7.5 billion in 2030 from $1 billion last year, according to Rystad Energy. Other companies involved are Hess Corp. and China’s CNOOC Ltd. Chevron Corp., which has operations in Venezuela, will step in the first half of next year after its $53 million acquisition deal of Hess is finalized. Production is on course to reach one million barrels a day by the end of the decade, according to Platts.

2. What are Maduro’s plans?

After staging a referendum that purportedly showed overwhelming support for Venezuela to take control of the region, Maduro announced plans to establish a new Venezuelan state dubbed Guyana Essequibo. Among his plans are to grant citizenship to the scarce population in the jungle territory, establish two new state-owned companies and a new military post and start awarding oil and mineral licenses to develop the region. It amounts to an ambitious undertaking for a country that has suffered through one of the worst economic crises in recent history despite being on top of the world’s largest oil reserves. The goals would be further complicated by the fact that Maduro has little to no access to financing and that the majority of the Essequibo lacks proper roads, water and electricity services. Maduro has also ordered a three-month ultimatum for oil companies drilling in disputed land to exit, a step that could risk his relationship with close allies like China, which has stakes there. The controversy could also deflect attention from the current political crisis in the nation, with presidential elections scheduled for next year and polls showing Maduro lagging badly behind opposition candidate María Corina Machado.

3. What’s the background?

The South American neighbors have been disputing their boundary since the 1800s, with Venezuela claiming everything west of the Essequibo River - about two-thirds of what Guyana considers its territory. In 1899, an international arbitration panel awarded Britain the territory. Then, both countries signed a treaty in Geneva to resolve the controversy in 1966, the same year that Guyana gained independence from Britain. After decades of bilateral negotiations and further mediation of the United Nations failed to yield results, the UN referred the controversy to the International Court of Justice in 2018, as Guyana expected and still wants. But Venezuela hasn’t recognized the ICJ’s jurisdiction. It says the Geneva agreement would provide the only valid resolution.

4. Is an armed conflict seen as a real possibility?

Military experts doubt it will come to this unless Maduro actually sees his grip on power at risk. If the opposition unifies ahead of next year’s presidential vote and leaves him with no possibility but offer concessions toward free and fair elections, analysts believe Maduro may escalate the conflict and issue an emergency decree, which could lead him to postpone the elections.

Despite its multitude of issues, Venezuela has a significantly larger military power than Guyana, with some experts estimating it at 100-1. However, if Guyana’s allies intervene, the balance may shift. Guyana, has leveraged the situation to boast of its international military alliance with the US, among others.

5. How has the international community and the oil market reacted so far?

Members of the international community, particularly Brazil’s President Lula da Silva, have expressed their concern regarding the rising tensions and have called for stability. Brazil has played an active role with others in promoting a Dec. 14 meeting between the presidents of Venezuela and Guyana. While there hasn’t been any significant reaction in the oil market so far, Exxon has said it was keeping a close eye on the situation and Chevron’s CEO Mike Wirth saying talks are more likely than war. Lastly, Guyanese President Irfaan Ali has said foreign oil companies are “moving ahead aggressively” with production plans despite Venezuela’s threats to take over the region.