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Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 50)

Introduction

Inspired by the May 20, 2015 announcement by ExxonMobil that it had made the largest discovery of petroleum resources for that year off the coast of Guyana, this column with the title Road to First Oil began, coincidentally, on May 26, 2017 and was expected to run for approximately twenty-five weeks. In fact, today’s column is the 50th in the series and there seems to be no reason why the Daily Editor would not wish to continue it indefinitely, albeit with a change in the contributor at some future date.

If for no other reason, the media and civil society need to guard against the seemingly single-minded pursuit of an oil economy to the exclusion of what President Granger has dubbed the six curses of Guyana – sugar, rice, bauxite, gold, diamonds, and timber – the essence of the Dutch Disease. In fact, there is little evidence of any conscious effort by the Government in the past three years to prevent the Dutch Disease from afflicting the country.

The purpose of today’s column is to assess the progress and preparation Guyana has made to being a petro-state following the first announcement made more than three years ago. The declared reserves at that stage of approximately eight hundred thousand barrels of oil has now jumped to at least four times that number. This is huge and puts Guyana among the world’s top oil producing countries measured by reserves per capita of population. But when it comes to petroleum, to use the language of Portia in Shakespeare’s Merchant of Venice, Guyana seems to be twice blessed – as volume increased so has the price for crude oil which has increased by approximately 40% in the last three years. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 50)”

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Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 49)

Introduction

We continue and conclude today on what is known as Sovereign Wealth Funds, essentially special purpose state-owned investment funds to achieve financial objectives using investment strategies, tools and instruments. We noted last week that there is no single model of SWF’s and that each is determined by the objectives which the relevant government seeks to achieve. As would be obvious from last week’s column I find the Singapore model particularly attractive and one which Guyana will do well to consider as a model, modified of course by Guyana’s national objectives and its state of development.

A reason for my preference for Singapore’s two SWF’s is that they had their origin in an era when that country’s economy was not significantly dissimilar to that of Guyana. Importantly too, while Singapore is somewhere about No. 40 in the world measured by size of the economy, and it is clearly not blessed with natural resources, it ranks way above many of the world’s richest countries that have chosen to invest in sovereign wealth funds. In fact, when its two funds are added together, it has the third largest SWF in the world.

Unlike most of the countries with SWF’s, Singapore, recognising the open nature of that country’s economy subject to the vagaries of international trade, began its fund as an instrument of savings to provide a cushion for a rainy day, should the economy fall into a period of prolonged difficulties. Interestingly enough, while most former colonies complain about the social, infrastructural and economic deficit of colonial rule, Singapore saw the very small sum of foreign reserves at Independence as an inheritance from British colonial rule. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 49)”

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Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 48)

Introduction

Column 40 noted that in practice, any Sovereign Wealth Fund for Guyana has to take a whole host of factors into account, including the country’s recurring deficits which are financed by loans; the deficit in its infrastructure; future revenue gains and losses; commodity prices including that of oil; and citizens’ rising expectations. In this Column attention moves away from the 2016 Petroleum Agreement to something into the future, something that considers how Guyana will use the oil revenues which will start flowing in 2020.

There are of course so many variables about the petroleum industry that indulging in projections is something of a fool’s game. One of the biggest uncertainties of course is the price of oil into the short, medium and long terms, which cannot be separated from the even bigger question of fossil fuel versus renewables; the cost of production by the monopoly producer; the effect of transfer pricing if any; the economic policies of the government of the day which will themselves be driven by popular expectations and political imperatives; the attitude of future governments into the next several decades to the crippling stability clause which Minister Raphael Trotman has embedded into the 2016 Agreement and the consequences of any attempt by a new Government to force a better deal; the effect of the Dutch Disease which is already rearing its ugly head with the loss of hundreds of jobs in the lower East Bank, Demerara; and of course a less likely unfavourable outcome of the border controversy with Venezuela. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 48)”

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Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 47)

Introduction

This column turns attention to the Environment Impact Assessment (EIA) for the Liza Phase 1 Develop-ment Project done by Environmental Resources Management (ERM) an external consultancy firm which describes itself as is a leading global provider of environmental, health, safety, risk, social consulting services and sustainability related services. Volume 1 of the Assessment runs to approximately 450 pages of which 100 pages make up Chapter 6 which includes a rather expansive description of non-environment related information about Guyana’s ground transportation infrastructure, the country’s Administrative Divisions, the ethnic composition of the population, the education system, the economy etc.

The consultants claim that they did not encounter any specific difficulties in preparing the EIA and that the information provided on the project and the resources found in the project development area were adequate for them to prepare a robust impact assessment.

It is with more than passing interest that ERM disclosed that the Petroleum Agreement was confidential! Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 47)”

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Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 46)

Introduction

For a country that will soon become petroleum dependent, Guyana’s petroleum legislation is not particularly expansive. There are two petroleum Acts – the Petroleum (Exploration and Production) Act comprising seventy-one sections and the largely gutted Petroleum (Production) Act which is now something of a misnomer since all it does is vest the ownership of petroleum resources found in Guyana in the State. That Act has a mere two sections. Then there is the Petroleum (Exploration and Production) Regulations made in 1986 comprising thirty-nine paragraphs, one Schedule containing four Forms, one of which has a First and a Second Schedule.

The word “environment” does not appear in any one of the Acts, and only adverbially in the Regulations in which pollution appears a few times. Fortunately, in 1996 the PPP/C Government passed into law the Environmental Protection Act (EPA). Accordingly, it was under the EPA that an environmental permit was issued on June 1, 2017 valid until 2040 for the Liza Phase 1 Project. This 46th column in the series looks at the conditions under which the environmental aspects of the petroleum operations are required to be conducted. Continue reading “Every Man, Woman and Child in Guyana Must Become Oil-Minded (Part 46)”