Change in US administration has potential to improve Guyana’s negotiating strength versus oil companies

This letter includes my commentary to The Dialogue (https://www.thedialogue. org/ energy- advisor/) on the current state of Guyana’s oil industry (published on 27-Nov-2020). The questions concerned oil production, impact of low oil prices, future oil development, and how the new PPP government is managing the industry.

My response:

“Only Liza 1 has reached production, yet ExxonMobil’s operations made Guyana one of the top five countries in the world for flaring gas (per capita). This is sad to witness, as I was successful in getting ExxonMobil to create a gas-to-power project in 2017, but which probably stopped after my involvement ended in 2018.

Oil from Guyana’s approved projects is high quality and relatively cheap for deepwater production, which insulates it from near-term market conditions. Guyanese oil production is critical to the continued existence of a number of large multinationals, such as ExxonMobil and Hess. So, there are artificial variables affecting production.

The recent change in the U.S. administration has the potential to

improve the negotiating strength of Guyana versus the oil companies, and this could affect production [ and improve Guyana’s share of oil revenue from the Stabroek Block] if Guyana leverages this strength.

For Guyana to succeed, it has to maximize its share of the oil revenue, and then not squander it.

The People’s Progressive Party (PPP) has not maximized the country’s share of revenue. Payara project approval was rushed instead of renegotiating the contract for the Stabroek block.

The PPP has a bad track record with state projects from its time in power (zero transparency and white elephant projects, among others), and unfortunately there are no signs that the same politicians will behave any differently now. The PPP will attract investment, but the question will be whether it is good for the country.

In 2015, the PPP awarded the Canje and Kaieteur blocks to unqualified contractors only days before ExxonMobil publicly announced that there was oil in the adjacent Stabroek block. This bizarre decision forfeited millions or even billions of U.S. dollars for the country. And one should ask why the PPP did not wait a couple days instead.”

Your faithfully,

Dr. Jan Mangal