First oil and other matters

As oil is the leitmotif of the day and the stakes and risks are stratospherically high, the government and the contenders for the March 2, 2020 general elections must be made constantly aware of what has been done, left undone and the imperatives.

● The APNU+AFC government has embarked on its campaign after presiding over the disastrously incompetent 2016 Production Sharing Agreement (PSA) with ExxonMobil’s subsidiary EEPGL. It has been projected by numerous commentators that the ineptly done PSA has ceded to Exxon and its partners billions of US dollars which should have accrued to the country and its people. Renegotiation of the PSA must be a key plank for all of the contenders at the general election and they should explain to the public how they will achieve this. President Granger should also be made to account for how he and his government arrived at the post-oil PSA.

● The first flows of oil will come without the requisite architecture in place for full accountability of monies. With Parliament not functional and credible concerns over the legislation for the Natural Resource Fund, the first tranche of oil money will require a fully authorised government in place before any allocations can be made.

● Minister of Finance Winston Jordan recently volunteered that the oil monies accrued will be placed with the Federal Reserve Bank of New York rather than the Central Bank of Guyana as had been previously stated. It is unclear when, how and why this decision was taken and whether it is within the remit of a caretaker government.

● The public is yet to be convinced that the Government of Guyana and its associated agencies are in a position to effectively examine claimed expenses from Exxon and its partners and to challenge these where necessary. These expenses and the open-ended period over which they can be claimed can severely diminish revenues accruing to Guyana.

● First oil will find Guyana without an approved local content policy and an enabling Act. Even though the government could not have anticipated the successful December 21st , 2018 motion of no confidence against it, there was clearly enough time after the discovery of oil in May 2015 for a local content policy and law to have been in place long before that event. This failure of the government has left jobseekers and local businesses at the mercy of the dubious benefaction of the oil companies and their assorted contractors. The contours of the local content policy and how it drives jobs and business into the local economy should be a major issue on the campaign trail.

● Thus far, the public is completely in the dark over the marketing arrangements for Guyana’s

oil, the thinking behind the choice and the cost of such.

● The recent application by ExxonMobil’s subsidiary for the drilling of 31 more wells exemplifies the breakneck speed at which the US company intends to pursue the search for and extraction of Guyana’s oil. The government is yet to present a depletion policy for oil which would in turn define – notwithstanding the onerous Stability Clause in the 2016 PSA - whether there is to be cap on the barrels of oil produced in the Stabroek and other blocks. The depletion policy would also determine what resources the government believes should be set aside for future generations of Guyanese.

● Once oil extraction has begun, the conventional wisdom is that the government of the day will ramp up expenditure of revenues on renewable energies and that Guyana’s actual use of carbon fuels will see a phased and swift reduction. The government is yet to make significant progress towards renewable energies – its planned solar farm at Mabaruma has been a litany of bad luck and incompetence. Neither has the government addressed its mind as to how becoming a major carbon fuel supplier can be properly reconciled with its ambitions to become a Green State and a warrior against climate change.

● Pollution of Guyana’s waters by the waste generated from oil exploration, drilling and extraction raise serious concerns which are beyond the capacity

of the Environmental Protection Agency and affiliated bodies. This is aside from any oil spill that could potentially occur and the regional and international fallout from such.

● Mitigation of the possibilities of the Dutch Disease and the resource curse must be foremost in the minds of the various contenders for the 2020 general elections. The concentration of resources in the oil and gas sector to the exclusion of other ventures is already evident. Lands along the eastern shore of the Demerara River are being allocated to oil and gas to the detriment of all else. Available capital is also being sunk into oil and gas as evidenced by the various shore-based services springing up. Where are the major investments in agriculture, light manufacturing etc?

Guyana’s oil and gas trajectory – navigating between best practices and the worst examples – is yet to be defined. There is much that can derail Guyana’s efforts and stakeholders and voters must seek answers from those who are aspiring to lead the next government.