Oil, Guyana and Climate Change – Quo vadis!!

Dr. Neville Trotz served as Dean, Faculty of Natural Sciences at the University of Guyana and Director of the Institute of Applied Science and Technology at Turkeyen, Guyana, before becoming Science Adviser to the Commonwealth Secretary-General (1991-1997). Most recently he served as Science Adviser to the Caribbean Community Climate Change Centre, based in Belmopan, Belize.

I turn my attention now to the implications of Guyana’s new oil wealth and how it might redefine our relationships with the wider Caribbean. A recent letter to Stabroek News by Mr. Ravi Dev opened my eyes to another opportunity for Guyana’s potential oil resources to become part of the solution of our collective challenge to pursue a low carbon and climate resilient development pathway in CARICOM countries. The letter raises the issue of the lack of local discussion of the report of the CARICOM Commission on the Economy. Dev alluded to the following statement in the report by the Commission that “We believe that in the area of greater economic integration, an “Enhanced Co-operation Mechanism” will overcome paralysis, where progress may be blocked by just one country or a small group of countries that may not be ready for an initiative”.

It is Mr Dev’s recommendation on the way forward with implementing the Enhanced “Cooperation Mechanism” that caught my attention:

“Moving from the theoretical to the reality of Caribbean geography, history, sociology and governance challenges, in addition to economics, I suggest that Trinidad, Guyana and Suriname are most ideally suited to proceed on the “Enhanced Co-operation Mechanism” proposal. Guyana and Suriname have already taken steps for closer collaboration in each of the four areas identified by the Commission – transport, closer financial integration, economic cooperation and climate change. All that is needed is for Trinidad to be invited to the table.”

The first thing that comes to mind is the influence that dependency on a fossil-fuelled energy sector has had on Caribbean development. For a start we are designated as one of the most energy intensive regions in the world. That means that for each unit of GDP generated the cost of energy is high and this makes everything we do that involves energy use uncompetitive – our manufacturing and service industries. During the spike of energy prices in the eighties some Caribbean countries had to fork out as much as fifty per cent of their foreign currency earnings to pay for imported fossil fuel. Clearly the present architecture of the energy sector that is fossil fuel dependent is unsustainable. With the climate change requirement for renewables and energy efficiency, all CARICOM countries now are committed to a carbon free energy sector and to pursuing the establishment of a zero-carbon energy sector. To address their current problem of maintaining a supply of fossil fuel, several CARICOM countries joined the Venezuelan PetroCaribe, an oil alliance involving 18 Caribbean member states. Under this arrangement, countries were allowed to purchase oil at market value, paying a percentage of the cost upfront with the balance being paid over 25 years at one per cent interest. The Government of Guyana signed a rice compensation agreement with Venezuela in 2009 wherein Guyanese rice exports were accepted in partial payment for imports of Venezuelan oil. The agreement ended in November 2015 and was not renewed for 2016. The arrangement did ease the immediate issue of the availability of oil but with the massive debt countries were accumulating and the current political problems in Venezuela, countries have had to terminate the arrangement.

Were Guyana, Suriname and Trinidad and Tobago to form an alliance, one can see multiple opportunities to use climate change as a basis for action on the implementation of the “Enhanced Cooperation Mechanism” recommended by the Commission.

For a start, with the energy infrastructure in Trinidad and Tobago, oil from Surinam and Guyana can be refined in Trinidad to supply the entire CARICOM fossil fuel needs until such time that the region transitions to an energy sector that is totally serviced by renewables.

This can set the platform for the introduction of an arrangement similar to, but more attractive than PetroCaribe, only that this time it will be PetroCARICOM. This ensures that the entire region would have access to more affordable and secure energy supplies that would give them some elbow room to address other development priorities on their national agenda – including actions to build climate resilience. All CARICOM countries like Guyana have committed to transform their energy sector to be totally dependent on renewables within a certain time frame and to address their vulnerability to climate change through taking action to implement adaptation measures across all vulnerable sectors of their economy. Just like Guyana, as they transition to a fossil fuel free energy sector, their energy needs would be supplied under a reliable and more affordable arrangement which operates under the CARICOM umbrella.

Further significant investments will be required to retire the installed fossil fuel infrastructure and to replace this with renewable energy systems. Normally, countries depend on foreign investments to support this changeover. Here again can we think of a regional investment fund set up to support investments in renewable energy so that the region has a readily accessible source of funds to install a zero-carbon energy sector? The regional investment fund could be a partnership with a generous investment from Suriname’s and Guyana’s oil revenues and from other governments and the regional private sector. Investments in renewable energy have a very high Internal Rate of Return on Investment (IRRI). Also, savings in energy costs caused by the switch to renewables provide the customer with resources to repay the loan. Some of these savings can also be used to support national adaptation programmes and accelerate our efforts at climate resilience building.

One of the biggest threats the region will face as a result of climate change is in the area of food security. The Jagdeo Initiative which envisages Guyana, Suriname and Belize as the main food production centres in CARICOM has been sitting for years on the shelf. Here again there is an opportunity to breathe life into