Wednesday, February 8, 2023

2022 Year in Review of Guyana, Part 1: What I have said so far

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By Dr. Lorraine Sobers – OilNOW

The year 2022 has been an intriguing one for Guyana’s energy sector: oil production and reserves have grown significantly, local content legislation came into full force, legal local content disputes arose and were settled, government expenditure and allocation of funds continue to be scrutinised, gas-to-energy gained momentum, and energy experts weighed in on the current and future state of affairs. Throughout the year I chose to focus on perennial issues instead of commenting exclusively on current events. I addressed themes that I believe to be foundational issues to building a strong, prosperous, resource-rich nation. Today’s column brings together quotes from articles that I wrote this year which summarise my viewpoints.

At the start of the year, I identified the ‘pillars’ needed to sustain Guyana’s energy sector. These pillars, I asserted, have already been established but I cautioned that the energy sector would test their strength, writing:

“The arrival of oil and gas production brings opportunities for and threats to Guyana’s progress. Rapid growth in this sector may be bolstered by the pillars of Guyana’s established extractive industries or crumble under the weight of success, prosperity and responsibility. The future will demonstrate what Guyana deems to be a good balance between commerce and conservation; the importance of safety and environmental protection; the value placed on the national repository of natural resource data, and answer the big question: will corruption or transparency prevail?”

In keeping with these values, Hess Corporation, a consortium partner for oil exploration and production offshore Guyana, announced their agreement to purchase $750 million in carbon credits to maintain Guyana’s rainforests, under the United Nations Reducing Emissions from Deforestation and Forest Degradation program (REDD).

Within the overarching theme of institutional strengthening, I considered the need for good governance in Guyana contrasted against the bane of corruption:

“The status of Guyana’s good governance is the backdrop for evaluating the risk of investing in Guyana. The higher the risk, the weaker the bargaining position.”

Government Effectiveness is the crux for good governance and as such, institutional strengthening is needed in every area of government administration.”

Efficient, trustworthy government institutions and state agencies, the nation’s centre of gravity, must play a stabilising role in the rapid rise of the local energy sector.”

“The institutions responsible for public services, education, power supply and distribution and finance must be able to deliver timely and quality service to stakeholders.”

“As larger projects are announced, it is impossible to ignore the lack of commensurate, game-changing policies and initiatives to protect whistle-blowers who call foul. It is time for a full-court press on corruption.”

Sustainability was always at the forefront of my mind when considering Guyana’s future. The demands for rapid growth can complicate the need for establishing policies and projects that are in step with the global energy transition and climate change. I have summarised the current situation in this way:

“Oil and gas revenue is set to transform Guyana, allowing the country to provide a better standard of living for citizens, upgrade its infrastructure and reduce the cost of electricity. A reduction in the cost of importing fuel oil has been used to further the argument for Gas to Power but notably, renewable energy projects are already underway to address this and related environmental concerns.”

With this in mind, I later opined:

“The experience of Guyana’s neighbours proves that the ultimate goal ought to be sustainability which allows the country to grow despite inevitable shocks and setbacks.”

“Sustainable hydrocarbon development for Guyana is possible with innovative approaches such as setting a low, nationally determined carbon dioxide (CO2) emission per capita cap, identifying and allocating COsinks, not including current standing forest, to counteract emissions from any proposed downstream industry development and, promoting the manufacture of carbon neutral products.”
“The country’s attractiveness
to environmentally and socially conscious international investors can also determine its ability to compete for foreign direct investment.

The news outlets were dominated by news of growing oil reserves and production and the anticipation of producing and utilising natural gas from offshore production. The volumes of natural gas may not be as extensive as oil reserves but its impact will be just as transformational for Guyana.

“Natural gas development has been touted as a “bridge” to facilitate the green shift in power generation and a long-term back-up to support renewables, however, it is shaping up to be a permanent, main highway to Guyana’s development.”

“The Gas to Power project is getting a jump start on changing Guyana’s energy landscape as renewable energy projects slowly ramp up capacity. Natural gas is likely to play an even bigger role than the Low Carbon Development Strategy 2030 (LCDS) is predicting.”

Guyana’s future though bright is challenging but there is no need to walk alone. I strongly believe that working along with CARICOM will have numerous mutual benefits –

“The green revolution is an opportunity for CARICOM countries to make inroads in the manufacturing sector.”

“Guyana can reduce spending and risk by collaborating with CARICOM neighbors to execute projects, build capacity and identify opportunities for funding and business development.”

“Should Guyana decide to begin gas exports within the next decade, early discussions with CARICOM neighbours can be advantageous.”

“Technical expertise and internationally recognized training programmes found in Suriname, Trinidad and Tobago and Venezuela can fill the current skills gap in Guyana while growing local capacity for critical roles. This is an important step in Guyana establishing its leadership in the region eventually becoming a hub for a new wave of energy expertise.”

Naturally, Guyana’s bright future has caused many to be anxious about the allocation of the petrodollar windfall. These are my thoughts on the matter:

“Guyana’s oil and gas windfall must be strategically invested with consideration for the interconnectivity of the various sectors and the people it is meant to serve.

“An effective sovereign wealth fund is one that is free of political meddling, transparent, underpinned by policies that allow for growth and hampers the proliferation of the resource curse on the economy by limiting transfers to the national budget. The onus is on the government to perform a delicate balancing act between present and future needs though they may be severely criticised for taking hard decisions. “

In summary,

… three main lessons Guyana can learn are that the country needs 1) fiscal prudence and discipline to put aside funds for future generations; 2) political stability to establish and maintain growth and, 3) economic diversity that prioritises its basic survival needs before its other national developmental priorities.

In Part 2, I will review more recurrent issues including clean energy and education.

About the author

Dr. Lorraine Sobers is a Fulbright Scholar currently lecturing at the University of the West Indies, St. Augustine. Dr Sobers has a BS in Chemical Engineering and postgraduate degrees, MS and Ph.D., in Petroleum Engineering from Texas Tech and Imperial College, London respectively. She has 19 years’ experience in the energy sector specialising in Carbon Capture and Storage (CCS). Dr. Sobers is the Project Coordinator for CO2 Emission Reduction Mobilisation (CERM) Project and a Fellow of the Caribbean Policy Consortium.

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