Even though Guyana enjoys an advantaged position as a world-class exploration hotspot with its light, sweet crude, and low breakeven costs for deepwater projects, it must remain focused on ensuring industry players comply with its rules and upkeep contract obligations. This was said by Marcelo de Assis and Luiz Hayum, two experts attached to Wood Mackenzie, an internationally respected consultancy group on global energy, chemicals, renewables, metals and mining research.
At WoodMac, Hayum is a Senior Upstream Research Analyst while his colleague is Head of Latin American Upstream Research. Both categorically agreed that as Guyana embarks on another exciting year as an oil producing State, it would be prudent to ensure its industry has some key features.
One of these, it pointed out, speaks to having sound environmental regulators who have adequate fiscal and human means to do their jobs. They advised too, that it would be in Guyana’s best interest to ensure that oil trading mechanisms are transparent and that proper controls are in place to protect the interests of the State.
The WoodMac officials told OilNOW in a recent interview that controls are critical to ensuring the institutions governing the sector can be effective guardians in ensuring the proper use of the natural resources. Furthermore, they said that controls would help to ensure investments are channeled in the right areas such as strengthening educational institutions and programmes to support other sectors. They said this is a key element in the strategy employed to reduce strong dependence on oil money.
Adding to this, Assis said, “Countries with solid institutions and independent controls usually benefit the most from natural resources. One of the best examples is Norway, which ensured the oil revenue surplus was invested in an oil fund…” Guyana has since established a Natural Resource Fund, which the current administration has vowed not to use until the governing legislation has been strengthened.
As for Hayum, he said Guyana’s future with oil is well protected since petroleum will still have the largest share in the energy matrix for the next 20 years. Although there is a push for more renewables and green technology in the energy mix, the Senior WoodMac researcher said that the transition will not happen in a short-term. “The first barrels to be removed from the market will be the expensive ones and the ones with a big carbon footprint. This is not the scenario in Guyana because the costs are competitive and its offshore production has a low carbon emission compared to other countries,” the Senior Upstream Research Analyst expressed.
Further to this, he said that the oil industry is already showing the first signs of recovery while adding that prices have increased in the past months and hovering around USD $55/bbl (Brent). He said that all companies will be very cautious in their capital allocation plans. Hayum pointed out that only projects with robust returns in this price environment will receive the green light. With the progress being made in the vaccination campaigns for the coronavirus, a gradual return of economic activities is expected, the WoodMac official concluded.
