Sunday, February 5, 2023

Guyana on ‘right track’ accelerating oil and gas development to fund energy transition – Rystad Energy

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Norway’s Rystad Energy has lauded Guyana’s efforts to implement the right policies to attract foreign investment that will essentially fund its transition to cleaner, greener energy.

In its August Review, Rystad Energy even urged that other Latin American nations use Guyana as “the blueprint” for energy policies aiming to attract foreign investments in the region.

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Guyana has been attracting major attention since ExxonMobil’s first oil discovery in the massive Stabroek Block in 2015. And since then, other oil-producing nations have been introducing new regulatory frameworks to make their business environments more attractive.

Guyana’s Production Sharing Agreement (PSA) with ExxonMobil, considered by some critics as too generous, is what is spurring aggressive development investments, that are consistent with the government’s transformative agenda.

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Within the last two quarters, ExxonMobil has upped Guyana’s resource count to 11 billion barrels of oil equivalent. It has two oil platforms currently in operation and has its eyes set on 10 by the end of the decade.

But Guyana’s energy goals are still in play. The country is at net zero and is working to transition away from fossil fuels with its upcoming gas-to-energy project. Also in the pipeline are massive solar farms along with its trademark Amelia Falls Hydro-project.

Columbia’s case

Compared to Guyana, Research Director for Latin America, Daniel Leppert said Columbia is heading in the opposite direction. Its President, Gustavo Petro introduced a new tax reform to fund social spending. According to Rystad Energy, the reform aims to bump up taxes on oil exports – which account for 30% of Columbia’s total exports.

Large number of ships heading to South America, Caribbean with refined products

President Petro has reportedly made “bold statements” on abandoning Columbia’s dependence on oil and gas – 12% of its total income flows alone for 2021. But with an economy and energy matrix that is highly dependent on fossil fuels, Rystad Energy said President Petro “walks a fine line” with its new tax reform. Rystad Energy argues such reform can harm much-needed investments in the sector that is capable of helping the country with energy security and could be the main source of funding for the energy transition.

“Colombia’s hydrocarbon sector has seen better days, and if investments are deterred, the consequence on the economy will surely be felt,” Rystad Energy pointed out.

The Petro-led administration’s objectives on the energy transition and renewables are necessary. However, it needs to blend with energy security, affordability, and access, Rystad Energy said. And with Columbia’s energy matrix that is more than 60% reliant on fossil fuels, Rystad Energy said it would be a hard task to implement a fast-paced transition capable of reconciling affordability and security.

“In that sense, it has been encouraging thus far to see a country like Guyana implement the necessary regulation and governance to attract foreign investors. The country is speeding up the development of its offshore hydrocarbon resources to not only develop its economy but also fund the energy transition,” Rystad Energy said. “Time will only tell whether the country enjoys the necessary long-term stability, but there is no question on whether Guyana is currently on the right track.”

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