With 16 discoveries, 8 billion barrels of recoverable oil resources and the start of production all in just under five years, Guyana is now one of the best-known newcomers to the league of petroleum producing nations.
While the significant hydrocarbon resources have the potential to transform the tiny South American country of just over 750,000 people, an expert in the industry says avoiding over-dependence on oil is vital and steering clear of measures such as gasoline subsidies and setting up a refinery will help in achieving this objective.
“Guyana is endowed with large oil deposits, but it should work to reduce its vulnerability to these swings by limiting its dependence on oil. Indeed, that is easier said than done. But it can, at the very least, avoid refineries and gasoline subsidies,” Chatham House Expert, Dr. Valerie Marcel told OilNOW in a recent interview.
Dr. Marcel said in her years of experience, she has found that many countries end up building refineries to ensure energy security. She said that countries want to ensure they have a steady supply of gasoline in country. She noted however that quite often, countries end up making the gasoline available below international market prices which lead to measures such as subsidizing. When that occurs, the Chatham House Expert said it becomes quite difficult to peddle back from subsidization even when it reaches an unaffordable point.
She said, “What you find is that it ends up costing the government a lot of money. And there is an environmental impact of course because both parties in Guyana have stated an interest in going down a path of green growth. So, the arrangement is one that is costly and environmentally damaging.”
Dr. Marcel noted that in countries like Iran, it sought to give poor households money to their account to be able to afford gasoline rather than give everyone cheap gasoline. On this premise, she alluded to the fact that there are other ways Guyana can ensure energy security without increasing its vulnerability to the volatile commodity.