The South American country of Guyana is on course to produce 750,000 barrels of oil per day by the mid-2020s, which, with its small population of equal number, makes the potential for massive transformation tremendous.
Speaking at the Guyana Petroleum Summit held on Thursday, May 9, at the Marriott Marquise in Houston, Texas, Dr. Valerie Marcel, Researcher at Chatham House, said as the country moves towards the production phase it can learn from emerging producers, such as Ghana.
“Ghana has 9 years production history. Unlike Saudi Arabia or Norway, which took the reign of their old sectors decades ago, Ghana remembers how it took the first steps in developing its capacity and institutions to manage the oil sector. That memory is fresh, and that experience is very valuable to a country like Guyana,” she told those gathered at the event organized by Houston-based Energy Conference Network.
Dr. Marcel said across the experience of countries in the New Producers Group, of which Guyana is a member, it has been found that the period after discoveries is very intense. To date, 13 discoveries have been made by US oil major ExxonMobil off the Guyana coast, with the first phase of oil production set to begin by 2020.
Pressure and attention, she said, come from multiple sources; donor agencies competing to have their institutional and policy framework adopted by government; private sector service providers and consultants lining up for opportunities; local job seekers; the public asking how the discovery will transform their lives; and political opponents challenging decisions made.
“This overwhelming attention and pressure do not create the space for debates around big policy decisions. But this is precisely the time when a country will want to think about where it’s heading, what kind of producer it wants to be, what it wants to do with the oil and gas and what it will do with the revenues,” she pointed out.
Referencing Guyana’s Green State Development Strategy, she said this plan envisages renewables meeting 100% of domestic energy needs, and as such, government’s policy on oil and gas in this context, is particularly important.
“A critical decision was to avoid having oil brought to shore for transformation (refining) and to use the export revenues strategically to support the diversification of the economy, renewables development and for saving for the future (in the sovereign wealth fund),” the Chatam House Researcher said.
She also pointed out that investing revenues strategically “is not as easy as it seems” noting that it’s important to set the revenues expected from oil in context. “In Guyana’s case it will truly be transformative, with 1 barrel per person per day, while in Ghana the resource flows are only 3 barrels per person per year,” she said.
The capacity of Guyana’s economy to absorb such revenues will be limited. “Moreover, investing strategically in specific sectors may be difficult to realise because governments have not been broadly successful if choosing sectors to support financially,” Dr. Marcel said.
Another avenue for creating long term wealth is to invest in public services and raising prosperity levels through public investment in infrastructure, education and health, she pointed out. “But even there, public investment will need to be incremental, growing in line with the state administrative capacity to manage the spending.”
The Chatam House Researcher said Guyana, having the benefit of hindsight, has an opportunity to get it right by learning from both the mistakes and advances which have been made by other oil producers.