Oil from Guyana’s giant Liza field should start to flow around 2020, and according to leaked reports put the government’s take at 12.5 per cent. This was revealed in an interesting article by Mark Wilson under the caption ‘Guyana oil cash — what can go wrong?’ which was published in the Trinidad Express newspaper.
Below is the full text of the Mark Wilson article:
On Tuesday (last), Guyana’s Oil and Gas Association was launched. Unlike T&T’s Energy Chamber, it’s not a network of high-octane energy professionals. Indeed, these are vanishingly few in Guyana.
The association wants to be a civil society watchdog, not a club for “wealthy boys and girls.” It wants the fast-approaching energy jackpot well-spent and well-saved. That’s more Transparency Chapter than Energy Chamber.
Oil from Guyana’s giant Liza field should start to flow around 2020. Leaked reports put the government’s take at 12.5 per cent.
ExxonMobil’s first-stage estimate is 100,000 barrels a day from this one field. T&T now produces less than 74,000 barrels. That’s just Scene One. For later, ExxonMobil is talking 200,000 barrels. This month or next, ExxonMobil or its partner Hess should announce results from their third assessment well.
The cash flow from Liza depends on the oil price and other imponderables, but the maths is easy enough.
At yesterday’s oil price of just over US$50, the initial 100,000 barrels from Liza would bring in almost US$230 million a year for Guyana’s government. That could cover more than a quarter of today’s annual budget. Just from first-stage production in a single oil field.
Ramp up the output to 200k, and you’re talking twice that.
It gets better. Exxon Mobil’s partner Hess says their shared offshore block has more than 20 geological structures similar to Liza. One of these, Skipjack, turned up dry last month. But it would be astonishing if Liza were the only one with big oil. In ten years, we could be talking oil revenues equal to today’s entire national budget.
But the state budget is pretty much where it stops.
Guyana has no onshore infrastructure. Strong marine currents and massive siltation rates make port development a high-cost challenge. That’s why Guyanese bauxite exports were for years transshipped at Tembladora.
Crude will be pumped into a huge vessel, perhaps 200 kilometres offshore, then shuttled by tanker for refining overseas. That’s a floating production, storage and offloading facility. ExxonMobil is talking one of these for starters, then ramping up to two.
Overseas refining may work to the benefit of Petrotrin, which currently imports crude for processing from Africa and elsewhere. But there are no plans for a refinery in Guyana.
There’s gas at Liza—but ExxonMobil want to reinject it, to maintain reservoir pressure and boost oil output.
Realistically, there’s talk of a few hundred onshore jobs. We’re not talking a Guyanese Point Lisas.
So the government’s cash take is what counts. And there’s scope for big investments in Guyana’s crumbling infrastructure and patchy public health and education.
Sounds good—but big resource-based state spending carries risks, not least the corruption curse.
Guyanese have plenty experience with the downside of a resource-based economy, leaving many deeply cynical. Too often, politicians have promised a glorious future. “All the optimism has long since drained away,” says a hard-bitten observer.
The independence-era promises of Forbes Burnham ended in the 1980s with a siege economy where even cheese and wheat flour were all but unobtainable.
The bright new future offered by Cheddi Jagan’s People’s Progressive Party in 1992 ended last year, mired in reports of mismanagement and corruption.
Guyana ranks 119th out of 167 countries in Transparency International’s corruption perception index, alongside Russia and Sierra Leone. T&T’s ranking of 72 looks a picture of health in comparison.
David Granger’s coalition government was elected in May last year—the same month ExxonMobil announced its big oil find.
The next election is due in 2020 —just when oil revenues should start to flow. Whoever wins next time, enjoys the energy bonanza.
To preserve his single-seat majority, Granger has to make do with the pre-oil economy. That means booming gold, half-stagnant bauxite, and a sugar industry bleeding cash from the loss of European trade preferences.
To lay the groundwork for the next parliament, he needs to think hard how to spend what cash there is. He needs to plan ahead for the oil funds. Most important, he needs to set a clear legal framework for managing the money.
Guyana wants to join the Energy Industries Transparency Initiative, which matches oil companies tax payments against the government’s declared revenue: T&T is already a member.
The government wants to establish a sovereign wealth fund to invest oil revenues, on the lines of T&T’s Heritage and Stabilisation Fund.
But that’s not enough. Detailed scrutiny will be needed.
Former president and current opposition leader Bharrat Jagdeo wants to play games. He now says he reacted too calmly to last year’s “rigged” election. He talks wistfully of the stormy protests organised by his party’s opponents in the 1990s. Today, he plans to boycott Granger’s address to parliament.
Guyana needs constructive watchdogs. The Oil and Gas Association’s president is Bobby Gossai, a policy analyst in governance and natural resources under the former PPP administration. Its director is Nigel Hughes, a forceful criminal defence lawyer who until April was chairman of the junior party in Guyana’s coalition government.
Supporting its launch were senior diplomats. Acting prime minister Carl Greenidge said all the right things. But transparency means more than talk.