…COVID-19, sharp drop in prices affect output
Guyana produced 12.3 million barrels of oil during the first half of 2020. However, production was beset by the problems arising from the COVID-19 pandemic and drop in oil prices and as such, fell short of the targeted production figures.
This is according to the Bank of Guyana’s half-year report, which covers the period up to the end of June 2020. According to the report, Guyana was able to produce 12.3 million barrels of oil, at an average of between 65,000 and 75,000 barrels of oil per day.
“However, this performance was 38 to 46 per cent lower than the 120,000 barrels per day targeted during the review period. The petroleum and gas industries were faced a sharp drop in oil prices from depressed demand and higher inventory of crude oil as a result of the COVID-19 pandemic’s adverse effect globally,” the report stated.
The report also noted that the petroleum and gas and support services industries expanded by 4712.9 per cent. In sharp contrast, however, the Gross Domestic Product (GDP) of non-oil economic industries such as agriculture, gold and bauxite contracted by 4.9 per cent in total.
“The lacklustre performance in the non-oil GDP largely resulted from slower activities in the services sector due to lockdown to limit the spread of the coronavirus,” the report went on to explain.
Overall, the agriculture sector’s output fell by 4.1 per cent. It was explained that this was driven by lower returns for forestry (17.3 per cent reduction), fishing (12.1 per cent reduction) and livestock (2.3 per cent). Conversely, sugar and rice grew during the half-year, compared to the corresponding period in 2019.
When the deadly COVID-19 disease arrived in Guyana, the former A Partnership for National Unity/Alliance For Change (APNU/AFC) Government took a number of steps from closing Guyana’s borders to mandating that only essential businesses open their doors. The remaining businesses, including those in the productive sector, received nothing in the form of a stimulus from the then Government, which last passed a budget in November of 2018.
This was corrected when the People’s Progressive Party (PPP) Government took office in August 2020 and passed its emergency budget within two months. A slew of measures was included in the budget, aimed at incentivising businesses to keep them afloat through the removal of Value Added Tax (VAT) on equipment and machinery, as well as other tax measures.
Guyana, with oil giant ExxonMobil as the operator, began producing oil last year in the Stabroek Block, lifting its first million barrels of profit oil from the Liza-1 well in February 2020. Oil tanker Cap Phillippe transported this lift from the Liza Destiny Floating Production Storage and Offloading (FPSO) vessel, allowing Guyana to receive its first payment the next month.
That money, $11.4 billion, constituted Guyana’s first oil revenue-based earnings from production in the Liza field. It was deposited in the Federal Reserve Bank of New York in March of this year.
An additional the sum of $7.3 billion was subsequently deposited, as well as royalty payments. So far, Guyana has received three cargo lift payments and two royalty payments, courtesy of the Liza-1 well. This means approximately US$150 million has been deposited in the Natural Resources Fund housed in the Natural Resource Fund.
However, this money has remained untouched, as the protracted political crisis that followed the March 2nd General and Regional Elections sabotaged any attempt to set up a system for withdrawing funds. The Natural Resource Fund Act stipulates that various committees must be established to provide oversight for the fund. It is expected that this legislation will be reviewed by the current Government.
Following his recent keynote address to the Forecast on Latin America and the Caribbean Conference, President Dr Irfaan Ali had made it clear that the monies will remain untouched until key reforms intended to ensure transparency are enacted.
“My Government is focused heavily on transparency and accountability. As you know, we have demonstrated this after the negotiations of the licence for the Payara. Not only did we make the agreement public, but we also made the environmental permit public, so nothing is done in secrecy,” he had reminded.
“I’ve said before, there’ll be an arm’s length relationship with the politicians. We had international experts leading those negotiations and discussions,” the Head of State was quoted by the Office of the President as saying.