THE PIPER: Developing oil for Guyana

With most Guyanese – especially those in government – convinced that oil will finally deliver the wealth and prosperity ‘El Dorado’ promised so many centuries ago, it might be useful to review some obstacles to the realization of that expectation. Our experience with exploiting gold, diamonds, bauxite, forestry, land (agriculture) but still left mired in poverty has left Guyanese cynical. Gold is still being mined but in forestry, the largest operator for over twenty five years –  with rights to over 1 million hectares – has thrown in the towel. What are the threats that might lead to the same results in oil?
The first one has to do with having individuals with a clear understanding of the oil industry be placed in charge of it. Obviously, with Guyana having absolutely no experience with an oil industry – the exploratory drillings over the last half of a century do not really count – we cannot expect policy makers to absorb the necessary knowledge base overnight. But they can at least hire advisers with the institutional knowledge to advise them. Instead, the Minister of Natural Resources Raphael Trotman, who the Opposition Leader has described as “clueless”, chose to hire only a PR staff. Even the best PR could not spin assertions such as ExxonMobil would be paying us for oil that wouldn’t be shipped for another five years, at best.
piperThe second requirement, with Chad in mind, is to make the contract with ExxonMobil and its partners public so that analysts can monitor the latter and simultaneously  assist the government in managing the expectations of the Guyanese public. Take the Minister of Natural Resources’ refusal to deal frontally with the clear statement of ExxonMobil that at the most, only a few hundred jobs will be created based in the model they are using to extract and ship our oil. In the beginning, these will all be expatriates and even as promised, ExxonMobil begins training of locals, at no point will they, for instance, replace the 500 jobs lost with the imminent departure of Barama from its forestry operations. The vaunted “local content” legislation is actually moot, since servicing of the drillship(s) will also not amount to the creation of a significant number of  jobs.
The third requirement then should be obvious – negotiate with ExxonMobil to utilize a model that makes sense for both the company, which would potentially be  investing billions of dollars (US), and Guyana, whose non-renewable resource would be extracted. Talking about a refinery just exposes the lack of familiarity with the oil industry by the Minister and Ministry of Natural Resources. Trinidad has excess refining capacity as does the Caribbean and the world. It does not make economic sense to make that billion-dollar investment right now. What might be more feasible is the construction of a small-to-medium fertilizer plant that would utilize the petroleum  gas which, under ExxonMobil’s present model, would be pumped back into the field. This plant would facilitate the expansion of our agriculture base while immediately reducing the input cost of our rice to make it more competitive with the Eastern producers.
Lastly, the formation of a Sovereign Wealth Fund is absolutely necessary for the development of the country – unlike what happened with the exploitation of other resources. Since the now Opposition PPP had also floated this idea on the last campaign trail, we know they agree with the proposal. They should be brought aboard to help craft the principles under which the Fund would operate and in this way provide the widest legitimacy to future spending from it.
Barring the above. Guyana would just  end it with holes under the sea just as it now has holes in the hinterland with nothing to show for it.


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