Trust or double-dealing: The Guyana-Norway MOU

Introduction

I ended last Sunday’s column with a brief description of the government’s case, which portrays Guyana as a small poor dependent economy confronted with a very difficult international environment yet willing to exchange the global environmental services provided by its pristine forests for compensatory payments through a global exchange mechanism.  I concluded the column with the observation that “if true this would indeed be exceptionally noble.”

In this week’s column I shall assess the validity of this government‘s portrayal of the MOU and the LCDS.  From my perspective the truth is otherwise for several good reasons outlined below.

Lip-service

For one, there is in Guyana no serious sustained and widely disseminated educational/awareness programmes promoting green environmentalism. In particular, theunder sea-level coastal belt, where most of the population lives and where negative global environmental impacts would be greatest (for example, through sea-level rise) has not been regularly advised and/or educated on the environmental and ecological threats of global warming   and climate change.  There is only lip-service paid to the environmental sustainability on the coast.

Furthermore, there are no indications of basic environmental policies and programmes.  For example, there is no definitive carbon budget to guide the public and the government.
In its absence, there are therefore no regular definitive measures of Co2 emissions on the coastal belt, where the worst pollution occurs.  Further, coastal mass transport principally depends on old, second-hand imported inefficient carbon-emitting minibuses, while in the towns and cities the ruling political elite and high-profile government functionaries by choice drive ostentatious gas- guzzling SUVs. Additionally, water management along the below sea-level coast relies on gas-guzzling mechanical pumps, as the gravity drainage system has fallen apart.

Scramble for
 minerals

Second, the MoU expects Guyana to promote carbon sequestration in exchange for payments from Norway.  But since its signing the government has been promoting a desperate scramble for mineral resources, including oil. Like Norway, it is relying on these discoveries to provide the foundations for Guyana’s growth and development.  This cynicism and opportunism therefore mirror that portrayed by Norway in its dealings with Guyana.

So far the frantic search for mineral resources has focused on three industries.  One is the exploration and discovery of fossil fuels.  Readers would recall that in the once “disputed waters” from which Suriname had expelled CGX, the Canadian oil exploration company, the United States Geological Survey has estimated there are reserves of 15.3 billion barrels of oil and 43 trillion cubic feet of natural gas.  After the expulsion, Guyana took Suriname to the International Law of the Sea Tribunal where it won the case in 2007.  Since then several European companies, along with CGX, have resumed exploring these reserves.

Another has also been a frantic search for gold, particularly on the part of the so-called large-scale gold mining companies.  This is in contrast to the much beleaguered small and medium-scale gold miners.  Here the major company involved is the Canadian-based Guyana Goldfields Inc operating at Aurora and the Aranka properties.

Finally, there is a major effort underway to revive large-scale manganese production.  This revival is being undertaken by Reunion Manganese Inc, a wholly-owned subsidiary of Canada-based Reunion Gold Corporation.  On the same site that it is exploring today, a subsidiary of Union Carbide had previously produced 107 million tonnes of manganese concentrate (37 per cent).

Development
 model

The model of development the government is promoting here is the direct antithesis of an environmentally sustainable development model.  Instead it is based on 1) national resources extraction; 2) dependence on primary level production with little or no value-added; 3) foreign investment being the main driver of the process; 4) utilizing highly capital intensive production techniques; 5) low labour absorption; 6) relying on primary commodity sales to world markets, with all the attendant risks; and 7) encountering severe social, community, and environmental/ ecological challenges.

The hydropower debacle
To crown this confusing and disturbing picture of mixed developmental messages, there is the murkier situation created by government efforts to promote hydropower development, in part to be financed by funding which is expected from Norway’s payments for its carbon sequestration efforts!  This is indeed the standard-bearer effort to promote carbon development in Guyana.
Sithe Global is the company responsible for bringing the Amaila Falls Hydropower Project (AFHP) on stream.  The intent is to construct a 165 MW power supply.  Sithe Global is a subsidiary of the Blackstone Group, but from all appearances it is a minor operation within that Group.

So far project closure has not been formally announced by either Sithe Global or its parent company.  Meanwhile, from public disclosures the projected project cost keeps rising.  The latest estimate is for a total of US$835 million, as put out recently by the President of Guyana.  This is US$200 million more than the earlier estimate put out by Sithe Global and US$300 million more than that put out in the Guyana Government’s Chronicle several months ago.

The financing arrangements for the project remain unclear.  The major investors appear to be the Government of Guyana, China Railway (supported by the China Development Bank) and Sithe Global.  China Railway has been appointed the contractor. At this point in time there is much public concern over the increasing cost of the project, even though it is not yet finally declared and the major design specifications for the project not yet released to the public.

Meanwhile the government has signed a contract with Synergy Holdings (a Guyanese and US-based company) to build the road and its accompanying pre-requisites (bridges, etc) to the site of the hydropower project. Synergy Holdings is, to say the least, well behind schedule on its contract performance.  There remains much public scepticism about the capacity of this company, given its poor to non-existent track record in road building in tropical rainforests.  Public concerns have also been expressed over nepotism in the deal.  These have been growing over time.
Next week I shall conclude this assessment of the LCDS.

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