The United States has again pledged support for government’s plans to lay the groundwork for the oil sector as well as the transparent management of potential revenues and to ensure that the people benefit.
“When the ambassador and I met with President (David) Granger, what we said was basically that ‘You guys work to make sure you prepare for this [the oil industry] and we want to be as supportive as possible,” Deputy Assistant Secretary for the Bureau of Western Hemisphere Affairs Juan Gonzalez told Stabroek News in an exclusive interview yesterday.
Gonzalez explained that while here as President Barack Obama’s representative for this country’s 50th independence anniversary celebrations, he and US Ambassador to Guyana Perry Holloway met with President Granger and key in their discussions was the issue of Guyana’s anticipated oil industry.
The diplomat said he was impressed with the president’s plan for oil and how it would benefit the citizenry.
“President Granger is someone that, in a very short period as president, has indicated a way forward for Guyana which is also essentially what we want; which is a prosperous Guyana and one that is trying to ensure its energy future and is committed to actually combatting the security challenges in addressing some of the corruption that is characteristic with a lot of our countries, even in the United States. That is an agenda we can get behind and so what I said to him was ‘Anywhere where we can be helpful to you please count on us to be there,’” Gonzalez related.
“Guyana is going to be transformed over the next five, ten years, maybe even shorter. Our experience around the world has been when you have countries around the world that have the commodities windfall, there are some countries that instill a legal framework and an institutional framework to ensure that the people of that country are benefiting from those resources. And then, there are others that maybe don’t put together that institutional structure and it is something that disrupts the country,” he further said.
US conglomerate ExxonMobil’s discovery of a large deposit of oil offshore last year has raised expectations of a windfall for Guyana even though it coincided with a collapse in petroleum prices.
Gonzalez, who has a wealth of experience working with US Vice President Joe Biden in the energy sector and specifically on the Caribbean Energy Security Initiative (CESI), pointed to how oil production can negatively influence a society and cited his own country as a reference. He noted how in the Dakotas, the influx of monies from the commodities windfall, garnered from the boom in the natural gas industry there, created problems for residents of those states as the price of real estate and needed commodities skyrocketed, leaving those who were not in that industry at a disadvantage.
Further, he explained that it also created security challenges, since persons who would have been residents in some counties for decades were not accustomed to the increased movement of strangers in their communities.
‘Tapping into funding’
Discussions between Granger and the US envoys also focused on the promotion of the use of renewable energy and how to get financing to push this initiative.
President Granger, recently attended the CESI summit in Washington, where Gonzalez said they met for the first time and had discussed renewable energy sources in great detail. Since Granger’s return, he has made a concerted call for a move towards green energy sources.
“So, what we agreed to do was to try and find ways to define his agenda, whether he wants to pursue solar, wind or other methods. We want to try to be as responsive as possible to his needs and work with international donors to support Guyana,” Gonzalez said.
He added that he wants Guyana to tap into the funding that was announced for the Caribbean and Central America for the green energy initiative and believed that an estimated US$300M more could be obtained from leveraging with donors, big private companies, investors and other stakeholders.
“What we have done in the Caribbean, specifically, is that since the Vice-President has started
working on this, we put together an OPIC (Overseas Private Investment Corporation) team to try to leverage big companies… what they do is they can take a small amount of capital and leverage it to basically what they have said is over the next couple of years to above over US$300M in the region. But that is for big projects,” he explained.
“Another thing we looked at is with the support of USAID and also OPIC is looking to finance small-scale projects. So anybody that wants to do a small scale solar project or a small-scale wind, here in Guyana, sometimes does not have the startup cost and we are actually looking for ways that we can help those efforts off the ground,” he added.
However, Gonzalez pointed out that even those sums collectively would not be enough for all of the Caribbean and Central America, as the World Bank projects that some US$20B would be needed in the Caribbean alone to address energy and security needs. Since his country has established this fact and realised that it alone can’t supply the necessary funding, it wants to coordinate with donors and the private sector, while at the same time getting the countries to set up the correct regulatory framework needed to attract investment.
The CESI has recognised that the Caribbean is facing three main issues—finance, regulatory structure and donor coordination—and the US is working with the leaders in the region to address these issues to have the programme tailored to address them, as is needed by the individual countries.
“The energy security summit, when we started the energy summit, we recognized that the three main issues facing the Caribbean were, one, finance, because a lot of countries have such high debt overhangs that the cost of borrowing is just way too high. That is where OPIC and the small finances projects are focused on. The second one is regulatory structure though regulation is incredibly boring but it is also incredibly important because what we were finding in some sections of the Caribbean, as we were talking to the private sector and to donors and to multilateral banks, was that sometimes the red tape and the regulatory structure was such that it discouraged the private sector from wanting to invest. We are offering technical assistance to help countries streamline that to actually attract investment that benefits the countries. And the last one is donor coordination. We can do a good job as donors of talking to each other, making sure you know as Canada, Mexico, the United States, the European Union that are looking to donate, that we are actually talking to each other to make sure we are having the maximum impact,” Gonzalez explained.
While some critics are wary of a possible contradiction between President Granger’s green initiative and planning the development of the country on expected oil revenues, Gonzalez said that they should not be.
“The objective of the CESI was to ensure that… to help the Caribbean determine its own energy future. What that means is for some countries that is natural gas, for some countries that is petroleum, for some countries that is wind, for some geothermal or wind or solar. It’s any solution that helps reduce their dependency on the United States or any other country and helps reduce the cost of energy which, for the Caribbean, is incredibly high. Even around the world prices have dropped and in the Caribbean it’s still relatively very high and probably one of the important things we can do for the region’s economic development,” he stated.
“Even though ExxonMobil and the other companies, in the agreement, are looking to invest heavily here and there will be production in a next couple of years, you don’t want to depend on one source of energy… and actually the funds from oil, what will happen is this when the government sets this up correctly, they will have the resources for this and it will facilitate them in making investments in green technology,” he added.
Although the US believes that the Granger-led administration is sincere in its promises that the monies from the sector will be used to benefit all Guyanese, it also thinks Guyanese should exercise patience as regards expecting an overnight transformation from the oil windfall.
“I am a big fan of President Granger and we look forward to working with him. Every country has its challenges and what I want to do is not evaluate what Guyana’s is but where President Granger wants to take it. What he has said to us is that he wants to ensure that there are laws in place and that they are being transparent to ensure that the people of Guyana know where that money is going and are the ones that benefit from it,” Gonzalez asserted.
“It’s hard for any politician to do because they have to show results tomorrow but I think it’s an important demonstration of leadership on him and his government’s part to want to actually get it get it right, so that when the funds actually come in, it’s the people of the country that are benefitting the most. I actually believe that commitment is real and we want to support it. That’s why I came down here and while we will keep working very closely with Guyana,” he added.