Confidence, long term strategy needed to reap benefits of oil industry

– UK consultant

As doubts persist about Guyana’s readiness for the oil and gas industry, a representative of a UK consultancy firm yesterday said confidence and a sound long-term strategy would see the country reaping the benefits.

“When I look around the world, I see very few opportunities such as the one [you] have here in Guyana, to actually make a true transformational difference and to actually make a difference to local people as opposed to what we often do, which is working on behalf of big oil companies, making them far more wealthy,” Chris Pateman-Jones, EY Global’s Director for Oil and Gas, said during a presentation to a filled room at the Arthur Chung Convention Centre.

Among those present at the event, which was organised as part of government’s ongoing efforts to hear the views of the private sector and other key stakeholders, were Minister of Natural Resources Raphael Trotman, Minister of Business Dominic Gaskin and Minister of Public Infrastructure David Patterson.

Chris Pateman-Jones
Chris Pateman-Jones

Pateman-Jones said that the interest shown by investors is an indication of how big a deal the creation of the industry is but pointed out that from his observations there seems to be a lot of skepticism about the timeframes that have been announced.  “Clearly, there is a very large opportunity for Guyana here with the discoveries,” he stressed.

Most of those in the audience who spoke expressed concerns about Guyana’s preparedness and lack of expert personnel. However, businessman Ifa Kamau Cush argued that the creation of the industry is too urgent a matter to worry about such things.

Speaking during the question and answer segment, Cush said there is too much talk about Guyana’s readiness and its experience. “I think as a country we need to enter into this process with a clear sense of urgency and some vision and some political will,” he said, while adding Guyana needs to negotiate with ExxonMobil with a posture that lets it understand that “they are not the only players in town. There are dozens and perhaps thousands of oil companies around and if they are not prepared to compromise and meet up and strike a happy meeting then we can go elsewhere.”

Cush said the notion that “we have to bend over backwards” to get Exxon to collaborate with us “is nonsense.” He said he doesn’t believe now is the time for persons to get all concerned about whether or not we have experience. “As I look around, experience can be bought. We have some pretty bright Guyanese …I think we need to move forward with a sense of urgency, with political will and a grand vision,” he added.

Pateman-Jones agreed with Cush and noted that there needs to be confidence and not necessarily compromise as had occurred in the case of Angola. He said that in the case of Angola, everything was built internally and if Guyana proceeds in that direction the cost will go up. “There needs to be a recognition of that, that needs to fit with the overall long-term strategy,” he said.

 

Negatives and positives

Pateman-Jones, who journeyed from London to make the presentation, pointed out that the oil and gas industry is a complex global business that is not only profitable but is filled with negatives and positives.

“It has also seen a huge redistribution of wealth and over the last 30 or 40 years from the developed economies to the emerging market and that seems to be growing in weight as international oil companies take over into controlling large oil reserves,” he said.

He, however, suggested that what is needed is a plan that would ensure the long-term viability of the industry and the building of production facilities that can survive the changes that are likely to occur.

According to Pateman-Jones, there is a wealth of positives that will come with the industry, such as economic development, diversification of the economy, attraction of international investment, protection of natural resources/environment, increased accountability of government, sustainable long-term wealth, and opportunity for rapid economic development.

One the flip side, he said, the creation of the industry could lead to the increase in the value of currencies (Dutch disease), increasing institutional weakness, the cyclical nature of pricing, environmental damage, societal inequality/impact, corruption and uncertainty over longevity.

He said the 2020 production target is “very ambitious and I think if we are trying to think about how we build onshore supply bases then we need to be starting to move forward on this.”

Pateman-Jones stressed that Guyana needs to be aware of the fact that the decisions have to be right on the first try to avoid mistakes made in the past. He added that Guyana needs to use “international partners and investors and really think cleverly about how you can leverage them and align your overall strategy.”

He said one way is to try and retain some benefits and try and develop economic growth through the construction of an onshore supply base as offshore projects ultimately need to have a supply base and the key question is often where.

He said that there are many examples of what a supply base should look like and the components that should make it up. The wider economic benefits, he said, need to be taken into consideration when building this.

Last month, the Ministry of Natural Resources announced government’s intention to establish an onshore oil and gas facility here to fully optimise opportunities for the country in the area of petroleum exploration and production.

The point was made that the development of onshore infrastructure is vital to the success of the offshore oil and gas activities.

Pateman-Jones later made the point that ExxonMobil can go into production without Guyana building an onshore supply base and use other locations around the Caribbean. “The challenge for you is how much of a piece of that pie  …you wanna take. As I said right from the start …there is a long-term aspiration and there is a current aspiration and those two should be aligned,” he said.

Meanwhile, Kirk Hollingsworth, former Deputy British High Commissioner to Malawi, said he is concerned that at present ExxonMobil is operating out of Trinidad, a distance of about 40 hours from the Liza wells, while the wells are about 13 hours from Guyana’s coast.

Hollingsworth noted that this travel between the wells and Guyana is a cost this country will have to bear. “In terms of just looking at the logistics of this, I think it is much more straightforward in terms of getting local employment and Guyanese realising the benefits of the oil and gas industry to have some sort of base here that can service the Liza wells,” he said, while adding that the industrial facility will take a few years to be completed. He said it has been estimated that Guyana has already lost out to Trinidad almost half a billion dollars in terms of servicing the wells.

Public relations consultant Kit Nascimento sought to get answers about concerns regarding the country’s preparedness and what needs to be done as a priority for the government as Guyana launches into the oil industry.

Later, Trotman informed that government has to file a development plan and it is at this stage that it can make its decision as to whether it commits and at what speed. He noted that government will have to rely on foreign expertise for advice on all aspects. He said that government already has a list and will receive support from the advisors in making a final decision as well as the input with the private sector.

EY Global is a globally integrated professional services organization. Its Oil and Gas Sector consists of a network of professionals with extensive assurance, tax, transactions and advisory experience working in the oil and gas industry and serving a wide range of companies: independent exploration and production companies, oilfield services companies, independent refiners, major integrated corporations and national oil companies. EY Global has about 230, 000 employees across a number of different sectors with over 170 offices worldwide. Its last office was opened recently in Guyana and is located at the Pegasus Hotel. It so far has one employee and efforts are ongoing to increase the staff size to 12.

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