Oil and gas: Prospects and imponderables

The sense of national anticipation that had attended the announcement by ExxonMobil in May 2015 that a “significant oil discovery” had been made offshore Guyana has subsided. Each subsequent disclosure, however, regarding progress towards the country becoming a major producer of oil and gas, including the more recent discoveries of further significant deposits beyond Liza-1, confirms our arrival at a juncture where the prospect of oil wealth is now elevated above the status of a pipe dream. If global precedent suggests that a smooth path to prosperity is by no means guaranteed, at least, in our case, the long-anticipated hope of a developmental ‘leap forward’ now belongs in a realm that is more tangible, more realistic, than the speculative fantasizing that previously obtained.

Lest we get ahead of ourselves, however, there is still good reason to be cautious. The oil and gas sector is new to Guyana in more ways than one. For the foreseeable future effective exploitation remains heavily dependent on external partners. Its profitability, meanwhile, hangs on vagaries which, elsewhere, have been known to ebb and flow with bewildering unpredictability. There is nothing, for example, save and except an iron-clad commitment to good governance and prudent allocation of resources that insulates us from the debilitating vices of profligate spending and illegal diversion of returns from the sector to sate the greed of the corrupt. After all, we cannot help but remind ourselves of the litany of precedents elsewhere in this regard. There is, too, the ever-present likelihood that the conflictual political culture now ingrained in our nation can torpedo the developmental aspirations held out by the prospect of an oil and gas windfall.

All of this adds up to the reality that the journey towards a ‘good place’ as far as meaningfully benefiting from our oil and gas resources is concerned, will have to be undertaken on a path strewn with imponderables and uncertainties, so that the hoped-for outcomes are by no means assured.

The year 2017, if the various official pronouncements are anything to go by, will be when the creation of limited local oil and gas infrastructure locally begins to materialize. Towards the end of 2016 we were told that the Ministry of Natural Resources had signed a contract with the Dutch-based group of companies, SBM Offshore NV, for the construction of a Floating Production, Storage and Offloading facility (FPSO) in the Berbice River. It would not have gone unnoticed that that announcement was attended by a promise of around 600 jobs, not an inconsequential disclosure in circumstances where immediate-term alternative major job-creation options would appear to be non-existent at this time. Recall too, that ExxonMobil has already doused the hitherto widespread but ill-founded expectation among uninitiated locals that the exercise of recovering oil and gas would have been attended by a profusion of job opportunities for Guyanese at home. The authentic wisdom is that the technical expertise required of workers in the extractive phase of the industry cancels out any prospect of significant levels of direct employment for home-based Guyanese, although the prospects of jobs in the local support sectors may be a good deal better.

During the earlier months of 2016 we had also been told of various other initiatives linked to the creation of a local oil and gas infrastructure, including the crafting of the Petroleum Commission Bill as well as legislation to provide for the creation of a Sovereign Wealth Fund. Beyond that there is also the planned creation of a Petroleum Division within the Guyana Geology and Mines Commission (again, the creation of such a division could necessitate a significant amount of external hiring) and the signing on to a MOU with Trinidad and Tobago for such technical support as might be forthcoming from that country’s oil and gas sector.

All of this, of course, up until now exists largely in the realm of public pronouncement. Such progress as materializes in 2017 out of the plans that have been unveiled by the Ministry of Natural Resources will help determine just where we are in terms of the planned 2020 commencement of oil and gas production. Here, we must bear in mind that the vagaries of the oil and gas industry are such that, for various reasons, recovery plans can change from one period to the next. Contextually, it is apposite to wonder whether it was not at all by accident that the President’s New Year address to the nation paid little substantive attention to fossil fuels, opting instead to focus on what the President termed a “green state,” including plans for the drafting of a comprehensive clean energy plan to enable transition to sustainable energy transition. What little was said about fossil fuels had to do with minimizing consumer dependence thereon, channelling the foreign exchange savings from oil imports into worthwhile developmental programmes, and protecting the country’s economy from the vagaries of global oil prices.

One can hardly help, therefore, but surmise that the downplaying of oil and gas in the President’s New Year message was designed not only to help guard against further ‘attacks’ of national hype linked to the prospects for the sector, but also because, out of an abundance of pragmatism, the administration may have taken a deliberate decision to hedge its bets in the matter of a timetable for significant material returns from oil and gas.

Still, there is a justifiable expectation that some of the promised local initiatives (like legislation, the creation of at least a framework Oil and Gas Division, the creation of an offloading facility and storage,  and the creation of local human resource capacity to support the running of an oil and gas sector) will at least begin to take shape this year. These, and whatever other set benchmarks might materialize, will be used by watchers as measuring rods for determining the likely pace of progress towards the destination of an ‘oil economy,’ the reality being that the realization of the government’s promise of a ‘good life’ for all Guyanese has now become linked, largely, to such prospects as repose in the successful creation of an oil and gas sector.

All of this, of course, is unfolding at a time when there can be no question than that it would be an act of the grossest folly to persist in further excursions into unrealism, in so far as the future of the sugar industry is concerned. More than that, no other sector of the economy, gold included, holds out prospects of the kind of economic returns that can bring about the envisaged national transformation.

If, therefore, having waited for decades, we are entitled to a measure of anticipation regarding the various positive ways in which our new-found oil and gas resources can transform the nation, raise standards of living and significantly reduce poverty, there is a compelling case for us doing so with a generous measure of circumspection. After all, the potential does not, contrary to what we might be tempted to believe, automatically translate into absolute certainties.

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