Guyana should formulate a National Depletion Policy

Dear Editor,
The recent announcement by ExxonMobil of a seventh oil discovery offshore Guyana includes a statement by Steve Greenlee, president of ExxonMobil Exploration Company, that “Pacora will be developed in conjunction with the giant Payara field, and along with other phases, will help bring Guyana production to more than 500,000 barrels per day.”
Surely the assertion that Guyana’s oil production will “help bring Guyana oil production to more than 500,000 barrels per day” is not a statement of the expected level of production under the PSA between the Government of Guyana and Esso, Nexen and Hess.
That PSA starts off by acknowledging that petroleum in its natural condition is vested in the State, which could only mean Guyana. It then goes on in Section 8.6 to concede that the State may impose policy-based production limits below the maximum technically efficient rate.
Guyana would be well advised, especially in the absence of a well-governed Sovereign Wealth Fund, to formulate a National Depletion Policy for the use of its hydrocarbon resources. Such a policy would be consistent with a diversified and sustainable energy policy. It would also be good economics, even if long-term oil prices were expected to decline in the wake of the energy transition that is occurring, because optimal natural resource management (from the perspective of the resource owner) doesn’t necessarily mean a deplete-as-fast-as-possible extraction path, as implied by maximum extraction rates. It cannot be up to a company, even one as large as ExxonMobil, to determine what Guyana would do with its resources, especially given our commitment to a Green State Development Strategy.
A focus on Guyana’s energy policy brings me to another point, and that is the potential of the development of the Stabroek Block to satisfy Guyana’s energy needs. The company had at first stated that there won’t be enough natural gas to allow for its feasible transportation to onshore Guyana. Yet the GoG is talking about a gas pipeline. It would be a fitting tribute to the late Prof Lloyd Kunar for me to note that, as I understood it, he had been asking why it is that ExxonMobil would be using natural gas to create the required pressure as oil-lifting increases, when in fact it can use water (as indeed it plans to). At the just concluded GIPEX 2018 I was privileged to hear Prof Kunar make his signature point, that more energy is a good thing, a necessary thing, for Guyana and other developing countries. For him, using natural gas when water could be used to maintain pressure, could not possibly be in Guyana’s best interest.
Maybe it’s a case that building a pipeline would take longer than the prospective first-oil year of 2020, while both the GoG and Exxon want to get on with it, the former for political reasons and the latter for “accounting for reserves” reasons. But whatever the reason, it would be useful to point out that Section 36 (1) of the Petroleum Exploration and Production Act requires that licences be issued only to applicants who would ensure that the “most efficient and beneficial” use of petroleum resources.
If ExxonMobil is indeed as serious about global climate change as it would want us to believe, then it will tell us what is its position on the matter of natural gas, which is a much cleaner energy source than the fossil fuels we now use.

Yours faithfully,
Thomas B Singh
University of Guyana

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