Gov’t needs a rational, coherent plan for oil sector

Dear Editor,

As reports of new oil discoveries are announced, it is becoming increasingly evident that Guyana is on the cusp of becoming a Petroleum Republic with all the attendant implications and consequences. How effectively the country and the government manage the petroleum sector will determine whether we become the petroleum El Dorado or another victim of the Dutch Disease. It is approaching three years since the Granger Administration took the reins of power and therefore assumed responsibility for the management of the country’s petroleum resources. While three years would not normally be considered a long time, in the context of the emerging petroleum sector, Guyana does not have the luxury of time.

Legislatively, the framework for the petroleum sector is outdated and hardly relevant, consisting of the Petroleum (Production) Act of 1939, which was effectively repealed in 1986 and which now has a mere two sections; the Petroleum (Exploration and Production) Act of 1986; and the Petroleum (Exploration and Production) Regulations of 1986 which has never been reviewed or revisited in thirty-one years. Neither the Environmental Protection Agency Act nor the Occupational Health and Safety Act passed in 1996 and 1997 respectively, specifically addresses the petroleum exploration sector. Clearly, that is a grossly deficient platform from which to engage in negotiations that will shape the future of the country and the destiny of its people.

To compound this most unfortunate situation, the Government appears to have played musical chairs with the ministerial responsibility for the sector. First indications were that Dr. Rupert Roopnaraine would have been appointed as the Natural Resources Minister, after which responsibility lay temporarily with the Ministry of the Presidency and then later portfolio responsibility was vested in the incumbent Mr. Raphael Trotman. But as we read in the press last week, a Department of Energy is being established in the Ministry of the Presidency as a precursor to a full-fledged Ministry of Petroleum. And in the midst of all of this, the President appears to have sidelined his Advisor on Petroleum appointed with much fanfare several months ago.

And if any evidence of disarray and confusion was necessary, the President himself provided it with the announcement that his Government has received an ‘Oil and Gas Master Plan’ for Guyana, which was developed and submitted by Mitsubishi Corporation and Chiyoda Corporation in collaboration with the Government of Japan. A coherent and well-structured policy is the first obligation of any state, let alone one that has been independent for more than half a century. It is not something that any government can and should contract out. That is dereliction, not even delegation.

We are told that this is a final report which suggests that there is no intention to share with or engage Guyanese on what appears to be a key component of a vital sector. Troublingly, it seems that the implementation of the Japanese plan (where did this idea originate?) will only go forward if the Japanese are prepared to fund the preparation of the “detailed economic feasibility studies”. That funding is a major consideration in critical elements of a non-renewable resource must cause concerns among the citizens about the Government’s appreciation of the scale of the challenge and the responsibility it bears.

Even if the Government were to say that the Japanese plan is for a segment only, surely such a segment has to align with some broad framework for the sector on which no work appears to have begun. In this regard, Dr. Thomas Singh’s letter (Government should formulate a National Depletion Policy SN March 4, 2018) calling for a petroleum depletion policy not driven by the oil companies but by the Government suggests that the citizenry is much better informed that the Administration. In fact, a depletion policy is one side of the Sovereign Wealth Fund coin raising the question whether there ought to be a phased exploitation of the country’s petroleum resources.

The Government needs to get its act together and have some kind of rational plan for this important sector which has immense potential but equally potentially grave consequences. Perhaps because the Government has done so little to inform itself, it finds itself relying on the IMF, the IDB, the World Bank, the Commonwealth Secretariat, experts from Africa, and an army of consultants hovering like vultures to share in the oil pie.

And let there be no mistake about it: the major beneficiaries of this incoherence, confusion, absence of national policies, outdated legislation and a failure of leadership, are the oil companies. No wonder that they are anxious to dictate the country’s depletion policy. It goes without saying that the biggest losers as we are already witnessing are the citizens of the country.

Yours faithfully,

Christopher Ram

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