Much work required to ensure responsible management of oil and gas sector

Dear Editor,

I am writing this letter to outline a few concerns that I have as we move to close out 2019 and move into 2020. 2020 will be a watershed moment in Guyanese history as 2020 brings with it ‘first oil.’ This moment in our history will either be the moment our nation took a major step towards becoming a developed nation or as the moment our nation fell into the resource curse trap as many other nations have, such as Equatorial Guinea, Nigeria and Venezuela. In essence, we can either push our economy into a boom and boom period or fall victim to a boom and a bust. I think working in our favour is the fact that there are many who wish us well, and in doing so, are pushing the conversation in their own way to help us. These groups include the Guyanese diaspora, the international community and our brothers and sisters in our region. However, we ourselves must band together to overcome internal divisions, especially ethnic divisions, and complete the work needed to truly take advantage of the resource that we are about to exploit.

Let’s take stock of the current situation – we have Production Sharing Agreements (PSAs) signed with the Guyana Geology and Mines Commission that is now housed under the Ministry of Natural Resources; we have a Department of Energy housed under the Ministry of the Presidency and we have a Natural Resources Fund. We have also done some capacity building in our Guyana Revenue Authority, Environmental Protection Agency (EPA) and Maritime Administration Department. Comparing this to Ghana, we see that petroleum exploration and production activities are regulated by a number of laws there:

– The Petroleum Commission Act, 2011 (Act 821);

– The Ghana National Petroleum Corporation Law, 1983 (PNDCL 64);

– Petroleum (Exploration and Production) Law, 1984 (PNDCL 84);

– The Petroleum (Local Content and Local Participation) Regulations, 2013 (L.I. 2204);

– Petroleum Revenue Management Act, 2011 (Act 815);

– Petroleum Revenue Management (Amendment) Act, 2015 (Act 893); and

– Environmental Assessment Regulations, 1999 (L.I. 1652);

– Petroleum Income Tax Act, 1987 (PNDCL 188).

Similarly, the government, regulatory and/or oversight bodies principally responsible for regulating oil and gas activities include the Minister of Petroleum, who provides the overall policy direction in the management of oil resources in Ghana; the Attorney General, under the Ministry of Justice, who assists the minister in the negotiation and drafting of petroleum agreements and the required laws and regulations regulating the oil and gas sector; and the Petroleum Commission which regulates and manages the utilisation of petroleum resources in Ghana. The commission also coordinates the policies put in place by the minister in regulating the utilisation of petroleum resources and it has the authority to make regulations, issue permits and carry out necessary inspections and audits related to the activities of petroleum companies operating in the upstream and midstream sectors.

Other oversight bodies include the EPA, which is responsible for enforcement of Ghana’s environmental laws and ensures that exploration and development of oil and gas is undertaken in an environmentally friendly manner; the Ghana National Petroleum Corporation, which is responsible for the development, production and disposal of petroleum and is required to ensure that Ghana obtains the greatest possible benefits from the development of petroleum resources and participates in petroleum operations on behalf of Ghana with contractors under the Petroleum Agreements; and the National Petroleum Authority, which is given a broad mandate to regulate, oversee and monitor activities in the downstream petroleum industry. In particular, it sets prices and supervises the bulk storage and transportation of petroleum products.

 (I should note that the content on Ghana was taken from the fact sheet put together by Bob Palmer, Partner at CMS Cameron McKenna LLP, which I came across while searching online.)

Clearly, just using Ghana as an example, we have a high volume of work ahead of us to put in responsible management of our oil and gas sector.

The risks of not doing this can be found in Equatorial Guinea. I recently read an old article from Human Rights Watch, which I would encourage every Guyanese to read, titled, “How Equatorial Guinea Turned Corruption into an Art Form.” The article starts by stating that Equatorial Guinea has the highest per capita GDP in Africa and then goes on to say that it went from being one of the poorest countries in Africa to one of the richest, but still the lives of the ordinary citizens have not been transformed. The researcher that the article’s author interviewed actually found some alarming trends; despite its oil wealth, the trend in Equatorial Guinea’s health and education sectors were that vaccinations and school enrollment rates had decreased over the 20 years since the country found oil. It should be noted that unless new reserves are found, the country’s oil reserves will run out in 2035. What went wrong? The article stated that money was siphoned off in infrastructural projects. For instance, the country has five major airports, and on one tiny island of just 5,000 people, Annobon, the government built a US$112 million seaport, but the island has no high school.

I shared the information about Ghana and Equatorial Guinea to say that we as Guyanese need to let go of our divisions and work together to ask for the appropriate legislation to govern the sector, as well as increased capacity in our ministries and agencies, minus the missteps such as the lack of local content legislation, the Petroleum Commission Bill which placed too much power in the hands of the subject minister or the Natural Resources Fund legislation that needs more national buy-in. We need to put the resources into our Revenue Authority and our Auditor General’s Department so that when the bills for exploration costs come in, they have resources to audit and give the nation the confidence it seeks. If, and only if we build the regulatory capacity to manage this oil and gas sector well, then we will experience the boom and boom period that we should benefit from, otherwise a boom and bust period synonymous with the resource curse awaits us.

Yours faithfully,

Nicholas Deygoo

President

Georgetown Chamber of Commerce & Industry