In attempting to develop a broad vision of where the oil and gas sector in Guyana is heading, last week (https://bit.ly/2Gue7ZD) I decided to use the decision chain consisting of five economic and three political decisions that the noted natural resources development expert, Sir Paul Collier, gave in 2013 in a talk at the London School of Economics on Reversing the Resource Curse: How to Harness Natural Resource Wealth for Accelerated Development (http://www.lse.ac.uk/lse-player?id=1803). I considered the first economic link in the chain, namely that countries should seek to discover their own resources, which he claimed is usually broken at the very start of the process. I argued that in retrospect Guyana was short-changed because that link was broken, but there are also future implications, another of which I will now turn to address.
ExxonMobil and its associates have been making a substantial investment and are projected to make other substantial finds at a time when far more oil has already been discovered than the world can burn if it is to meet its climate target of keeping warming preferably not more than 1.5% greater than in pre-industrial times. Speaking on the environmental issue, no less a person than the Pope has said, ‘Enforceable international agreements are urgently needed, since local authorities are not always capable of effective intervention. … Given this situation, it is essential to devise stronger and more efficiently organised international institutions, with functionaries who are appointed fairly by agreement among national governments, and empowered to impose sanctions’ (Encyclical letter Laudato Si’ of the Holy Father Francis on Care for Our Common Home, 2015).
Two years ago, another world-renowned economist and advisor to the United Nations, Professor Jeffrey Sachs, warned that the world will have to get rid of fossil fuels by 2050 and that in getting there the low cost (Saudi Arabia $10 per barrel compared to Guyana US$35-40) producers who have as much oil as the world should burn are the ones who are most likely to remain in production as the world counts down to that time (http://www.lse.ac.uk/lse-player?query=Jeffrey + sachs+). Only a few days ago, Stabroek News reported that the largest political party in Norway – Western Europe’s largest oil producer – has supported restricting oil exploration in that country. At about US$1 trillion, Norway also has the world’s largest sovereign wealth fund, managed by its central bank, which has also decided to reduce its investment in oil and gas assets. According to the governor of the bank, ‘We have always known that oil and gas activities will be phased out sooner or later… A stricter global climate policy may mean that this will occur sooner than foreseen earlier’ (‘Climate before cash’: Young Norwegians call time on oil industry, SN:21/04/22). https://bit.ly/2XDRfh8
