By Remi Piet
For decades, international oil companies (IOCs) have stationed drilling vessels almost 200 kilometer from the shores of Guyana in an attempt to find oil in the depths of the Atlantic Ocean. In 2015, with Exxon Mobil’s discovery of the Liza-1 oil reservoir, surprise and excitement immediately reverberated across a country that could foresee improved opportunities and diminished poverty. Five years and 18 discoveries on, Guyana has officially joined the ranks of petroleum-producing states.
With the help of world-renowned organizations, Guyana is setting the framework for it to become a transparent and developed society. The World Bank has provided a USD$35 million development policy credit to strengthen the country’s financial sector and the International Monetary Fund (IMF) helped implement an enhanced data dissemination system.[1] Guyana’s emerging potential as an oil and gas player has attracted widespread support and will help maximize the benefits enjoyed by Guyanese people.
However, Guyana’s newfound status has also drawn the ire of some. Take, for example, the recent report by Global Witness, an anti-corruption NGO headquartered in London which suggested that Guyana is “losing” USD$55 billion as a result of its oil deal in its massive Stabroek block. In what amounts to an ideologically motivated effort to halt oil exploration, the report’s recommendations could well put at risk billions of dollars in future revenues for the local population.
This is not the first time that Global Witness misrepresented a situation in an effort to promote its anti-oil agenda.[2] The government of Guyana has already denounced the report for being a “sensationalist, agenda-driven and extraordinary speculative” attempt to disrupt oil development in the country.[3] Although investment in renewable energy is necessary, fossil fuels still account for over 50 percent of the primary energy consumption.[4] A gradual transition is crucial in order to prevent energy disruptions across the world.
The numbers used in the report were also debunked by independent energy company Rystad Energy, who said that the government’s share of revenues is 60 percent, not 52 percent cited by Global Witness. The 60 percent government share is actually in line with other emerging oil and gas countries, such as Israel and Mozambique, whose average range is between 50 percent to 65 percent.[5] The report also does not attempt to quantify the true value lost by a forced renegotiation of contracts. Reopening negotiations could delay the production of oil and put hard-fought money at risk, jeopardizing the development of Guyanese society.
Global Witness also states that once the government obtains the hypothetical USD$55 billion, they should issue a moratorium on all new drilling procedures and cancel nine already allocated licenses. This would not only disrupt a cooperative relationship between Guyana and the IOCs but more importantly, it would also deprive Guyana of billions of dollars in additional revenues. This would put at risk the indispensable structural reforms needed in Guyana.
In the midst of an intense election season, the Global Witness report also serves much more as a distraction than as a blessing. In the following month, the local population should elect a government that can adequately manage its first oil revenues. This begins by having the new administration put forth a concrete plan with strict guidelines on how the money can and will be used to improve Guyana’s society. The plan must include education reform, training programs for the workforce, and the development of essential infrastructure such as the reconstruction of Guyana’s sea wall.
As the government receives its first USD$300 million in oil revenues in 2020, and up to USD 5 billion annually during the next decade, it cannot lose sight of what is the most important: the well-being of its people. The country is still one of the poorest in the region, with the 8th lowest GDP per-capita at USD$5,252 and 14 percent of the population living with less than USD$1.90 a day. [6] In order to turn this around, Guyana needs level-minded government officials that implement a proper fiscal regime to manage the newfound revenues.
The approval of a National Resource fund to transfer the money into the budget is a positive start, but the country also needs a monetary framework that allows for exchange rate flexibility and inflation control.
The government will also require constant cooperation with IOCs and multi-lateral institutions to ensure job opportunities, transparency, and accountability. The IOCs should continue to offer specialized training to the local people while developing an oil contingency plan that protects against environmental damage. The multilateral institutions, such as the European Union, IMF and the Organization of American States (OAS) can provide independent accountability that ensures free elections and prevents the mismanagement of funds.
As the Guyanese society braces for a monumentally important election, Global Witness released a poorly timed report to rock the boat. It attempts to influence the electoral outcome by making unverified statements that seek to discredit the government’s contracts. Many people, without the proper information, may believe that what they have read in the report is true. But the truth of the matter is that Global Witness has a hidden agenda driven by its anti-oil ideology.
Readers should do their own fact-checking and come to their own conclusions as they prepare to vote. Preventing a resource dependency, fighting against corruption and developing infrastructure should be the main themes as voters head to the polls—not a baseless report. At the end of the day, the Guyanese people have been awarded a blank canvas and only they will be allowed to paint the society they envision for generations to come.
