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WHAT ABOUT THE GAS?

Jul 10, 2017 Features / Columnists, Peeping Tom

This past week the Trinidad Express ran a story which questioned what Guyana was going to do with the natural gas which would be released when oil exploration begins.
Trinidad and Tobago had used its natural gas to develop a large industrial sector. In fact, it is the natural gas rather than petroleum that is keeping Trinidad and Tobago afloat. Many people expect ExxonMobil to begin producing oil from the Liza well in Guyana by the year 2020. Some estimates have claimed that 100,000 barrels are likely to be produced each day beginning in 2020.
The basis of this prediction is uncertain since the Guyana government is mysteriously tight-lipped about the contract it has signed with Exxon and how the terms compare with international best practices.
Guyanese are no wiser as to whether the country has been outfoxed by Exxon, if the interests of Guyana have been sold out or whether Guyana has got the deal of a lifetime.
Against this background, not many people are interested in finding out what will become of the natural gas which is usually released when oil is extracted. There have been murmurs about plans to bring these to shore to help generate cheap energy, something that Guyana badly needs, but not much is being heard about this aspect either.
All of this has led to unnecessary speculation about whether the Guyana government really knows what it is doing and who exactly it is dealing with. Unless the Guyana government gets its act together, Exxon can end up seizing the hog’s share of Guyana’s oil wealth.
Exxon does not need to drill for oil right now in Guyana. Oil prices are low. Exxon has massive investment in the oil industry around the world, including in Saudi Arabia, the world’s largest oil producer. It is not short of oil fields. It does not need to make any investment in oil production in Guyana.
Guyana is part of Exxon’s long term strategy. Exxon is seeking to get its hands on oil finds so that it can be assured that whatever happens elsewhere in the world, it will not go out of business. This is Exxon’s strategic interest in Guyana. It does not need the oil right now which lies in the Stabroek Block. What it needs is to hold ownership of that block for the next twenty-five years before someone else gets their hands on it.
Exxon is investing in non-oil businesses with the Saudis in Mexico.
It plans to use natural gas in that operation. It is not saying what it will do with Guyana’s natural gas.
The government itself seems to be waffling. It too does not know what to do with the natural gas and how to get an investor. It also seems clueless when it comes to what are its options in terms of production sharing.
Exxon Mobil is not going to invest a cent into oil production in Guyana with such indecisiveness from the government.
It does not need to. Exxon is interested in ensuring that when the oil runs out in most of its major investments, it can turn to Guyana. At best, therefore, it is likely to only develop one well, not the eight or nine which people expect it to do in Guyana to being major wealth to the country.
Exxon is not bothered by any environmental backlash. With America pulling out of the Paris Agreement, the environmentalists who could have presented a problem to Exxon’s operations in this part of the world have been neutralized.
But this is not necessarily good news for Guyana.
What it means is that oil production in other parts of the world will not be threatened with the scaling-back of climate change concerns.
As such, Exxon does not necessarily have to seek new discoveries in other parts of the world to boost its output. It can boost its output from its traditional sources, including its investments in shale and fracking.
Guyana had therefore better gets it act together and do so far because while the horizon may seem bright, it may all be an illusion. Production may not get off the ground in 2020. And it definitely will not unless a decision is made about natural gas.

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