Govt. proactively and responsibly preparing for oil production

Oct 16, 2016 AFC Column, Features / Columnists

---

The Ministry of Natural Resources has noted the perspectives and opinions expressed by members of the public on how the country should be preparing for the oil and gas sector. The Minister and staff, indeed the entire Government of Guyana welcome healthy discourse and we will stay committed to continuing these conversations in an inclusive and consultative manner.
However, we also recognize that there is need for a bit more accuracy, so we take this opportunity to fill in a few gaps and at the same time, remind you of the progress the Ministry has made since we started on this long and meandering road towards oil and gas production.
International financial and industry experts have given us the assurance that despite low current oil market trends, Guyana will benefit when production commences around 2020, provided that the well(s) perform as projected. They have also assured us that no international oil company would sanction a project if the break-even price is higher than its forecast. Further, they pointed out, despite the global push for renewable sources of energy, demand for oil – now at 94.1 million barrels per day worldwide – is still very high and growing.
We ask you to consider the following points raised at the 2015 OPEC World Oil Outlook (WOO):-
*Global energy demand should increase by almost 50% in the approach to the year 2040
*The overall energy mix will continue to be led by fossil fuels at almost 78%
*Combined, oil and gas are expected to supply around 53% of the global energy demand by 2040
*In the medium-term, demand projections are revised upward from WOO 2014, rising above 97 (mb/d) by 2020
*Oil demand is projected to be at 110 mb/d by 2040
The oil industry is fraught with uncertainty, but we believe that industry experts’ projections do show us the direction in which the industry is headed. In Guyana’s case, there are many variables that may affect production plus the revenue that the country might earn through production sharing, taxes and other arrangements.
As such, we would be doing ourselves a disservice if we did not do everything possible well in advance to ensure that there is transparency, honesty in our dealings with international partners, sincerity and fulfilment of promises, now and in the future.
To this end, the Government led by the Ministry of Natural Resources is in an accelerated process of developing the new industry and building internal capacity for it. This approach includes building appropriate and enforceable legislative, financial and institutional capacity; drafting action plans for the short, medium and long term; and developing a robust communications strategy to keep every stakeholder informed of these developments.
Here are some of our main achievements:
TECHNICAL SUPPORT
The Government of Guyana (GoG) will soon sign an MOU with the Government of Trinidad and Tobago for technical support and cooperation. There is also a visit scheduled to Trinidad and Tobago to further cooperation which will continue with exchange visits and university scholarships. Other scholarship opportunities are being pursued with the Mexican Petroleum Institute (IMP). Capacity building initiatives and assistance to develop the Sovereign Wealth Fund were also received from the University of Calgary and the Government of Canada.
DEVELOPING LEGISLATIVE FRAMEWORK
With the support of external expertise, the Ministry is creating a Local Content Policy to guide local services and skills to participate in the sector in lucrative ways. GoG is also receiving support from the Commonwealth to prepare legislation and very shortly, Minister Trotman will table eight pieces of legislation, all of which are geared to strengthen the regulatory and fiscal policy frameworks.
FISCAL MANAGEMENT
The Cabinet sub-committee on Oil and Gas met in September with representatives of the Bank of Montreal upon the institution’s invitation.  This bank focuses on the global natural resources sector. The parties discussed financial investments, sovereign wealth funds, pitfalls to avoid, and managing risk and uncertainty in the industry. In addition, Guyana is receiving support from the United States Government through the Energy Governance and Capacity Initiative (EGCI). This is intended to build capacity to responsibly manage oil and gas revenues.
TRANSPARENCY
Guyana will soon sign on to the Extractive Industries Transparency Initiative (EITI) to ensure that fiscal transparency is entrenched in the sector, which also includes every extractive sub-sector along with oil and gas. MNRE will remain responsive to our citizens’ requests for information and we invite you, wherever you are, to reach out.
TOP FLIGHT WATCHDOGS
The Guyana Oil and Gas Association (GOGA) was established last week with some specific objectives among which is a mandate to keep the industry honest. It has set its sights on ensuring transparency and accountability of all transactions, and adequate provision for Guyanese to be directly or indirectly employed in the sector.
The Associations is led by its President Bobby Gossai Jr., Director Nigel Hughes, Resident Representative of the IDB, Sophie Makonnen, and Canada’s Ambassador to Guyana, Pierre Giroux.
According to the AFC’s Chairman, Attorney-at-Law Hughes, “GOGA will support all efforts which will lead to the fullest possible disclosure of all information on all transactions related to the exploitation of this national resource, and encourage the widest possible discussion on the development of this asset”.
The Guyana Oil and Gas Association has committed to ensuring that the growth of Guyana’s anticipated hydrocarbon industry is well managed in such a manner that all Guyanese will enjoy the maximum benefits from this national natural treasure.

---

---