Latest update December 12th, 2024 1:00 AM
Guyana is not plagued by the ills of many frontier countries
Dear Editor,
I found a recent letter in the press examining Exxon’s Facebook video on Oil Contract, Revenues and Taxes from February frustrating. The authors asked an important question: what does Exxon mean when it calls Guyana a “frontier country”?
But the two members of the Oil and Gas Governance Network, which is opposed to oil development, seem to intentionally skirt around the true answer.
The theories about what the term “frontier” means was entertaining, but the authors almost entirely miss the point and concept. It has nothing to do with the depth of wells, the type of crude oil we possess, violence, or Facebook.
To be clear, the term “frontier country” is how global markets refer to nations that are in the early stages of economic development. To investors and developers, frontier countries may have problems with local politics, social unrest, poor financial frameworks or a lack of existing infrastructure. All these things are a risk for business because they can make energy investments too difficult and too expensive to make a profit.
Fortunately, in the case of Guyana, we are not plagued by all of these ills. But we are still very much a “frontier” in the industry sense.
For one, we have a general lack of infrastructure. Exxon and other producers are experts at getting oil out of the ground, but the production chain requires extensive infrastructure on onshore support. They need deep-water ports, pipelines to move the oil, refineries to process it, roads to move it. They need storage facilities for the reserves, which are secure. They need places for their workers to live and eat.
It is an unfortunate but true that Guyana cannot provide all of these things at the moment, whereas other nations such as the United States or even smaller countries like Trinidad are able to provide them to some extent.
In addition, we must remember that the contract that we are discussing dates back to 1999 and was renegotiated in 2015, which the letter ignored. Some will recall that in 2000 a CGX Energy drillship was chased off by gunships from Suriname. More recently, Venezuela detained an Anadarko survey vessel operating in Guyana waters, in 2013.
While the label of “frontier country” is frustrating, we must see why the global markets have given it to us. Our first oil contract reflects these realities. We needed to offer attractive terms to attract major capital investments.
So how do we move beyond that of a frontier country? Building our infrastructure and improving our general security requires money. Fortunately, for us, we will start getting a lot of it starting in 2020, from the very contract, which the letter writers go on to criticize.
We should focus on creating real plans to build up our infrastructure and remove the “risk” that global markets see when they evaluate the oil operations here. In that way, we can build partnerships with international companies, which are more beneficial and will allow us to benefit from our reserves for years to come.
Sincerely,
Clement Smith
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