Guyana’s oil company has to be an island of competence to be successful - Bauer

Guyana’s oil company has to be an island of competence to be successful – Bauer

Nov 04, 2018 News

National Oil Companies (NOC) in places like Nigeria and Myanmar suck up billions of dollars and are sometimes deemed a burden to the taxpayers of the nations they serve. If Guyana is going down the road of setting up an NOC, then it must ensure that that company is an island of competence, otherwise, a similar fate should be expected.

That is the view of international economist, Andrew Bauer.

Bauer is a consultant with the Natural Resource Governance Institute (NRGI) and while he is an expert in Sovereign Wealth Funds, he also has vast experience in most policy and management related matters in oil and gas.

During a recent interview with this newspaper, Bauer noted that many NOCs around the world end up losing loads of money. He said, “That’s the worry, there are lots of useful ones (NOCs) but it is risky to create an institution that manages large amounts of wealth.”

Often, oil companies haemorrhage the State when there is corruption and major capacity issues.

Bauer said that Guyana will be safe once it addresses those two issues. He was asked how realistic would the hope of achieving this is, knowing that most of Guyana’s public enterprises are plagued by capacity issues and corruption.

The expert said, “There are countries where there are huge dysfunctions in the public sector but you have these islands of competence so things work.”

Bauer noted that in Timor-Leste, there are major capacity issues at state agencies, but the oil regulator is an island of competence. “Their salaries are a little bit higher but they are well managed. They have very strict rules and mandates of what they can do… the management structure creates accountability and they are transparent. So you can create a National Oil Company that is an island of hyper competence; but, indeed, this does not always happen.”

The Government of Guyana has long signaled strong intentions to pursue the establishment of an NOC. In fact, Minister of Natural Resources, Raphael Trotman had told the media that government is leaning more towards establishing the company. However, no official decision has yet been made public.

Recently, Attorney and Law, Charles Ramson noted that the decision to establish an NOC or not, needs to be made soon.

Ramson, who has a master’s in Oil and Gas Management, noted that there are different versions of oil companies. He said that, “Guyana has to figure out quickly if it wants to become an operator itself, like Norway has Statoil, which is a fully integrated oil company that explores and produces. It will take us about 10 years to take our self up to the level of expertise to be able to be operators ourselves, employing mostly locals. Or does Guyana want a company focused mainly on having a share in oil blocks distributed?”

He said that in the latter choice, “You do not need employees to do a lot of things that we are not capable of doing at the moment. But, you have more say. Not sitting at the table when they are making decisions for exploration or drilling leaves us in a disadvantageous position. We are not able to have a say. There is economic information that we would not have by virtue of not being a partner on that block.”

Ramson added, “But my point in all this is to note that having a state oil company has been mentioned by this government as being explored, but there is no decision as yet. We need decisions and actions on this and other matters in the oil industry; that is the only way we can protect it.”