Peak demand is a ploy by oil companies to get away with “rubbish” contract terms ...Don't fall for it - Dr. Mangal

Peak demand is a ploy by oil companies to get away with “rubbish” contract terms …Don’t fall for it – Dr. Mangal

Jun 26, 2019 News

“Oil companies always want to pump everything as fast as possible…Don’t buy into the hype…Countries [like Guyana] benefit from longer, sustained production.”

Oil & Gas Consultant, Dr. Mangal

That is the insistence of Dr. Jan Mangal, Oil and Gas Consultant and former Advisor to the Government.
In an article published on the subject of constraining petroleum petro production, Dr. Mangal was responding to a question posed to him about whether Guyana’s oil should be extracted and produced as quickly as possible.
He said that it’s beneficial for an oil company to advocate for early production, as it would grant them quick returns on investment.
But it is “highly unlikely to work for the country,” Dr. Mangal said, “especially with a nation like Guyana, which is inexperienced and unable to cope with this industry of industries so early on.
“The justifications are unlikely to be valid.”
To the contention that oil, its demand and the value thereof, are likely to deplete in a few decades, Dr. Mangal said that it isn’t that easy to predict those things. Yet, oil companies continue to push the rhetoric that now is the time to extract as much as possible.
“Peak production, which is different from peak demand, has always been incorrectly predicted. For example, we were meant to run out of oil in the 70’s. And there were numerous other predictions, and all wrong. So we are likely also to incorrectly predict peak demand.”
The Consultant said that while demand for hydrocarbons is likely to reduce, that’s likely to happen faster for coal, a “nastier” one.
Even in this regard, “Coal use is actually increasing right now in many parts of the world, so this has to be reversed before the sweet light oil in Guyana gets affected,” Mangal stated.
He explained that Guyana must be prepared for the depletion of the oil industry, but it’s going to take some time; and Guyana should use that time to manage its oil sector well.
Guyana first discovered high quality commercial oil reserves in 2015, and is set to start production in 2020. It’s likely the fastest a country has gone from first discovery to production. And many concerns have been raised about the terms under which production will be executed.
According to Dr. Mangal, unfavourable contract terms for the country are part of the reason why oil companies rush to produce as much as they can, as quickly as they can.
He said, “With respect to Guyana, all this talk of peak demand is a ploy by the oil companies and their supporters. Scare Guyanese into thinking that they have to pump everything now, and they will accept whatever rubbish contract terms ExxonMobil is offering.”
The Stabroek Block Production Sharing Agreement (PSA) was signed by the Janet Jagan led administration in 1999 with Exxon’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), and revised in 2016.
“It is said to be very unfavourable. On top of that, it is said to be riddled with illegalities. Those concerns were raised by Attorney-at-Law Christopher Ram and the Transparency Institute Guyana Initiative (TIGI).
Dr. Mangal said that a country like Guyana would “start off dumb but get savvy over time” and would, in time, require better contract terms. That’s not something a company like Exxon would favour.
Even then, he added, small nations take decades to learn how to cope. “Most never learn; most become permanent basket cases.”
It is his view that if a country constrains production, implements depletion strategies and allows production to be longer sustained (over generations), it will have a fighting chance to develop its competence to manage the sector more wisely.

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