Latest update March 8th, 2025 6:36 AM
COVID-19 & The Oil Industry … Guyana lucky to get early wakeup call – energy strategist, Anthony Paul
By Kiana Wilburg
The devastating impact of the COVID-19 pandemic on the oil industry can be seen as an early wakeup call for Guyana, the latest entrant to the global oil producers club, says Local Content expert and energy strategist, Anthony Paul.
Local Content expert and energy strategist, Anthony Paul
Expounding further during an interview on Kaieteur Radio’s programme, Guyana’s Oil and You, on Friday, Paul noted that in the oil and gas industry, there are peaks and troughs.
This will always occur, said Paul. In fact, the energy strategist said that this is the fourth major price slump in the last 20 years of this century.
“But Guyana is lucky to get this wake-up call so early in its oil production and revenue life. Production is still quite low so the full impact did not happen. But there is another important lesson I think Guyana has to learn from this,” the international advisor said.
Turning to his home country, the twin-island Republic of Trinidad and Tobago, he pointed out that several mistakes were made with the billions of dollars in oil revenue that came in.
“The mistake made, as most producers do, is to move your budget to match your revenues and there is a big danger in doing that because we know that small countries with small public service and limited capacity have difficulty managing expenditure effectively. It therefore means that a lot of wastage ends up happening.”
He added: “So Guyana has to be able to say, ‘Fine, this is what could end up happening to us so how do we properly prepare ourselves to spend this money? Do we target the top of the price cycle that we see coming? Do we go for the bottom of the price cycle and save everything above that or do we go somewhere in the middle?”
With this in mind, Paul said it will speak volumes about how Guyana builds its strategy after being faced with this type of volatility.
“The trick now is how well Guyana learns the lessons this brings. How Guyana behaves, knowing this, will determine how well Guyana does from oil and gas,” the official concluded on this front.
COVID-19’S IMPACT ON OIL MONEY
As a result of the COVID-19 pandemic, demand for oil has declined to unprecedented levels and the oil price war between Russia and Saudi Arabia inflicted its fair share of damage as the latter flooded the market with its cheap oil. Considering this, the Inter-American Development Bank (IDB) anticipates that the Government of Guyana will experience a 40 to 60 percent decline in the estimated value of its oil exports.
In one of its latest reports, the financial institution specifically said: “The government is expected to make four more sales in 2020, potentially at much lower prices. Under oil price scenarios varying between US$ 20/barrel and US$ 35/barrel, the estimated value of oil exports (US$ 2.4billion ) could decline by 40% – 60%, leading to terms – of – trade effects affecting the GDP growth estimate.” Such a decline is equivalent to a loss of US$1.4B or $288B. To understand the significance of this loss, one only needs to remember that Guyana’s 2019 budget was US$1.5B.
Further to this, the bank said that Guyana’s expected oil – related revenues, some US$230 million, could decline by 15 percent to 40 percent, which would be the main impact on Guyana from the oil price fall-out between Russia and Saudi.
Guyana began producing oil in December 2019 and variations in oil prices along with the Coronavirus pandemic are expected to have deep implications for the revenue outlook and GDP growth estimates for 2020.
The IMF originally estimated that Guyana’s oil production would contribute to achieving oil exports worth US$2.4 billion, oil – related government revenue of approximately US$230 million, and a GDP growth rate of 86% on an assumed price of oil of US$ 64/barrel.
As the IDB noted, these will be affected in light of the coronavirus and the effects from the oil price war.
The Government of Guyana had executed a sale of one million barrels of oil in mid -February as part of its profit–sharing agreement with ExxonMobil, earning US$55 million from Shell.
That money has since been transferred to the Natural Resource Fund (NRF). It cannot be touched until a Parliament is in place to approve withdrawals.
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