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Pump, Baby, Pump!

Jan 05, 2021 Features / Columnists, Peeping Tom

Kaieteur News – ExxonMobil is no longer the greatest threat to Guyana’s future. Bharrat Jagdeo has now become the greatest obstacle to this country’s long-term prospects.
Bharrat Jagdeo is the government’s point man for oil and gas. But he is pointing the government in the wrong direction.
Listening to him recently on the Kaieteur Radio (99.1, 99.5 FM) was a deeply disturbing experience. The man is out of his depth when it comes to a Depletion Policy.
Jagdeo is in the wrong Ministry. Unless Irfaan Ali is able to rein in Jagdeo and limit his involvement in the oil sector, Guyana’s future is doomed.
What Guyana’s oil sector needs now more than ever is effective regulation and policy-making. Not excuse-making.
Jagdeo was questioned on the radio programme Guyana’s Oil and You about the country’s Depletion Policy. He danced around the issue and eventually offered an excuse rather than an explanation.
His excuse is to the effect that oil production should be intensified since with the thrust towards renewables, fossil fuels are going to be phased out. It is therefore best that Guyana extracts as much of its oil as fast as it can before the fossil fuel market crashes. This is the essence of the excuse he has made. And this constitutes the essence of his belief about an Oil Depletion Policy.
Jagdeo’s idea of a Depletion Policy effectively hands the management of Guyana’s oil to the oil companies. The policy is a licence to them to pump as much as they want because Guyana has to maximize its earnings before fossil fuels usage is reduced and prices tumble.
Jagdeo is clueless about the future of oil. Renewables will not replace fossil fuels as the main sources of energy in the next 100 years. But even if Jagdeo’s predictions are true, this is all the more reason why a Depletion Policy should have been in place to ensure that his doomsday scenario does not occur.
Fossil fuels are not going to disappear anytime soon. A recent study found that, at best, by 2040, fossil fuel usage will decline by a mere 25 percent, from its present level of 85 percent of total global energy consumption to 60 percent. But even this prediction is premised on meeting the targets for reduced emissions under the Paris Agreement. And we know that even before the pandemic, the ambitions under the Paris Agreement were not being met.
Jagdeo is presuming that because of the investments now being made in renewables that oil demand is going to fall and thus it is best that Guyana capitalizes. In so doing he fails to make a fundamental distinction between usage and demand.
The fallout of global consumption of fossil fuels does not translate necessarily to a decline in fossil fuel demand. Even if fossil fuel usage declines, the demand for fossil fuel will still be high given its share of total energy consumption
The world’s population is going to increase by about 1.5 billion by 2040 and global output is estimated to double by them. Renewables are incapable of driving this increase output and therefore fossil fuel demand is expected to be high for the next 60 years.
It is going to be costly to transition to renewables. The world’s transportation sector is one of the major guzzlers of energy. And it will not be cheap to move towards renewable energy use in transportation. Neither will it be cheap to close fossil fuel energy plants and replace these with renewable energy generation. Down to condoms are made from petroleum.
Jagdeo may have been blindsided by the investments being made by oil companies in renewable energy. But he will be naïve to believe that the oil companies are doing this because they recognize that renewables will be the next major energy wave. The oil companies are investing in renewables to control the market and to ensure that it does not displace fossil fuels.
The Organization of Petroleum Exporting Countries (OPEC) has long recognized that oil is here to stay. The organization’s Secretary General, four years ago, told a conference in Paris that fossil fuels will account for three quarters of the world’s energy mix by 2040. He said that he did not envisage a scenario in which non-fossil fuels would come even close to overtaking fossil fuels in the decades ahead.
It is therefore tragic to see a man who was once hailed as a Champion of the Earth, expressing support for a Depletion Policy which will allow the oil companies a licence to pump as much as they want and as fast as they can.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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