Guyana losing big by failing to implement World Bank US$20M Project

Aug 16, 2022 News

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Kaieteur News – In highlighting some of the benefits of the US$20M World Bank loan which was secured by Guyana in 2019, the institution posited that the smallest effort made by the country to improve its oil and gas management capacity under the project supported by this money could translate to huge improvements in the amount of revenue the country gets from its oil resources.

The World Bank support document, ‘Guyana Petroleum Resources Governance and Management Project’ is one of the important documents currently available for Guyana to build its ability to oversee and manage its nascent oil sector. It is also one of the important documents which remain unused by the country despite the institutions being paid to provide the capacity building support, insisting on how imperative the work is toward Guyana safeguarding itself from various types of losses associated with the oil and gas industry.

In the project appraisal summary, the Bank noted that the future economic and financial benefits of the oil and gas sector projects being developed here cannot be attributed to the proposed technical assistance project, nor can they be easily quantified since there are too many external factors that would have to be considered. It said that the economic analysis of the project could only be conducted based on considerations using the technical assistance verses what would happen without technical assistance. The document noted therefore, that because Guyana is new to world-scale oil and gas sector developments, “the economic benefits of the Project would thus derived from improved decision-making thanks to capacity building with respect to the development of the oil and gas resources.” It said that it is not possible to quantify the increased likelihood that best decisions will be reached because of this Project.

The Bank did say however that, “even a small improvement in the Government of the Cooperative Republic of Guyana capacity thanks to the advisory services and training provided by the Project, could have a huge impact in government revenues.”

“For example,” the institution continued, “if Guyana derives an incremental benefit of 0.25 percent of gross revenues as a result of improved capacity to manage the oil and gas sector, collect revenue, audit costs, or reduce environmental damage, the benefit to Guyana would be around US$200 million (assuming US$80.5 billion in oil revenue, before costs and oil company profits).

” The World Bank related that it is important to underline that its calculations are not meant to reflect the views of either the operators or government, “but to confirm that the potential benefits from the Project could plausibly outweigh the US$20 million spent on the project many times over.”

So far, the World Bank project’s overall implementation has been downgraded to ‘Moderately Unsatisfactory’, with around 24 percent of the total credit disbursed and no disbursement requests received by the Bank since October 2020.

The former A Partnership for National Unity+ Alliance for Change Government had requested the money as part of preparatory works for better control of the new oil and gas sector. The project development objective is to support the enhancement of legal and institutional frameworks and the strengthening of the capacity of key institutions in the country to manage the oil and gas sector here.

The project has four components which speak to the enhancement of legal framework and stakeholder engagement aimed at supporting governance and oversight of the sector as well as support for stakeholder engagement and transparency. It supports the capacity building of key institutions such as the Guyana Geology and Mines Commission (GGMC), Department of Energy, Environmental Protection Agency among others, by providing critical training and insights regarding petroleum data management, and strengthening environmental and social management.

The project’s components also seek to enhance the country’s fiscal management deals by, among other things, improving Guyana’s capacity to manage the Natural Resource Fund. It provides support and builds the Government’s systems for procurement and financial management, while allowing for the implementation of safeguards for proper management and monitoring.

Minister of Natural Resources, Vickram Bharrat, and other government officials have claimed that when the People’s Progressive Party Government came into power in 2020, there was no meaningful work done to build Guyana’s oil and gas capacity. Guyana’s Vice President, Bharrat Jagdeo, had also said that the Government was “disappointed” that it was unable to find within a timely manner local teams to conduct the oil production cost audits causing the country to miss some auditing timelines. However, this US$20M project if utilized would have allowed the Government insights into many important aspects of the oil industry to allow Guyana better management. In fact, two other documents have surfaced in weeks highlighting support for the Government to build the sector but remained unused. Despite a US$11.6M loan, this time under the Inter-American Development Bank (IDB), Guyana seemed to have ignored key recommendations that pertained to contract administration and cost management in the oil sector since the country was warned to build management capacity before ramping up oil production, but has done the opposite. The Institutional Assessment and Action Plan for the Oil and Gas Sector for the Environmental Protection Agency of Guyana project was delivered under the said US$20M loan with an additional US$1M grant from the World Bank to build the EPA’s technical capacity in environmental management, and included over 30 highly skilled professionals. Minister Bharrat said that program was not scrapped, while EPA’s, current Executive Director, Kemraj Parsram,  claims not to know anything about the document. The government said it’s  still “refining” the US$20M project to suit the Government’s needs.

 

 

 

 

 

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