Guyana’s positioning in climate change policy has become more complex as it ramps up its oil production

Jan 31, 2023 Letters

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Dear Editor

In my latest article, I rehashed a selection of themes addressed during 2022. Regular readers and energy sector observers may have noticed the omission of local content, education, ESG criteria, Guyana’s political stability and positioning on climate action, since becoming a major oil producer and, action Guyana can take to avoid the resource curse. This, my final article for the year, will review these outstanding issues.

The Local Content Policy (LCP) and its upcoming legislation were the focus of attention at the end of 2021 into the first quarter of 2022. Education is to local content as sowing is to reaping so at that time I decided to focus on education, writing: “A solid foundation at the primary school level leads to improvement in performance through to secondary and tertiary education which feeds into the availability of professionals to provide the technical goods and services required by the energy sector.”

“Guyana needs to aggressively pursue a vastly improved quality of education for the majority of Guyanese children in the primary and secondary school system right now.  Enhancements of tertiary education institutions alone will not suffice.”

In reference to the energy sector specifically, I agreed with statements made by Prof Cardinal Warde, Executive Director of the Caribbean Science Foundation, during the third episode of Transforming Guyana series stating: “STEM education can become the means to achieving sustainable socio-economic development for Guyana through technology-based entrepreneurship.”

“Rapid growth is needed in STEM companies working in Guyana to provide real opportunities that translate technical expertise into other industries.”

I also added, noted that education, on its own, is not enough: “Education may be the passport but it cannot also be the aircraft, fuel and engine all at the same time. The impact of STEM education is intricately linked to policies, legislature and spending in other sectors such as business and banking.”

Without supporting policies and action, those educated in STEM will continue to leave their homeland as documented in “The Guyanese Diaspora” report published in 2020 by the Center for Strategic International Studies. “Almost 90 percent of Guyanese nationals with a tertiary-level education and 40 percent of those with a secondary education emigrated from Guyana between 1965 and 2000…Based on these statistics, Guyana is thought to have one of the highest levels of “brain drain” of any country on Earth.”

Petrodollars will be spent on a range of projects but where can they be strategically invested? Apart from spending on immediate developmental needs — infrastructure, health care and education — investment is needed in areas such as the manufacturing sector and electricity systems that can, in turn, generate or support the generation of revenue. This is how countries avoid the resource curse: “Investment in a robust manufacturing sector can shift Guyana away from exporting its raw materials, towards creating more value-added products. As a natural consequence, there can be an accompanying increase in the value of exports, reduced demand for importing those products and increased employment.”

“…Guyana’s manufacturing sector will be able to boast of producing products using cleaner and green energy with a mix of natural gas, hydropower and solar power.”

“Guyana’s power sector must meet the demand for the shift from centralized systems of thermal power plants. The inclusion of offshore natural gas bolsters Guyana’s energy security by providing cleaner energy for the growing domestic and industrial power demand. Additionally, there will be a more attractive environment for investment with lower energy cost and greater reliability of supply.”

Shifting to external factors that affect Guyana’s progress, imagine that Guyana retained its abundant resources and completely resolved governance, labour force capability and capacity challenges by 2030. Is that enough to ensure success and prosperity for all Guyanese? Unfortunately, resolving those issues will not be enough. The response of foreign investors and climate change also need to be considered and navigated.

In June, I identified some additional “fire clubs” that the country will face starting with the Environmental, Social and Governance (ESG) Criteria:

“ESG criteria are a set of standards used by socially conscious investors to screen potential projects for investment. These standards influence the allocation of funds and management of operations. … In short, fossil fuel production and development in Guyana may be a stumbling block to environmentally conscious investors — this cannot be completely ignored.”

“Meeting ESG standards adds complexity to the energy transition … These challenges call for innovation and new approaches to doing business.”

“The country’s attractiveness to environmentally and socially conscious international investors can also determine its ability to compete for foreign direct investment.”

Guyana’s positioning in climate change policy has also become more complex as it ramps up its oil production: “Guyana holds a unique position being a longstanding significant carbon sink then swiftly becoming a significant oil exporter, transitioning to clean energy consumption and boosting the development of the nation in less than a decade. The Tyndall report and the IEA are asking governments and oil and gas producers to walk away from hydrocarbon reserves.”

On one hand, the country acknowledges the need for action on climate change but on the other hand, there is equally valid need for socio-economic development in a country that is eager to modernize and provide a better standard and living for its people while it can do so:

“Guyana’s oil revenue is earmarked advance much needed development in infrastructure, energy reliability and access, telecommunications, health care, education, agriculture housing and national security. The issue is more about survival than it is about progress.

…oil demand is expected to decline after 2050 and Guyana is racing against the clock to produce and sell a commodity that is slated to be phased out. Revenue projections indicate that this is a long-awaited opportunity to secure sufficient funds to meet national objectives and absorb inevitable economic shocks.”

There is one gift the people of Guyana ought to give themselves in 2023 and beyond — political stability: “History will judge the actions and statements of government representatives and the opposition that impact and influence the sentiments and, in turn, demands of the general public. Weak political institutions are a fast track to the dreaded Resource Curse, corruption and inflation.”

“It is quite simple; politically stable countries flourish, politically unstable countries devolve into chaos and poverty regardless of form of government, size of hydrocarbon reserves or the favourability of contracts secured with multinational companies.” In 2023, optimists can confidently hope for Guyana’s progress and prosperity as long as the country does all within its power to secure political stability. As local government elections approaches in under three months, I say to Guyana: the world and investors are watching.

Regards,

Dr. Lorraine Sober

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• Dr. Lorraine Sober, environmental, Local Content Policy, Prof Cardinal Warde, STEM

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