Guyana’s oil bonanza is being squandered by political duels

Sep 15, 2024 Features / Columnists, Peeping Tom

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Kaieteur News – In Guyana, politics and economics have always danced an ill-fated tango. It is difficult to say which has failed us more: politics or economics. They are both intertwined.

The failures of successive administrations, both the People’s National Congress (PNC) and the People’s Progressive Party/Civic (PPP/C), have left Guyanese teetering between frustration and outright despair. Here is the most resource-rich country in the English-speaking Caribbean that has somehow managed to become the poorest in the Western Hemisphere under the PNC, only to remain shackled to the bottom rungs of development under the PPP/C.

But then, oil was discovered. That black gold, long dreamt of by nations caught in the whirlpool of stagnation, finally gushed forth. With it, came and opportunity for true transformation. This was Guyana’s moment—a chance to rise above the wreckage of its divisive politics and economic failures. The country was presented with a gold-mine opportunity to chart a new course, to break free of the cycle of dependency and poverty. The old, tired excuses about international commodity prices, weather-related tragedies and loss of key markets no longer can be used as excuses. Oil can provide the resources to reverse, and reverse quickly, decades of decadence.

December 2019, when oil production began, should have marked the dawn of a new era for Guyana. Instead, it has only confirmed the worst fears: the politicians, drunk on their own incompetence, are squandering the greatest opportunity this country has ever had.

There is little doubt that the management of the oil and gas resources should be the highest priority of any government that claims to act in the national interest. Oil represents the one resource that could, if managed properly, lift our people out of poverty, provide a secure economic future, and finally pull the country from the depths of its historic underachievement. But the failings of Guyana’s political elite have cast a long shadow over this potential windfall.

The contract signed with ExxonMobil—infamous for its pitiful returns to the nation—resembles more of a charitable donation than a sovereign agreement negotiated in the interests of the people. One would think that a government, claiming to represent the will of the people, would be keen to renegotiate such a sordid deal.

But the PPP/C administration has not done so. What happened to their promise to secure a better deal for Guyana? Why has there been no move to establish the much-touted Petroleum Commission, an entity that was meant to oversee the sector?

The government’s failure is compounded by its refusal to tackle other critical issues surrounding in the management of the sector. One of the most glaring concerns is the absence of “ring-fencing” provisions. The current arrangement allows oil companies to deduct costs from one oil field against future profits from others, ensuring that the country may never see the true benefits of individual oil wells. The potential financial fallout from this is staggering. Yet, the government has chosen to remain stubborn, allowing Exxon and its partners to rake in their “massive rate of return” while the Guyanese public gets crumbs from the table.

Then there is the issue of decommissioning costs, a ticking financial time bomb. The oil companies will eventually need to dismantle their rigs and clean up their mess, but there is little clarity as to how these astronomical costs are determined. What is now obvious is that these expenses will be dumped onto Guyana.

Then we have the most amazing debacle of the government’s failure to install its own independent meters at the production and exportation pumps. Instead, the government is monitoring oil production and exports with the same meters installed by the oil companies —a glaring dereliction of duty.

One of the most egregious provisions of the oil contract is the clause that mandates the government to pay the taxes owed by oil companies. This effectively robs the country’s Treasury of much-needed revenue. Instead of collecting billions in taxes that could fund critical infrastructure, education, and healthcare, and pay teachers, nurses, the disciplined services and public servants better,  the government is paying, at least on paper, what should be the oil companies’ responsibility.

One might think that with the discovery of oil, the nation’s political leaders would be fully absorbed in securing the future of the country. But no, the country’s two main political parties seem more interested in staging weekly press conferences that amount to little more than theater. The Opposition, PNCR focuses on issues that, while important, fail to recognize the significant transformative moment that the nation is experiencing. Its political harangues are focused more on other issues rather than the oil sector. And even when they segue into addressing oil and gas, it is done in piecemeal fashion— including adopting ambivalent positions on renegotiation and ring-fencing.

The ruling party, meanwhile, has reduced its public engagements to a one-man show in the form of Bharrat Jagdeo, the PPP/C General Secretary. He hosts weekly press conferences that devolve into a tit-for-tat exchange with the main Opposition. If the Opposition coughs, he is ready with a bottle of cough-syrup.

Questions about oil are treated as secondary and are dealt with mainly in response to questions from the media which has to sit there and endure his weekly tantrums. His soliloquies on corruption, governance, and development do little to mask the reality: the PPP/C, for all its talk, is unwilling to challenge the interests of Exxon and other oil giants, preferring instead to tinker at the margins of the sector while the real profits flow offshore.

Rather than engage with the enormity of the oil sector’s potential and the risks it poses, both parties are locked in a battle for political capital. The PPP/C wants to convince the electorate that they inherited a rotten deal and the Opposition is not fit to rule. The Opposition is content with throwing barbs about corruption and discrimination. Meanwhile, the people of Guyana are left to wonder whether their leaders are truly capable of handling the complexities of an oil economy.

The question that should preoccupy every serious politician, economist, and public servant in Guyana today is this: how can the country secure the best possible deal for its oil and gas resources, and how can those resources be managed to ensure long-term, sustainable development? Without clear answers to these questions, the oil boom will become just another chapter in Guyana’s long history of missed opportunities.

The politicians in Georgetown, however, seem to believe they have all the time in the world to play their games. They don’t. The window of opportunity is closing, and with each passing week, the nation loses more of its leverage. Oil reserves are finite, and once they’re gone, they’re gone. If Guyana’s leaders continue to prioritize political finger-pointing over serious governance, the oil wealth will slip through the country’s fingers.

It is a sad indictment of the political class that, in the face of such historic opportunity, they have chosen the path of least resistance. Guyana’s oil wealth has the potential to transform the country, but only if its leaders wake up to the reality that scoring political points means nothing if there’s no future left to win.

(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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• bonanza, difficult, economics, People's National Congress (PNC), People’s Progressive Party/Civic (PPP/C)

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