Guyana Treads Carefully Toward Sustainability

Credit: Getty Images.
Kaieteur Falls, Potaro-Siparuni, Guyana

Guyana is ready to explode. The small rainforest country nestled between Venezuela and Suriname has recently struck oil—a lot of it. With this newfound vast potential comes concern about developing the resources sustainably and with proper consideration for the country’s people and environment.

In 2014, ExxonMobil found oil in the Liza field of the Stabroek block offshore Guyana. Since then, several more discoveries have been made, the most recent in April 2019. Estimates put recoverable resources from the Stabroek block at greater than 5.5 billion BOE. “Liza is a beautiful discovery,” said Erik Oswald, ExxonMobil Exploration’s vice president, Americas.

As ExxonMobil readies floating production, storage, and offloading (FPSO) vessels to take advantage of the discoveries, its relationship with Guyana has been referred to as a marriage. “This is a thing that we bring to this marriage, this experience of working with countries as they evolve and are introduced to the energy sector,” Oswald said, adding, “The company is very happy with its position in Guyana, and we see a long and very happy marriage ahead.”

ExxonMobil says first oil is expected in 2020, with production estimated to reach 750,000 B/D by 2025. For perspective, Guyana has 750,000 residents. This will certainly change the country.

“To illustrate the transformative nature of the Guyana resource base, if, in Guyana, we’re talking about 360 bbl per person per year, in Uganda, it’s 2 bbl per person per year. In Ghana, its 3 bbl per person per year,” said Valerie Marcel, New Producer Group project lead with Chatham House. “So, Guyana is on par with Qatar. It’s that kind of transformative.”

How that transformation takes place and what it looks like are the major questions Guyana faces. Other countries have seen similar windfalls, and not all have weathered the change well. “We all know that’s not necessarily a pretty history in a lot of places,” Oswald said. “And you learn from your mistakes and bring that advice to the resource centers that you’re dealing with today.”

“How to avoid the resource curse, I think, is probably one of the biggest questions that Guyana has,” Marcel said. “And looking to other countries on how to manage that will be really important. And it’s not an easy task to get around.”

Credit: ExxonMobil.
Stabroek block.

The resource curse, according to a report from the National Resource Governance Institute, “refers to the failure of many resource-rich countries to benefit fully from their natural resource wealth and for governments in these countries to respond effectively to public welfare needs. While one might expect to see better development outcomes after countries discover natural resources, resource-rich countries tend to have higher rates of conflict and authoritarianism and lower rates of economic stability and economic growth compared with their nonresource-rich neighbors.”

Guyana is, indeed, looking outward for help dodging the curse. “Guyana is making a very good start,” said Wendy Brown, environmental director for the International Association of Oil and Gas Producers. “Guyana has sought advice from the IMF [International Monetary Fund] and the US State Department about how best to draft legislation for its fiscal regime for oil revenues, environmental regulations, and government oversight,” she said. Additionally, “The World Bank has recently approved a $20-million credit from the International Development Association to strengthen the country’s institutions, laws, and regulations to promote good governance and prudent management of Guyana’s oil and gas sector.”

Also high on the list of Guyana’s concerns is how to capitalize in a sustainable and environmentally conscious way. “As part of the Amazon rainforest, we are part of the lungs of the world,” said Nicholas Chuck-A-Sang, deputy director of the Petroleum Department in Guyana’s Ministry of Natural Resources. “And we take that role very seriously.”

Chuck-A-Sang pointed to Guyana’s coat of arms to indicate how important the environment is to the country. “Within the shield of the coat of arms, you can see the three rivers, which are blue, not murky brown or with little bits of oil floating on the top, but blue,” he said. “And those blue rivers have to remain the way they are—perfectly blue. And we intend to ensure the quality of all the rivers of Guyana remain that way, as well as offshore.”

The United Nations’ 17 Sustainable Development Goals (SDGs) will play an important role in the future of Guyana from the perspective of both industry and the country. “This isn’t about using the SDGs to greenwash but about being realistic and pragmatic about the contribution the industry can make and candid about the challenges faced, too,” said Becci Collacott, senior manager for sustainable development at IPIECA.

To further the goal of sustainable and environmentally conscious development of Guyana’s resources, the country has developed a Green State Development Strategy, which incorporates the SDGs. In addition to aligning the country with the UN’s vision of sustainable development, the development strategy hopes to inoculate the country against Dutch disease. The term “Dutch disease,” coined in The Economist in 1977 to describe the effects of the discovery of the massive Groningen gas field in the Netherlands in 1959, refers to a decline in other sectors of a country’s economy after a resource discovery.

“A key part of this Green State Development Strategy of Guyana is that of achieving balance,” Chuck-A-Sang said. “Even though we have a commitment to protecting the environment, we also have a commitment to the development of Guyana. … We’re not going to be focusing on oil only and leaving everything behind. And we certainly are not going to say, well, the oil industry is not going to have focus, we’re just going to have pristine forests and people are just not going to be having the economic development that they are looking forward to.”

Guyana is busy building a strategy to deliver that expected economic development and keep the benefits at home. An option considered and used elsewhere is to use the resource benefits for subsidies. “Guyana does have the benefit of foresight because it can learn from the mistakes made elsewhere,” Marcel said. She went on to caution against subsidies. “[Guyana] can see that, in the Persian Gulf, where they did subsidize electricity, gasoline, and water, it led to unsustainable patterns of consumption. The growth of consumption was so much it was curtailing exports of oil. And it is extremely difficult to remove subsidies. So once you include them, politically it is very difficult to navigate away from that.”

The local workforce, however, presents a major opportunity to keep the value of the country’s newfound resource at home. “I think local content is the No. 1 issue in countries, whether they are established or emerging,” Marcel said. “No. 1 is capturing that value in-country, because there are billions [of dollars] plowed in to the oil sector, so if you can retain a percentage of that, it’s significant.”

Chuck-A Sang said that training programs are being designed so Guyanese can fill any employment voids, and Brown added that Guyana has looked to the Mexican Petroleum Institute to provide training for welders, drillers, and other oilfield workers. Oswald said the desire to use local content is one of the planks that strengthens the marriage.

“Local content is a strong source of alignment for an international oil company and a government,” Oswald said. “It’s not a source of conflict. It’s definitely in our best interest to employ local people for many, many reasons, cost being one of them. You can imagine how expensive it is to take somebody from Texas and land them as an expat down in Georgetown. And, if someone can do the job equally well that’s a native Guyanese, that’s a huge uplift for the company.”

Chuck-A-Sang said he sees the use of local workers as a way to benefit the entire community. “One of the things that we are looking at there is the issue of social cohesion,” he said. “That has to do with ensuring that, as we go forward, divisions don’t develop and that you don’t have marginalized peoples and that everybody is brought along on the ride.”

But Oswald cautioned that new jobs may not be the greatest benefit the new resource brings to the country. “When you’re doing deepwater exploration, and you have FPSOs developing the fields, you’re, in general, in a very low-employment very-high-revenue scheme,” he said. “This is not like having a factory or windfarms or something like that. There are very few people involved relative to the revenue that is streaming in. You might put 100 people, maybe, on an FPSO … . So, there’s jobs, but there’s not 100,000 jobs.”

ExxonMobil, as well as other companies involved in development of Guyanese resources, have a vested interest in all of Guyana benefiting. “We are all very interested in Guyana being a success story,” Oswald said. “You can imagine the reputation of these companies that are involved down there if things go wayward in the country. … We don’t want to be involved in anything less than a success story down there. The reputations of the companies are very tied to it.”

Planning for adversity is a way to make sure everybody can tell that success story. “There’s always bumps along the way in marriages,” Oswald said. “We’ll work through all that. We start from a position of enormous alignment.”

“It’s a really exciting time for the country,” Collacott said. “I look forward to watching how this all unfolds.”



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