Last week’s Blog highlighted the success of the Inaugural Global Energy Conference held in Guyana February 15-18, 2022. It examined the aspirations for sustainable development presented by President Ali and the verbal commendations, counseling and warnings by keynote speakers, the Presidents of Ghana and Suriname and Prime Minister of the new Republic of Barbados. However two topics — full coverage insurance by and renegotiation of the contract with EXXON - essential aspects of the complex conversation to which PM Motley referred, were off the table and swept under the conference carpet. It is to be expected that changes will be stimulated with sustained advocacy from civil society, the media, a wide cross section of the Guyanese private sector and respected regional and international policy makers, among whom are Government of Guyana advisors. These are essential ingredients of equity and the “inconvenient truths” for not “leaving Guyanese as tenants in their own country”.
It is clear that Guyana today is in a competitive position. IHS Markit Petroleum Economics and Policy Solutions [PEPS] ranks the country as the 10th most competitive jurisdiction for upstream oil and gas exploration & production investment out of 45 countries. Moreover with its current estimated 10 billion barrels of recoverable oil and gas, Guyana is likely to be a major international player in energy corridor with Brazil and Suriname. Among the more specific highlights of the conference that attracted attention and to which we address in this Blog are the roll out of low carbon development strategy, local content to include training, investing in the supply chain, growing the non-oil sector and accelerating access to capital for Guyana’s sustainable development within the CARICOM region.
Rolling out the Low Carbon Development Strategy
The Low Carbon Development Strategy (LCDS) released for consultation in December 2021, establishes Guyana’s commitment to a net zero emissions target by 2050 thereby adding to the urgency of getting new exploration of oil and gas underway. It places emphasis on leveraging Guyana’s “world-class forest, biodiversity, water and marine resources” to build a “low-carbon ecosystem economy” using mechanisms such as carbon-pricing. It argues that these resources have, historically, been undervalued and ignored. For example, in his presentation President Ali placed an annual value on Guyana’s forests of US $40 billion. Consequently creating a low carbon economy presents enormous and complex challenges. It means grappling with the climate change agenda with respect de-carbonizing existing sectors of the economy, business-models, lifestyles and practices. The presentations recognized that among the prerequisites of LCDS is to upgrade Guyana’s physical capital: its energy, transportation, digital, water and housing infrastructure”.
Local Content Linked to Improving Business Competitiveness and Reducing Poverty
There has been a recurring discussion on what does local content actually mean. From the discussion during the parliamentary session that approved the local content legislation and more so during the Energy Conference, the message was clear. While ensuring greater access of local workers and businesses to opportunities from the oil and gas sector will be guaranteed, attracting foreign investments is equally important. However, more implicit than explicit is the extent to which local content applies to skills and business enterprises within CARICOM. Among others, this requires unmasking more clearly the statement by President Ali at the opening session that Guyana is intricately linked in CARICOM since Guyanese prosperity is linked to the prosperity of the Region. The more fundamental aspects of local content, often neglected, is that of ensuring the emergence of the oil and gas sector is a catalyst for expanded business opportunities, and fostering a giant leap to a diversified economy and alleviating poverty.
The 2022 Budget, initiated in Parliament in January 28, 2022, was the first time that a budget was being partially supported from the National Resource Fund. It included a series of tax measures focused on improving the ease of doing business, increasing disposable incomes, easing the cost of living and supporting the vulnerable. These include Tax concessions for local content, supporting the renewal of the industrial and commercial fleet, promoting farmers markets, reducing import duties and VAT charges, increasing 'we care' cash grants to children in public schools, support for health care, reducing the cost of fuel, increasing public assistance and support to the elderly.
Investing in Human Resource Development
Presenters at the Energy Conference repeatedly referred to investment in human resource development as a critical spinoff of the potential wealth from oil and gas. Illustrations of these intentions were provided by EXXON with respect to its over 60M investment in education and Training including its partnership with the University of Guyana. EnerMech is another initiative of over $20 million invested into the training center in Berbice. It is intended to provide Guyanese with key skills and training certifications that are required to work in the offshore environment and combines training facilities, blended learning software and technology, as well as fully immersive simulators for high hazard activity learning. Then there is CGX and its JV Partner, FEC, that has invested $5 Million Canadian in the Guyana Advanced Academic Training and Research Program in Sustainable Transformation. This is intended to support the educational and innovative skills of Guyana’s future leaders in fields crucial for the development of the sustainable sectors of the Guyanese economy. Professor Suresh Narine's presentation revealed that the first five students are already studying at Trent University in Canada and additional students will be selected this year as candidates for advanced degrees with requirement for them to become lecturers and professors at the University of Guyana for a period of five years. Much more investments in education and training are needed as part of local content mission. At the same time, a much more cohesive approach is required to education and training for the sustainable future of Guyana, its role within CARICOM and as a player in the global arena. But an important statement made by Prof. Narine must be part of the equation. He said that academics need to learn that inaction isn't neutral. This also must be a consideration of governments and the corporate sector and the University of Guyana and other academic institutions whose research and think tanks will no doubt push the boundaries of enquiry and policy making on the basis empirical analysis.
The Challenges of a Growing the Non-Oil Sector
Compared with 2020, GDP growth in 2021 was 20 per cent overall, and 4 per cent for the non-oil economy. For the extractive industries, the mining and quarrying industries were estimated to have grown by 23.1 per cent, with higher output from the petroleum and other mining industries. Manufacturing grew by 23.1 per cent. There was a strong performance in the construction sector, which grew by 25.5 per cent reflecting increased emphasis on implementing the public sector investment programme, as well as increased private sector construction, reflecting improved private sector confidence and optimism regarding the economic outlook. The agriculture, forestry and fishing industries, however contracted by 2.4 per cent compared to a decline of 4.1 per cent. So did the sugar industry by 22.4. Conversely, the rice industry grew by an estimated 7.8 percent , but ‘other crops’ declined by 7.3 per cent due to the floods. Further, the livestock industry was estimated to have grown by 10.6 per cent. However, the fishing industry contracted by an estimated 6.6 per cent. It was reported that total output from the petroleum sector increased by 65.4 per cent when compared to the same period last year.
The sketches provided on the various issues raised at the Guyana Energy Conference, are exactly that. They are just part of a scenario for which deeper examination is required. Among them are evaluations of the outcomes from the goals established for LCDS, local content and the diversified non-oil economy. Most important is the access to capital, the beneficial use of the National Resource Funds, the nature of the partnerships for advancing Guyana's economic prospects and indeed how these are truly integrally linked to the CARICOM region. Perhaps the second iteration of the Guyana International Energy Conference set for February 14, 2023 will provide an opportunity for a score card highlighting levels of efficiency, growth and equity from the El Dorado Corridor.
Edward and Auriol Greene Directors, GOFAD.